In the next section, Meister tries to develop tools by which justice-seeking movements could extract amounts of money to, in turn, generate liquidity for themselves, something that governments, hardly interested in justice, are unlikely to want to do. Thus, movements could become the gravedigger of the financial system, in the sense that Marx spoke of. The question is whether such movements would not be suppressed, and Meister rightly points out in this context the connection between the financial industry of producing collateral and the state/private security industry.
The amounts paid to maintain liquidity in the markets always include the present value of a hedge against the event of non-accumulation through revolution or financial sabotage. In politically turbulent times, part of the cost of maintaining liquidity would then be the expense of the security industry fighting anti-capitalist movements through the police, surveillance, and encryption industries.
There is a probabilistic mode of governance that leads to predictions, and there is a possible mode that can lead to anticipations. The latter refers to the imagination of a low probability, but when it occurs, it results in drastic consequences that damage security. The data analytics of the security industries, which also have their purpose in visualizing coming disasters in advance, are less concerned with an actuarial use of assigning probabilities to risks in order to minimize them. Predictive visualization is more a way to take advantage of changing views of risks today. This is found in pricing financial assets based on the current uncertainty of whether past probabilities might be a guide to future probabilities. Here, perhaps an analogy can be made between the logic of derivatives in finance, which always consists in the ex ante visualization of threats to liquidity, and the logic of the security state, which always acts ex ante on threats to security.
In financial markets today, one also tries to model the possible event of illiquidity that can occur, for example, through hacking or terrorist attacks. In the last instance, however, the liquidity of the financial system is linked to trust, and precisely to trust in its security industry, and it is this that should contain the possibility of visualizing (in order to prevent) the collapse of the system ex ante. For Meister, there is a link between the contingent aspects of liquidity and the uncertainty of whether markets survive.
The idea that a sudden illiquidity of markets, caused either by sabotage or revolution, could destroy accumulated wealth also indicates that capital’s fear that it might self-destruct, rather than precisely its blindness to this possibility, could be used by opponents of the system to democratize finance. The option for historical justice is useless only if one assumes that there is no liquidity premium that can be claimed by revolutionary movements precisely in politically and financially unstable situations. Very much, the liquidity provided by the state to the financial markets had a price, but the rescued banks did not have to pay it, because demanding payment would only have further shaken confidence in the markets. Ultimately, capital owners were bailed out on national security grounds, and those who lost their homes were sent packing.
There is a national consensus in the United States today that maintaining liquidity in global financial markets is essential to U.S. national security. Financial markets would have recovered nowhere near as quickly after the crisis if investors had not assumed that the U.S. government had not learned to protect markets from cyber attacks since 9/11. Meister asks what are the deviant patterns in real-time data markets that serve as legitimacy for governments to keep current asset values from free-falling. If these patterns were publicly known, then again they could be secretly replicated or redirected by hackers. Therefore, they are known to be unknown except to those to whom they must be known entirely to guarantee our security. The public knows and does not know that since 2001, metadata can be used to trigger the persistence of markets.
Financial markets could not have fully recovered after 2008 if the public did not believe that governments could secure markets from attack, with continued clarity that governments will not protect everyone who invests from losses. But then, if governments are not responsible for what they have saved, why is it not reasonable to believe that financial markets can be hacked, and perhaps even by their protectors? One need not believe that the metadata used for trades to maintain security in the markets is not available to powerful aides of the political elite to generate profits. Hasn’t Wall Street hacked itself long ago, Meister asks. That cybersecurity experts do not intervene on behalf of private interests seems rather implausible. Hayek’s assumption that a decentralized market is more secure than any other system seems rather odd today, because no data on transactions can be cleared faster than the markets‘ instantaneous assimilation of all known data to generate prices. Indeed, one supposes that there could be a computer simulation of finance, a meta-market that is safer than the financial market, and that could be used to hedge it. But if the financial market can still be hacked or sabotaged, why shouldn’t it be able to be socialized, asks Meister succinctly.
Justice as an option implies that the value of the market can be enhanced by any threat, whether politically motivated or not, in that the option denaturalizes the demand for safe and robust markets. Government provision of security and liquidity are two sides of the same coin. Both secure the value of existing values of financial assets, and both have a price and require an underlying machine that is hidden from public view.
Organized movements, such as the student debt strike movement, whose success could threaten the liquidity of capital markets, are accused of sabotage, just like workers who strike. For Meister, sabotage must be democratically organized and thus legitimized. Meister returns at this point to Randy Martin, who distinguishes between those in the markets who are capable of managing risk and those who are merely at risk, that is, unable to take on risk.
If financial markets can navigate between cloud computing and state control, then the former would be a point for revolutionary movements to politicize. For this, the Internet should be neither state nor private, Neither state control nor the private cash nexus, therein lies the first watchword.
Meister then goes into more detail about cryptocurrencies. First, the issuance of coin is a historically important attribute of state sovereignty, distinguishable from the ability to incur debt, which is secured by the ability to collect taxes in coin, which can then be used to repay the debt. The dollar, for example, is a coin that the U.S. government alone can issue without incurring debt, and it is also a banknote that represents the government’s obligation/obligation, which is indexed to the value of the dollar coin. A large part of the supply of dollars today are deposits created by private banks that can borrow the dollar without having to issue it. They are negotiable debt instruments indexed by government-issued money (money token that does not represent government debt).
This is based on the assumption that the recognition of coins is what constitutes payments and that the issuance of coins is the opposite of the incurrence of debt. On the question of recognition, Karl-Heinz Brodbeck has said all that is necessary; money can exist only by being recognized by everyone, and who recognizes it because everyone recognizes it.
