Finding himself with time on his hands during Covid, actor Ben McKenzie started to ponder crypto currencies.
Before he started his acting career, McKenzie got a degree in economics. When a friend suggested he invest in crypto, he took a good look at the data and gave it a pass.
McKenzie has spent two years investigating the industry with journalist Jacob Silverman.
Their new book is called Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud.
Ben McKenzie Photo: ALBERTO E. RODRIGUEZ
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In the midst of Covid in 2021 crypto currency and NFTs were everywhere, he tells Afternoons.
“It was the era of memes, stocks and cryptocurrencies and NFTs.
“And none of it really made sense until I did my homework and realised that we were in effectively a bubble.”
The bubble had its roots in the wake of the 2008 subprime crash, he says.
“The reaction to the subprime crisis were sort of manifesting in 2021 in the most sort of absurd way possible with people buying links to receipts for JPEGs, stored on blockchains, which is what NFTs are, or buying these ephemeral digital assets, that really had no value. It was quite a trip.”
So, he got in touch with journalist Jacob Silverman and began “a two-year odyssey to unpack what was really going on with crypto.”
Silverman had written an article Even Donald Trump knows Bitcoin is a scam, he says.
“Which I thought was quite funny and brought together a few things that I was thinking about, not just crypto, but casino capitalism and also the golden age of fraud, best personified perhaps by Donald Trump.”
He was worried that Silverman would see him as a dilettante actor, he says.
“But the truth is that Jacob helped me understand that at the end of the day, actually one of my superpowers, perhaps my only superpower, really, was that I was on television, and therefore people would talk to me.
“And sure enough, they did.”
He was also reading his daughter the Emperor’s New Clothes at this time, he says.
“Two things stuck with me. The first is that the tricksters, the essential sort of genius of the tailors is that they appeal to status worship and ego on behalf of the adults.
“And so, adult after adult is tricked into believing that these clothes that they weave are real because they don't want to look stupid.
“And the second thing that I had forgotten was that at the end of the day it's a child that calls out the lie. The only person brave enough to speak truth is someone that doesn't know he's being brave, he's simply telling the truth.
“It was hard not to see myself as that child.”
He’d already detected crypto red flags some years earlier, he says.
“And the first was actually the word currency. Words have meaning. I'm the storyteller, words are our tools.
“And words can be used to educate or entertain, but they can also be used to deceive. And economically speaking, these are not currencies, I cannot stress that enough.
“In economics, currencies do things, they're a medium of exchange, you use them to buy and sell things.
“They're a unit of account, you can use them to run your books, and they're a store of value, meaning their value stays relatively consistent over time.”
Cryptocurrencies do none of these three things, he says.
“They weren't being used as money, they were being used as a form of investment, people were putting real money into them, hoping to make real money off of them, through no work of their own.
“Under American law, that's an investment contract more precisely, it's a security, and securities have been regulated since the 1930s.
“But it seemed as though these cryptocurrencies were out there in a more or less unregulated state, being sold through overseas exchanges, themselves unregulated.
“As soon as I started looking into it, well, it looked as though we were headed toward the iceberg, I was on the Titanic and we were headed to the iceberg and I was searching desperately for the captain only to realise there was no captain.”
Get-rich-quick schemes are as old as money itself, he says, but crypto does real harm in the real world.
“Besides regular folks who have lost a lot of money, unfortunately, some of them, their lives have been ruined by this.
“In addition to that crypto's other use case besides gambling is crime. Crypto can be used for amongst other things, ransomware, terrorist financing, money laundering, sanctions evasion, tax evasion, and the like.
“So, some of the worst people in the world, I would argue are benefiting from this system.”
Easy Money book cover Photo: supplied
The conditions were rife for crypto, as central banks’ policies of quantitative easing throughout the world weakened traditional currencies, he says.
“It's a really a predatory financial story, right? It starts from a premise that most of us can agree upon, which is that our current financial system is deeply flawed.
“Those flaws were obvious, some of those flaws were exposed during the subprime crisis, but then it pivots, crypto pivots to say that crypto can solve it - and that's really the con there. That's the trick.”
Essentially crypto is a huge Ponzi, he says.
“Economically speaking, the price that's being quoted in the speculative asset isn't based on any fundamental value.
“It's not based on a revenue stream of a company or something like that. It's based on what's called ‘greater fool theory’, the ability for you to sell whatever you've just bought to someone who's a greater fool than yourself.
“It's all fun and games until you run out of fools.”
As other celebrities were spruiking crypto, he found himself on the outer, he says.
“I actually think I know what I'm talking about when it comes to crypto. I'm uniquely positioned in the sense that I understand a bit about money and I understand a bit about lying as an actor.”
The book marks a bizarre time in history, he says.
“I would hope that people picking it up will just enjoy it for what it is, a kind of a rip-roaring yarn, or that's the intention, of a particularly bizarre moment in the history of money when we were making up these things that we called money, that actually weren't.
“It's quite funny to look at it even just a year, after the fact, and see how easily we can all be fooled. It's incredible.”