Ethereum co-creator and founder of Cardano , Charles Hoskinson, said that a long-term chain reaction to central bank monetary policies was about to drain small and medium-sized businesses - while strengthening and supporting Wall Street and the wealthy. As countries make their way through an impending recession or depression, Hoskinson argues that cryptocurrencies will have the opportunity to challenge the existing financial system.

The CEO of IOHK, who is the research arm behind Cardano , a blockchain-based platform designed for the transparent transfer of digital funds across borders using the Ada cryptocurrency, Hoskinson says that the working class and the poor are required to bear the brunt of the fallout from an asymmetric depression because of the drastic measures used to stop the spread of the virus.

In an interview on the FinancialFox, where Hoskinson takes stock of recent Cardano developments , he takes a look at the macroeconomic situation to assess how things can turn out.

Coming soon: serious economic consequences that will hit the least privileged groups.

While the consequences will be disastrous, they will also open up an opportunity for cryptocurrencies to emerge and lay the groundwork for a new, fairer system.

Said Hoskinson,

"If you shut down all of your supply chains, your restaurants, your entertainment industry and start saying that elective procedures are no longer allowed to be done in hospitals, what ends up happening is that you take away a very important part of your economy. Then they cannot pay their rent. Then the owners are in trouble. You have a credit crunch happening and, of course, consumer spending is starting to tighten everywhere. People stop buying cars.

Obviously, there is no vacation right now, so all of the hotels are injured. The entire travel industry is hurt, and then the people who work in these industries have no more disposable income. So they stop buying things. So the luxury goods market is collapsing and these people are suffering. So you have this wave of wave of things happening until you finally push the economy into a depression. "

Hoskinson says it became clear in February that the bottlenecks in Italy would end up having a major impact on small and medium-sized businesses, the middle class and the poor.

“What is really strange, however, is that there is this counter-cyclical push where the stock market is going up in value. And the main reason for this is that central banks are just printing money en masse and emptying it into the economy.

So basically big companies get a bailout, and that's why their stocks are doing quite well, especially tech companies, because they also have the huge spike in people staying at home consuming their services. So Netflix and Google, they do pretty well in this stuff. But big companies and small companies are just devastated.

New York has about 20,000 restaurants. As a result, about 10,000 businesses will close, if not more. Most are small businesses. The agricultural sector in the United States is also devastated. They have told farmers to slaughter their cattle, their sheep, their pigs. They receive very little money for it, and it doesn't even enter the food supply chain.

So it's an asymmetric depression where the wealthy are doing pretty well, and the big companies are doing pretty well and will end up making big profits. There is going to be a lot of consolidation from that. But small businesses are devastated by these closings. It is extremely hard for them. "

Hoskinson predicts that it will take another six to nine months to see the real economic impact of the closings.

But no amount of money printed will create productivity, he argues, and a complete belief in today's traditional money will eventually erode.

"These are just numbers on a spreadsheet. And because people will have faith and have confidence, they will believe that money for a short period of time. But over time, they lose confidence and credibility. What ends up happening is that it is actually a transfer of wealth, if not to the poor but to the rich, because the rich have first access to this precious money .

Then they can use it to diversify. As the poor receive leftovers and their purchasing power decreases more and more. "

Calling the reinvention of money a journey, Hoskinson says people will naturally turn to new solutions such as Bitcoin , which he says currently offers a good store of value - like gold.

“The existence of an asset [like Bitcoin] gives you the dimension of freedom you need to launch monetary innovation and start exploring and creating stable coins and all kinds of financial products that could become replacements in dollars. ”

The capacity of the cryptocurrency replace fiat currencies will depend on its ability to create credit and effectively exploit the principles of modern financial services that allow people who don ' have not the capital they have need to buy wholesale assets, such as houses and cars, to borrow money and to charge interest lenders. But that will require that cryptocurrencies lose their defining trait: sensitivity to epic price fluctuations.

“Credit-debt is a very difficult thing to practice, to institutionalize. This requires stable money because [the lender] has to be repaid in something with a predictable value over time. "

Hoskinson names Nexo and Celsius as two examples of platforms that reinvent money and lay the groundwork for new crypto-based financial services.

"So, unless cryptocurrencies allow an alternative credit system to the current banking system, they will never replace it. But we are doing enough monetary innovation where there is a very good reality where I think that within 5 to 10 years, we will have a legitimate stable currency and that we will really be able to obtain good stability in our ecosystem. "