The second requirement is that cryptocurrencies are built on computational cryptography. The biggest advantage of these currencies is to have invented a secure technique to transfer coins and copy them in an account that can be made universally available. A coin, as money, is thus the unit of an account that references transactions, and it is a transactional token that can be hoarded, unlike that money created by the liquidity of credit. The possibility of writing derivatives on these currencies presupposes the distinction between their internal chain use and their external chain use as financial derivatives.
Often, cryptocurrency software experts assume they are more secure than hierarchical systems of account management, which must be constantly matched against exogenously produced tokens such as the U.S. dollar, because of the encryption of the tokens. One shares the protocol but not private passwords, so there is agreement that all copies of a universally shared account are identical. The encryption itself is sufficient; no system of surveillance is needed, which is characteristic of a state security apparatus. Of course, these encryption systems must also be trusted. Such a cryptographic utopia would eliminate the need for a firewall between an Internet that can be hacked and a secure financial system, and would indicate that the existing financial system is only one of many. The concept of smart contracts seeks to eliminate the option of mismatch between contracting parties by reducing its value to zero. But what happens when circumstances have changed for the parties entering into such a contract?
At the same time, and this is also indicated by Bitcoin, its token can be hoarded as a speculative investment by those who trust in the future of this platform. Cryptocurrencies can be traded on par with other financial assets that coexist in the financial system. They can add liquidity to one’s portfolio. It is an investment that can be paid out when these coins are bought as an asset class by official financial institutions, if they are just looking for potential short positions in the future. Even banks like JP Morgan have long been experimenting with blockchain – the best established technology for increasing redundancies, the number of backups – as a form of security. And states themselves, see China, can use the same cryptographic techniques to issue digital coins that are at par with their fiat money.
The question Meister asks at this point is whether a growing acceptance of a plurality of coins or currencies creates new opportunities for stabilizing or destabilizing existing financial relations. And his answer is that this plurality creates opportunities to write options on these opportunities, creating effects outside the community in which they are already accepted. This makes possible new financial and political strategies for arbitrage.
The current revival of the word coin, used to describe a token in a secure messenger system, relates to the traditional distinction between money, which comes from mines and is said to have intrinsic value, and money, which is created in the process of exchange and extended in credit. When cryptocurrency designers seek to operationalize the intrinsic value of their coins, they seek to tie it to a rare resource, as with metal coinage.
Meister explores movements that seek change in capitalism while operating with the current volatility of capital. These movements, of course, create financial opportunities in and for financial institutions to go short or long with respect to the operational effects of the movements, no matter what tactics are now pursued (sabotage, strike, boycott, etc.) An environmental movement might increase the volatility of property rights vis-à-vis homeowners by increasing the risk of taking possession, and it might thus increase the value of hedging against such risk. Meister is also thinking of issuing coins that need to be indexed in terms of a defensible internal metric of value or success for the movement. The question remains, however, whether alternative currencies can be mobilized as a means of anti-capitalist resistance before the movement is suppressed. What if cryptocurrencies and the investments in them were designed as investment instruments to transform the system of financial intermediation that today is still substantially co-determined by the issuance of fiat money? This would be possible through insider trading of their own instruments. Or one would have to leverage the financial fear one generates oneself. Meister says that right-wing movements understand this sort of thing much better than left-wing movements at the moment. You can assume, of course, that states would fight such currencies.
But it’s not mainly about political movements hedging funds to profit from the chaos they might create themselves. The movement needs to create internal value for its supporters and do something meaningful for outsiders. But it must already recognize that there are hedge funds that can profit from exaggerated fears that may result from the success of the movement itself. Shouldn’t such a movement go long itself with regard to these fears in financial institutions?
The strategy proposed here is an alternative to the fantasy that someday some anti-capitalist movement will become viral enough to kill its capitalist host. Rather, it recognizes that financial institutions are already parasitic within capitalism – not just in the usual sense of sucking blood, but because they know how to profit from a threat to assets by treating it as an increase in volatility to bet on within the financial institutions themselves. Normally, the immune responses of capital qua derivatives are sufficient to combat its enemies. But perhaps political movements can still influence volatility and leverage it themselves. When it comes to the shorting of capital by revolutionary movements, this is simply based on the fact that there is no necessary link between the ideological positions of being pro- or anti-capitalist and the financial positions of taking a long or short position on the liquidity of the market.
Meister asks again whether the ability of capital to insure itself (a resource of resilience) could be leveraged from the side of political movements themselves in order to strengthen them, and this also in financial terms. Financial instruments do not have to be spent by the movement itself, it can be third parties that do so, and there can be investors who are not directly involved in the movement and ultimately not interested in its political success.
The movement against climate change implicitly seeks to lower the stock price of Exxon by questioning the current value of the oil industry’s most important asset, namely the option to exploit oil reserves at some undefined future date. In financial terms, this would mean that the tactic of the movement is to make a valuation of this option that includes the political risk of increased future awareness of climate change when its effects become apparent. But one can also write derivatives on the spread between a political threat to liquidity and the historical probability that an event will occur that creates illiquidity. One need not then buy into political movements to profit from their success. Conversely, movements could themselves create tools to profit from a feared threat to liquidity that they themselves might generate. Hacking and joint actions by many participants in financial networks are of course possibilities, but there is also the issue of political legitimacy, without which such actions can be more easily suppressed by capital itself. Capital desperately needs liquidity and constantly imagines threats to it, and it is the task of the anti-capitalist movements to profit parasitically from it.
translated by deepl.
Foto: Bernhard Weber