AMU In Public Safety Matters Podcast Public Safety

How Bitcoin and Cryptocurrency Can Mitigate Inflation

Podcast featuring Buster Nicholsonmanager of Public Sector Outreach and
Mayor Scott Conger, Jackson, Tennessee

Inflation rates are skyrocketing. In this episode, AMU’s Buster Nicholson talks to Mayor Scott Conger of Jackson, Tennessee about his initiative to invest in and educate his constituents about investing in Bitcoin and cryptocurrency to hedge inflation. Learn about the potential of digital funds, the city’s efforts to educate people about cryptocurrency, and how its adoption could benefit municipalities and lead to the evolution of our monetary system.

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Buster Nicholson: Well, welcome to another episode of In Public Safety. I’m your host Buster Nicholson. Today I have with me Mayor Scott Conger. Scott was elected Mayor of Jackson on June 18th, 2019, with 63.2% of the vote in a runoff election. Scott is the third member of his family to serve as Mayor of Jackson.

Mayor Conger served as the President and CEO of United Way of West Tennessee from 2015 to 2019. He also served on the boards for Jackson Downtown Development Corporation, the Jackson Area Chamber of Commerce, Area Relief Ministries, The Salvation Army, and WLJT-DTV public television for West Tennessee. Welcome Mayor Conger and thanks for speaking with me today.

Scott Conger: Oh, thanks for having me on. Looking forward to it.

Buster Nicholson: All right. I got hold of you maybe about a month ago to basically discuss Bitcoin and your interest in blockchain technology. And I just wanted to ask, what drew you to blockchain technology?

Scott Conger: I really started looking into it, probably the height of the pandemic. We call it the height now, I guess 2020 early 2021. Started doing some personal interest for what it could do as far as investing. And then kind of a happenstance tongue-in-cheek tweet one day from one of my friends that included a Mayor Suarez from Miami, really opened up a conversation about what that can look like at the city level, and then started doing some more research on how we could introduce that at Jackson and the city of Jackson and what it can look like in the future. And it really started taking off from there.

Buster Nicholson: Wow, that sounds great. I got interested in it myself around the same time, so I guess the shutdowns caused people to really look around and see what was out there. And that was kind of like my driver as well. I just got interested in it. Had a little more time on my hands and said, what is this blockchain? What is crypto?

Scott Conger: I wasn’t going to events like normal Mayors do. Weren’t having them. And so I gave a lot more time at home, a lot more time in the office and got to look into things that could possibly benefit the city.

[Podcast: Municipal Innovation in Innisfil: Cryptocurrency and On-Demand Transit]

Buster Nicholson: Excellent. So I wanted to just talk about an issue that is definitely, I think, on the minds of many Americans is inflation. And right now it’s red hot at the time of our conversation. I think the numbers for December were a 7% increase in inflation. So, one definition of inflation is too much money chasing too few goods, and you’ve been quoted as saying that Bitcoin is the only answer to inflation. Can you explain what Bitcoin does to mitigate inflation and what that looks like with the public’s day-to-day economic transactions?

Scott Conger: I think looking at what the federal government has done over the past two or three years since the pandemic started of stimulus packages, investment acts, the continual print of money. And so you see that the only thing that it’s guaranteed to do is drive the value of the dollar down. If you seemly have an infinite supply and not worried about where the money’s coming from. I think looking at Bitcoin, knowing that it’s completely decentralized, that no government, no individual, no company has a hold on being able to print more—that 21 million will only ever be mined.

I think that really shows what it is, the hedge against inflation. And what really got my attention on that was the same friend who got me connected with Mayor Suarez has a fence company. And we were talking last year, he said, “If I look at the cost of lumber to put up a fence and I look at it in U.S. dollars from 2020 to 21 at the time, he said, it’s way more expensive. But if I look at it in terms of SATs, it’s actually cheaper.

