Michel Santi: “All this little world has become gentrified with cryptocurrencies and these young people only have their eyes to cry today. – Kernews – La Baule +

An analysis on the fall of cryptocurrencies and the planned disappearance of cash settlements

Millions of investors who speculated on cryptocurrencies found themselves ruined within days. Among them, many young people in their twenties who had invested all their first savings there, but also more seasoned savers who have sometimes lost several hundred thousand euros. After Christine Lagarde’s shocking remarks on cryptocurrencies that “are worthless”, the economist Michel Santi also hit the headlines for having written that “cryptocurrencies are speculation for the poor!” »

Michel Santi is a Franco-Swiss economist and financier. He has been advising several central banks since 2005 and is the author of various books. A former member of the World Economic Forum and IFRI, Michel Santi is a founding member of the NGO Finance Watch. A specialist in financial markets and central banks, he is the founder and managing director of Art Trading & Finance. He has just published “Armchair 37”, with a preface by Edgar Morin. He is also the author of “Testament of a Disillusioned Economist”.

Kernews: Recently, in an analysis, you called cryptocurrencies “speculation for the poor”. For what reasons ?

Michael Santi: I made the connection with the subprime crisis, which started in the United States in 2007. Originally, these were poor families, that is to say the American lower middle class, who couldn’t afford to borrow money to buy his home, but was still able to obtain generous loans from American banks. We called it at the time subprime to evoke these underqualified people who got into debt. I have the feeling that cryptocurrencies – I’m not talking about blockchain technology, but about bitcoin or ethereum, in short all this arsenal which has been the subject of an almost irrational craze on the part of an entire generation who, using his mobile phone, constantly zaps, communicates and speculates, on thousandths of bitcoin, since this currency can be bought in fractions – this is speculation for the poor. This generation now finds itself stuck because it bought cryptocurrencies at the highest level, while we are witnessing a general collapse of this asset class thanks to rising interest rates around the world. . I think it’s a real mess. This is the reason why I made this somewhat provocative analysis.

You remember that when you invest in the stock market, even when there is a sharp drop, there is always something concrete left, like a share of a real company that has a storefront and that sells products… However, with cryptocurrencies, there is nothing left…

It’s not just young people who have experienced this craze for cryptocurrencies, but all this segment of the population who got very excited about cryptocurrencies was driven by a libertarian temptation, because it’s an ideal way to to escape the grip of the state or the banking system. I received a message that clearly illustrates what I have just told you: a person explained to me that she had been banned from banking for a few years in France and that she was financing her everyday life solely through cryptocurrencies… Of course, there was a speculative side, but this enthusiasm also reflects investors’ desire to free themselves from the grip of the banking system which, it is true, has committed enormous abuses in recent decades.

You are more of a statist, but doesn’t this libertarian spirit ultimately reflect a more noble reason than the simple desire to speculate?

Yes, but a lot of libertarians are getting out of this collapsed market. I am in contact with some of them. They are intelligent people and some still want to stay in this universe, not to sell, telling themselves that in a few years we will return to the past level. There has already been a clue in recent months that has fooled no one: we could trace the bitcoin graph to the Nasdaq graph, that is to say the American technology stocks.

Sure, but US tech stocks are losing money…

Sure. There is an almost 100% correlation between the Nasdaq and bitcoin, which means that this cryptocurrency market has become gentrified, with an influx of speculators and investors who went to the exchanges. All this little world has become gentrified with cryptocurrencies and this youth only has their eyes to cry today. They can sell today, with a loss of more than 80%. Otherwise, wait until you are forty…

You are in favor of the disappearance of cash payments. Shouldn’t the libertarian, consistent with his ideology, plead for the maintenance of cash?

It’s clear, we know very well that the species will disappear. I have been a strong supporter of the disappearance of cash and have been advocating for it for about fifteen years. Covid has accelerated this inevitable trend. I believe it is done. Only cryptocurrencies remain. Today, you pay for everything with your credit card or apps, so libertarians have to make up their minds. You don’t have to rely on cash anymore.

However, species constitute a zone of intimacy and freedom. When there is a problem, be it computer or even a war, those who are saved are those who have cash on them…

You can’t ask this question, as long as you accept to sacrifice your freedom and privacy by having a mobile phone on you!

Until now, someone who wants to give flowers to his mistress can do so by paying for her bouquet in cash: this is still part of what is called the intimacy zone…

You have to make up your mind: the world you are talking about is over. If there was still any doubt, the Covid has consecrated the advent of all digital. Now, most airlines refuse cash payment, even for small amounts. It’s a paradigm shift. Cryptocurrency fanatics thought it was going to replace all of that, but it’s not, it’s just part of the New World that’s emerging. China is experimenting very successfully with the digital yuan. The European Central Bank is also doing the same thing. It is inevitable.

Behind this, there is also a change in society, with a new perception of our individual freedoms. You were born in Beirut and you can see that in the Middle East, in North Africa or in sub-Saharan Africa, many people survive thanks to what is called the parallel economy. If species were to disappear, wouldn’t we risk impoverishing hundreds of millions of people around the world?

You are completely right. I’m talking about integrated economies, like the European Union or the United States. The facts prove you right since a few years ago, India took steps to replace almost all banknotes. It happened almost overnight. The objective was to curb the black market or the gray market, by forcing people to go to the banks to deposit their old notes, in order to have new notes a few weeks later. It was a humanitarian catastrophe, in the literal sense of the term, because the population was not prepared, because not everyone had a bank account. In addition, to have a bank account, you need an identity document, and many Indians do not even have an identity card. Indeed, the disappearance of species will weigh heavily on the GDPs of developing countries. That being the case, I will take another example. Kenya has been a leader for ten years in terms of payment by telephone and Cambodia has also developed this. Kenya is a leader in this area, because there was a lot of burglary in small houses and barracks, and, in response to this, the state and the telephone operators set up payment by telephone. Everyone got on board, and in Kenya’s most remote village, you can pay your grocer with your phone. Provided there is preparation, we can still avoid humanitarian disasters in developing countries.

When we whistle the end of recess on cash, can this be a good way to get money quickly into the coffers of the State, because we know that there are millions who sleep under the mattress ?

It’s true, but the most acute problem does not arise in France, it concerns above all Italy and Spain. Very serious calculations have been made and, if cash were to disappear from these two countries, GDP could increase by around fifteen points, since the parallel market would disappear. France is the country that uses bank cards the most, unlike Germany where you can go and buy a Mercedes for €60,000 with a suitcase of cash… The European Union country that will be the most reluctant to disappearance of cash will remain Germany: not for theoretical reasons, but because this country has experienced several monetary traumas, such as hyper inflation in the 1920s, until reunification, when Mr. Kohl decreed that the Deutsche Mark would be worth the same as the East German Ostmark. All this has been imprinted in the genes of the Germans and this is the reason why they are reluctant to the disappearance of cash, just in case…

In summary, faced with the danger of cryptocurrencies, you advise us rather to go to the stock market or real estate…

I’m not giving advice in terms of investments, but I find that there is too intense a correlation between cryptocurrencies and traditional stock markets. This means that cryptos no longer represent diversification. The key to wealth management is diversification. Cryptos could have represented an alternative, or an asset class, if they evolved independently from traditional stock markets. But this is no longer the case. We are witnessing a stock market collapse, but also a crypto collapse. So it’s not an asset class that has been able to find its cruising speed.

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