To battle cryptos, digital money created by monetary authorities must protect individual liberties while minimising the state’s role in credit allocation. Doing that without disrupting commercial banking and the dollar’s hegemony will be a tall order for Powell, Lagarde and Co.
Like “Bubble Companies” of 1720 England, today’s blank-cheque vehicles are “carrying on an undertaking of great advantage, but nobody to know what it is.” That speculative era ended when authorities stepped in. The SPAC bubble may be more rational but will meet a similar fate.
Long before the failed Archegos manager was even born, Benjamin Graham, tutor to Warren Buffett, and J.M. Keynes were teaching the perils of speculating on stocks with oodles of debt. It’s worth remembering their stories as Credit Suisse, Nomura and others count their losses.