Buster Nicholson: That’s good. And then just for the audience out there, SATs is Satoshi. So they are incremental fractions of Bitcoin or any crypto. That’s good. That’s good. So your friend got you into it. A lot of us “friends,” I’m doing air quotes with my fingers, get other people into crypto. We like to spread that around.

Scott Conger: Absolutely. Once you get your eyes open to it, you want to tell people about it.

Buster Nicholson: Right. Right, exactly. So I’ve told a lot of people about it and I’ll keep doing it. And that’s for the reasons that you said. It is a finite resource. 21 million Bitcoins. They’ll never be anymore. And that to me does give it an edge over Fiat money. We know that Fiat money, it has a life span and it’s around 50 years. And one little factoid is that every Fiat that’s ever been printed, which means it’s backed by nothing, Fiat meaning faith, has failed. Not one has lived on.

Scott Conger: Absolutely. And if you look at just the evolutionary cycle of currency, if currency never evolved, we’d still be trading in sea shells.

Buster Nicholson: That’s right. That’s good. That’s true. That’s a good way to look at it. If you go all the way back, people probably traded in feathers and eggs. Not very efficient way to do business.

So, the innovation of Bitcoin, as you mentioned, it’s a creation of an open, permissionless, secure, fair network, and it creates a digital property through proof of work, which is mining. So how would you contrast that, BTC or Bitcoin blockchain, to our current centralized monetary system run by the Federal Reserve? You spoke about that a little bit, but where do you see that going, considering that it seems like ad infinitum this currency can be created.

Scott Conger: We’re getting to a point now, I think the adoption piece of utilizing Bitcoin will be local level on up. Grassroots, local government, state government onto the federal government. The regulation piece will have to come from the federal government and there has to be a good conversation on what that looks like. How can it be utilized? How can the monetary system begin to evolve from just being able to print dollars and utilizing the U.S. dollar. 7% inflation means that the dollar’s less 7% valuable than it was two months ago. And so we’ll get to a point where the cost of goods, with every inflationary cycle, the last thing to catch up to inflation are wages.

And so you see the crunch from people who are struggling with the cost of inflation going up with everything. And so you either say we’re going to stop printing money and have another monetary system that’s going to take hold at a very organic level. And I think that’s what we’re starting to see now.

We’re still very, very early in the Bitcoin adoption and crypto currency, but the more people talking about it, the more local government, state government, federally elected officials start talking about it, then I think that you can see the light bulbs lighting up and the change start to slowly happen.

Buster Nicholson: Yeah, I do agree with you. We’re very early. Under 5% of citizens own crypto. So that’s real early in the change. And I do agree with you. There’s going to be a shift, there’s going to be a change. And I often wonder, how could the dollar exist alongside Bitcoin? Would it be a situation that looks like that? And it’s anybody’s guess. Or would something be based on Bitcoin maybe as an international store of value? There’s a lot of speculation out there as to where this is all going.

Scott Conger: Yeah. I think people a lot smarter than me will have to figure that out what that looks like.

Buster Nicholson: Me too, because it gets up there in this lexicon that I’m not real familiar with in the financial world.

Scott Conger: Yes.

Buster Nicholson: You’ve mentioned in previous interviews, you talked about a little bit here about using Bitcoin and maybe that’s the planning the dollar or going alongside it. But you’ve mentioned in other interviews you’ve done that you would like to expand the investment options for Jackson employees to include dollar cost average into Bitcoin. So how’s that ever going? Have you started that? Have you looked deeper into that?

Scott Conger: Yeah, we’ve looked deeper into it. Right now we are in the process. We have our request for proposals out with third-party vendors. And so here in Tennessee, we’re still restricted by our state laws on what governments can hold. Cryptocurrency and Bitcoin being something that is not on the list. So, we can’t hold it, so it means that we cannot pay employees, we can’t hold on our balance sheet at all.

