This week’s post is the fifth of a monthly series of open-discussion posts focusing on books I’ve written. Our theme for the present is Mystery Teachings from the Living Earth, and this week we’re discussing “The Fifth Law: The Law of Cause and Effect” (pp. 54-62). It so happens that just now the Fifth Law is particularly newsworthy, for a reason we’ll get to in a moment.
Here’s the Fifth Law, as it appears in the book:
Everything that exists is the effect of causes at work in the whole system of which each thing is a part, and becomes in turn the cause of effects elsewhere in the whole system. In these workings of cause and effect, there must always be a similarity of kind between an effect and at least one of its causes, just as there must be a similarity of scale between an effect and the sum total of its causes.
That sounds pretty obvious, doesn’t it? Once you’ve read the section of the book we’re discussing, with its commentary on the way people like to ignore the Law of Cause and Effect when it comes to money, turn to your favorite source of financial news and read the latest on the Bitcoin bubble.
Yes, it’s a bubble. It doesn’t matter a lick whether or not Bitcoin or the other cryptocurrencies are brilliant innovations with a long future ahead of them; plenty of the companies whose stocks went up like a rocket in the 1920s boom also had a long and prosperous future ahead of them, and the people who invested in them in 1928 and 1929 lost their shirts anyway. The price of Bitcoin isn’t soaring into low earth orbit because of its actual prospects. The price of Bitcoin is soaring into low earth orbit because a great many people who think they can get money for nothing are cashing in their other investments and using the proceeds to buy Bitcoins. Once the supply of suckers runs out, so will the bubble, and never—not one single time in the history of finance—has a bubble like this one ended without a messy crash.
We could get into a long discussion about the difference between money and wealth—they’re not at all the same thing, you know—and the way that people confuse an increase in the price of a speculative asset with the theoretical increase in wealth they could have if they could extract the value of that asset without crashing the price (which, of course, they can’t). Still, the section of Mystery Teachings from the Living Earth we’re discussing this week covers the basics of that; I’ve written more extensively about the same subject, too, in my book The Wealth of Nature and in the latest volume of the collected Archdruid Report essays, so I’ll let that pass for now, and put in a brief public service announcement instead:
If you have any money you can’t afford to lose in Bitcoin or any other cryptocurrency, you need to cash out and walk away, right now.
Don’t fool yourself into thinking that since you know it’s a bubble, you can time the market and cash in before the bottom drops out. Everyone thinks that. What will happen is that at some point in the weeks or months ahead—and it’s impossible to predict when—one of those sudden dips in price will keep on going down, and before you realize it’s not just another dip, you won’t be able to cash out without taking a serious loss. Then it’ll go up again, but it’ll never reach its previous high, and right around the time you’re starting to think that the trouble’s over and you can take your profits, it’ll lurch downward again, hard. Rinse and repeat; by the time it bottoms out a Bitcoin will be worth maybe thirty or forty dollars, if it’s worth anything at all, and you’ll be bankrupt. (Shares in General Motors, the Microsoft of its era, sold for nine dollars and change once the 1929 crash bottomed out; some of the other hot stocks of the period ended up worth precisely zero, because the issuing companies folded.)
People are taking out second mortgages on their homes to invest the proceeds in Bitcoins. In a sane market, that doesn’t happen—and that kind of idiocy is the only warning you’ll get.
Let’s make this even simpler.
If you have money in Bitcoin, get out.
And if, dear reader, you’re sitting comfortably on the sidelines watching this latest example of our species’ propensity for giddy financial idiocy, I encourage you to get the popcorn popping, pour yourself a beer, and settle back with a copy of John Kenneth Galbraith’s brilliant and funny history of the end of the Roaring Twenties, The Great Crash 1929. I promise you you’ll find the parallels educational.
With that, we can return to the central theme of this week’s post, the current section of Mystery Teachings from the Living Earth. Questions? Comments? Discussions? Have at it—subject, of course, to the usual rules.