Cryptocurrency

Say What?!

Hayter’s article for July 3, 2022

            I don’t know much about Economics, but I taught it in High School for about four years. It was a fun, but tough course to teach. I think Stephen Stills of Buffalo Springfield, summed it up when he wrote the song “For What it’s Worth”. He included the lyric, “Nobody’s right if everybody’s wrong.”  

As I mentioned, I did enjoy teaching Economics. Unfortunately, I found that it required a lot of preparation. Planning would’ve been a lot easier had there been personal computers and the Internet. But, nooo. I was forced to read the Economics book. 

In class, I started out talking about the history of money. During the olden days, people just traded what they made, found or caught for something they didn’t have. It might be a cantaloupe in exchange for a sharpened stick. 

The question is, how did anyone come up with the idea to give value to certain rocks or shells? To help with the concept, I showed the classes an animated video on the subject of money. It was educational as well as a real hoot. 

Shortly into the video, there was a scene where an attractive cavewoman approached a guy in a palm tree trying to dislodge a coconut. The woman said, “Hi, Franky. How are your coconuts hanging?” – Franky said, “Fine Mary Ann, would you like one?” I couldn’t believe that the educational censoring committee hadn’t banned the video. No worries. No one noticed the coconut comment… except for Scott.

            Scott immediately interrupted. “Uh, Mr. Hayter. Could you play that part back? I was taking notes and missed something there.”

Good ol’ Scott. I replayed the scene. This time half the class caught on. After some whispering, a few others caught on and there was much laughter. I told everyone to, “Grow up! This stuff is important!” Scott asked if that scene was going to be on the test. I said, “Yes, bartering will be on the test.” The episode did make everyone pay more attention.

            That semester I had the students invest in the stock market. I credited each of them with $1000. I told those who could, to bring to class the financial section of the Chronicle. I once took them to the library to research different companies. What a waste of time. Fact-finding was much more challenging back then than today. 

As complicated as the stock market is, it’s easy peasy compared to the subject that caught my attention earlier today – Cryptocurrency. It’s make-believe money that can be purchased or traded by anyone with access to a computer. You begin by purchasing imaginary money with real money. After that, you can buy stuff with it or sell stuff in exchange for it. The value of your cryptocurrency is dependent entirely on the belief others have that the currency has value. 

The most common cryptocurrency is Bitcoin. In 2009, the year of Bitcoin, the estimated value of a single imaginary coin was 35/1000 of a cent. Later in the year, it went up when someone managed to purchase a Papa John’s Pizza for 10,000 Bitcoin.

The highest dollar value of one Bitcoin was $63,000 in November of 2021. The value has changed considerably since then.   

You can purchase Bitcoin from its founder Satoshi Nakamoto. No one knows if it’s a he, she, or they. At the moment there are hundreds of other Cryptocurrencies spread all across the Globe. Or perhaps all of their headquarters are in Willis. No one knows for sure where they all are.   

        Cryptocurrency is merely a monetary concept. It’s not too unlike what we’ve been using for decades. Last week, I had to pay my mortgage, yet, I had only $10 in my wallet.

What I did was contact my bank online, and have them take, say, $1000 from my account and transfer it to the account of my mortgage company. I didn’t see a bit of the money. In fact, I’ve never seen any of the money that is in my bank account. Most of it came from my teacher's retirement. What TRS does is forward my bank a number signifying how much money they wish to put in my bank account. The computers don’t transfer cash. Just numbers.

        Since the advent of online banking and credit cards, little money changes hands nowadays. If you ever watched “It’s a Wonderful Life”, you know that banks do not have the hard cash to cover all their accounts. It’s been loaned out to people. No way does the U.S. government have enough cash to back all of the online currency.

        In other words, our monetary system is much like Cryptocurrency… with one big difference. Your bank is real people. And they’ve got your name and all of your info. That works both ways. As long as the banker treats you right, and you continue to keep your account in order, the more likely you’ll learn to trust each other.

        Of course, one big problem today is inflation. Blame it on COVID, the war in Ukraine, or corporate price gouging. Inflation happens. Always has and always will.

        The same is true of Cryptocurrency. The value of Cryptocurrency is more volatile than the value of the U.S. dollar. In November 2021, a bitcoin was worth $63,000. A few minutes ago it was worth $19, 064. Right now it’s worth – give me a second – Ah, $18,900. How low will it go? Who knows? I keep going back to Stephen Stills.

   

end

hayter.mark@gmail.com