And so we mimic the request for proposal very similarly to what we have for our IRA investment portfolio strategy for our employees and so this will give them the opportunity. One thing that we really focused on was the investment and the education piece. We want to make sure that our employees knew that this wasn’t a day-trading opportunity, a get rich quick scheme, that they want to invest to make sound investments for the long term to create that hedge against future inflation.

And so that’s one key element of that. We want to make sure and educate our employees. And I’ve had some employees that are all in. “Hey, let me know when we start. I’m in.” Some that have been very hesitant and some just say, “I have no idea. I’m interested in it. I’d like to talk about it, but I don’t know where to start.”

And so that’s where we thought it was very important to start with that so whoever is our third-party vendor that we contract with, they will be tasked with providing some workshops and seminars and educational material for our employees so that once they get paid in U.S. dollars from us, then they can use their payroll deduction option to enter that into a crypto wallet and make those investments in what they want.

Buster Nicholson: That is wonderful to hear. That is very progressive, very forward thinking for a city to do that. And the education piece is critical. Warren Buffet said that if you are not going to invest into something for 10 years, don’t invest in it for 10 minutes. The education part of knowing that Bitcoin has gone up on the average 173% a year on the average, since its inception in 2009 is pretty impressive. And just letting people know that this isn’t about the day to day stuff you hear on the news. Oh, it’s down, it’s up, it’s down. When in doubt, zoom out. What has it done for the past 10 years?

Scott Conger: Yeah, I think it’s really easy to get lost in the short-term volatility and not look at the long-term horizon of what the potential is. And especially over the last three to four years on that appreciation value. I think from inception, we’re at about 274,000% increase in value. That’s pretty good.

Buster Nicholson: That’s great news. Glad to hear that you’re definitely leading the way on that, your city, and congratulations for starting that.

Scott Conger: And hopefully for us, we start here, we start with what we can manage and have the control of with our employees. And hopefully this leads to a greater conversation with businesses. We will have an option as well, utilizing the same third party that, by chance, if a company says, “Hey, we’d rather be paid in Bitcoin or whatever,” then we can still pay immediate conversion. So if that short-term volatility is real, so we do immediate conversion. We pay in USD. The immediate conversion over with a third party vendor to allow them if they do want to get paid in that then they have that option as well.

Buster Nicholson: That’s great. Immediate conversion is critical. I agree. So tell me a little bit about the blockchain task force.

Scott Conger: We established that, all my days run together now, last year to look at how we can start implementing and introducing and educating people about cryptocurrency, Bitcoin, and overall what that future economy looks like.

We had two schools of thought on how to introduce this into Jackson. One was what we’re doing now, having the option for the employees. I’ll take you back to when I first looked at it, my original thought was, “Hey, we have some vacant space in city hall, very well ventilated. How about we spend some money, get some miners, set them down there and just let it mine in the off-peak hours.” Comptroller’s office quickly told me that wasn’t an option. So then how do we do that?

And that was one and the other was, could we open up to take our property taxes in Bitcoin if we wanted to? And that would be the same third party idea when we would look at, what would be the most beneficial and what would be have the greatest impact now, and then moving forward, realizing with the short-term volatility of Bitcoin and cryptocurrency that people paying property taxes probably wouldn’t happen.

We’d spend a lot of time and energy on infrastructure for that payment that wouldn’t net a lot of results. And so, what can we do today to better set ourselves up for those opportunities in the future? And I think the education piece of our employees, and then venturing out, hopefully, to more citizens to talk about it, to have the education for the employees to see, “Hey, this is a long-term sound investment in dollar cost average. Anyone can do it. You don’t have to have $44,000 to buy an entire coin. You can buy fractions of it for whatever you can afford, and you can still see that appreciation over time.”

Buster Nicholson: Exactly. And that is where people get confused a lot. They see this, it’s $44,000 today and can’t afford that. Well, a lot of people don’t understand that you can get small fractions of a coin. And like you said, stacking your SATs and that’s the name of the game.

