A theory: how BitCoin will be used as a scapegoat for bad monetary policy

Here’s my conspiracy theory in a nutshell:

The hype of cryptocurrencies is backed by governments and banks (Russia and China are explicitly doing so).  Global market psychology is manipulated by driving up cryptocurrencies with an injection of capital (on the scale of 70%+ of the market cap). The sharp rise in the price of cryptos garners widespread media attention, thus every Tom, Dick and Harry are aware of the crypto craze, piling in to “get rich quick”.

The powers that be then withdraw all their backing at once, causing the market psychology to reverse. They take out all of the 70%+ in market share and all of the gains, which causes an immediate steep loss for the common folk that put in their money at peak hype. The lay-investors scramble for the exits with huge losses and look to the government to protect them from another such bubble (oblivious to the fact the government helped orchestrate it).

Central banks, now armed with the supposed responsibility of preventing another crypto bubble, are now “justified” to hike rates to much higher levels to address the original concerns of cryptocurrencies.  Consequently, federal governments are obligated to increase taxation to help pay the rising interest payments on federal debt if they want to keep all their spending on public programs in place, but can now blame faulty cryptocurrencies and not their poor economic policy.

All the other debt-fueled bubbles collapse. Leverage unwinds and market psychology goes from “buy now or never” to “never catch a falling knife”. Mass recession. Great depression.

Taxpayers accept the cost of higher taxes and higher interest on their record-setting personal loans as they are persuaded it is the solution to avoiding another crypto-inspired panic.  Meanwhile, the government has justified its growth and has an excuse to raise taxes, the central bank justified its power to manipulate rates to its liking, and both can continue to siphon the citizens’ productivity for decades to come all under the illusion of protection.

It’s just a theory, but not as far-fetched as you think.  We can look back in a couple years to see whether there was any truth predicted in this article.

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