Oh, heeeeere's a banger, the creation of which I had a little something to do with.
Jeff Deist, of Ron Paul and Mises Institute fame, is giving the bitcoin treasury companies a shake-down. You guys are off your meds, Mr. Deist concludes.
As with all things Saylor, the jury is still out concerning his status as prescient genius or dangerous madman. But the bitcoin treasury model he pioneered is worthy of closer examination, and not only because it represents a novel form of corporate finance to put it mildly.
"Bitcoin treasury companies challenge our foundational view of how capital markets should operate and the proper use of investor capital by public companies. "
Most Twitteraties and Sailor-bois think "a leverage play on stereoids" is a good think. Thoughtful people like Deist are more skeptical.
Whether these companies are good for bitcoin is one thing, whether they’re good for society is quite another. Issuing debt or equity to buy bitcoin may “work” to the extent bitcoin continues to appreciate against fiat currencies. This is precisely what advocates argue: MicroStrategy and similar companies are simply prudent stewards of corporate assets, managing their treasury function against fiat currency depredations.
these companies engage in nothing less than dangerous financial engineering bordering on Ponzi. They are fiscally reckless, tying up corporate (and investor) capital in a highly speculative and volatile intangible investment. What’s worse, they irresponsibly issue stock and corporate debt the way governments irresponsibly print money
THIS is the massive problem. Financialization isn't a force for good, at least not at this stage in America's pseudo-capitalism:
The “financialization” of modern firms—a concept many purist libertarians reject—is real. And it’s definable. It is broadly described as making money by using money: moving money around instead of producing stuff. It describes a set of economic conditions where ordinary non-financial firms make more profit speculating and investing than innovating. Financialization means firms focus on managing the money they’ve got instead of innovating better and cheaper ways to bring us goods and services.
financialization is also the phenomenon whereby firms artificially change their capital structures (i.e. their mixture of debt and equity) in response to fiscal, monetary, tax, and regulatory policies. In other words, financialization also occurs when corporate managers spend more time worrying about government and financial markets than their own business or industry.
and, hating on bitcoin treasury companies isn't hating on bitcoin itself:
Whether bitcoin treasury companies are part of this broader (and lamentable) trend toward financialization is of course a matter of debate. And the answer doesn’t depend on one’s view of bitcoin more broadly. You can love bitcoin or hate it; believe it’s destined for collapse or headed to the moon as the future global settlement currency. The important issue here is how we want capital markets to work and how we want entrepreneurs to use the capital those markets provide. Saylor and his fellow travelers force us to reconsider both.
Interesting remark, too, that it makes us associate bad forces with capitalism, in part being responsible for Generation Confused (#1290320) hating markets, hashtag NYC.
Financialization, however, is another story– and a bad one. It’s more zero-sum than additive. And potentially destructive. Financialization bolsters the leftwing argument against “capitalism,” namely that it produces a class of undeserving rich, people who became wealthy without any evident benefit to society.