Conversation with U.S. House of Representatives: Discussing Crypto Policy, CBDC, and Modern Monetary Theory

The U.S. House of Representatives has successively launched a number of cryptocurrency-related bills. Recently, CoinMetrics co-founder Nic Carter took this topic to talk to Rep. Tom Emmer from Minnesota.

He is the co-chair of the Blockchain Caucus and one of the most active advocates of cryptocurrencies. The two sides discussed topics such as crypto policy, CBDC and Modern Monetary Theory (MMT) in 2022, trying to clarify the impact of cryptocurrencies on the existing world.

Tom Emmer: A few years ago, I learned about a theory called Capitalist Information Theory, which involves a wealth of knowledge. Economic growth is actually the result of knowledge growth. As an entrepreneur like you, take risks and learn from the risks you take. Assuming you work in a truly free market, this knowledge advances. Not only are you doing better as entrepreneurs, but our quality of life as a society has improved dramatically. The result is that the real economy grows amid an expansion of wealth. And politicians like to call it prosperity in general terms.

Nicolas Carter: It's very important to stay in sync with cryptocurrencies and blockchain, I feel like I'm always inundated with information, but how do you stay in sync with that?

Tom Emmer: Frankly, the financial system has been mismanaged for decades. The Fed has been manipulating the market and controlling interest rates. Near-zero interest rates are actually fraudulent because you are not pricing capital. At its real price, you are actually borrowing money from tomorrow. The White House is full of new MMT theorists who believe that as long as governments control their own fiat currencies, they can print money recklessly. Isn't cryptocurrencies a direct result of this behavior?

That's what we're ultimately going to focus on, because the Fed is manipulating the cost of capital, driving down the cost of capital, and I use the word fraud because it's very strong. But it's a tool they use to manipulate the cost of capital, so it's not really the cost of capital. So capital doesn't go where it would normally go. In fact, it's kind of like Medicare. If you reimburse people more for coronavirus-related deaths in the U.S., there are more coronavirus-related deaths, and I'm not saying that's happening. This is an analogy. When you incentivize the market, the market can be very selfish. They will use this incentive to their advantage, rather than letting the market do it on their own initiative.

In my opinion, these MMT believers are legacy institutions who are now in conflict with people in crypto like you and the crypto community. Because of the mismanagement of monetary policy, the crypto community has taken its place. When you do this with interest rates, when the next crisis comes, you guess the cost of capital will price itself properly and the assets will return to their real value. But debt will remain high. What does this mean for those in the crypto community who have discovered an alternative store of value? People like to compare cryptocurrencies to gold. But I think, whether people know it or not, what they're doing is protecting themselves from intermediaries that actually distort the market.

Nicolas Carter: I think your analysis is very sharp. If you know Balaji Srinivasan, he also stated that the most influential battle of the next 10 years is the battle for effective sound money between cryptocurrencies and modern monetary theorists. MMT thinks they are not the establishment, but a group of outsiders. In the second quarter of 2020, government spending exceeded 50% of GDP. It seems to me like a normalization of MMT, like a secret implementation of MMT in Washington.

Tom Emmer: I don't think it's a secret. I think it's pretty obvious, overt. MMT people don't want to be seen as the establishment. If they abandon their ideology and allow their greed, desire, and interests to flourish, they will have to admit that doing so will never work out. Looking at the evolution of the crypto community, before 2008, you really didn't have much experience until the mysterious Satoshi Nakamoto came along. At first, the traditional financial industry and institutions did not pay much attention to this because they thought it was just a flash in the bubble.

in the US and around the world. The U.S. dollar remains the reserve currency, while cryptocurrencies have begun to flourish. Over the next 10 years, see if the disruptive force of cryptocurrencies will ultimately prevail. One is about personal liberty, the other is more about you handing over your identity to a central authority.

Nicolas Carter: Moving on to the topic of stablecoin CBDC, which is the most attractive topic for me. Just on the topic of the level of spending we've seen in the last two years, I'm disappointed by Republicans in Congress who, in my opinion, have not resisted the massive fiscal shock we've seen since 2020.