Scott Conger: Oh, absolutely. And as you start stacking and see more appreciation. I did an interview a couple weeks ago and said, “Well, today the value is X and people who bought it a month ago at this, they haven’t seen any return.” Well, you’re only going to see a loss on your investment if you remove your investment and try to cash out. If you hold your investment, then you’ll see the eventual appreciation of it. Whether it was a short-term dip or not.

Buster Nicholson: Right. You don’t lose money until you sell.

Scott Conger: Right.

Buster Nicholson: Mayor, we talked a little bit about Bitcoin, but I’m really into alt coins myself. I love Polkadot, Chainlink, THETA, TFUEL. I see a lot of potential in many other coins. Maybe not to be used as currencies, but they are going to become the infrastructure or the backbone of what is called Web3. Do you like any alt coins? Do you have any alt coins? Tell me a little bit about what you see as valuable in the alt-coin space.

Scott Conger: Yeah, I don’t dive much into alt coins. I don’t own any, I’m focused on Bitcoin. Not that I have anything against alt coins, there are just so many of them. It seems like every day there’s a new alt coin or five, and you’re really trying to figure out what the best hedge is.

And for me, the mindset of an alt coin right now, I could be totally wrong. I’ve been proven wrong at least five of times today, is still thinking in that Fiat transaction mindset of, if someone is going to invest or it’s almost like I’m going to invest when it’s 0.008 on a dollar. And then when it gets to a dollar, I make money and cash out.

If we’re looking at a currency transition and we’re looking at the future of hedging inflation and what sound monetary policy and investment and future is, and I think that Bitcoin still holds that. Now, I think at some point there will be alt coin, whether it’s Ethereum or Polkadot or some of the ones that you mentioned, will come out alongside Bitcoin and it may be that Bitcoin is the standard. And then there’s a currency base that you spend on a daily outside of Bitcoin and you hold your Bitcoin as your store of value and then your currency exchange is another platform.

But, if I’m looking at the monetary viability and future of it, then I’m still holding Bitcoin and that’s until I can see something that just really piques my interest. It may be something to come alongside that. That’s where I’m going to stay at the moment.

Buster Nicholson: Sure, sure. And my brother-in-law is a Bitcoin maximalist and I think that’s a great strategy because it’s proven. It’s been around a while. A lot of these alt coins kind of took root around 2017, 2018. So they’re very, very new to the game. But as far as a Bitcoin maximalist, I agree with that strategy for sure, it’s a good strategy.

Scott Conger: Knowing that there is 21 million that’s ever going to be mined. And I’m just not well versed enough in the alt coins that it almost has the feeling to me, if there’s a finite supply, that’s where your value is. It’s where we’ve got into the issues with the US dollars. It seems there is no finite supply. There is no end in sight. And that’s where the value tends to decrease.

Buster Nicholson: Yes, I agree. And people do look at Bitcoin and cryptocurrency because they see the volatility, they say, “Oh, that’s somewhat risky.” But my response to anybody that makes that point is, “Well, nobody knew they were going to print 35% of all existing federal dollars in 2020. Basically in one year.” So I think holding Fiat, and the bank is risky as well. I mean, when they could just turn the spigot on at a whim, it seems to me that’s a bit of a risk.

Scott Conger: Well, I think the volatility is a concern just as an excuse. When the stock market dips, no one blinks an eye. It’s part of the cycle. When the stock market crashed in 2008, it was just “Wait, it’ll come back.” Because it’s what we’re used to. And so the newness of it, and when people are afraid of new, they find reasons not to buy into it, not to see the validity to it. And sometimes the arguments don’t really make sense.

Buster Nicholson: True. True. I agree. And you’re right, it is so new. And it’s going to take a few years for people to get used to how the market moves. There could be a 20% change in a single day with Bitcoin, but I think that’ll settle out as the years go on.

Scott Conger: Well, I think you see the volatility goes from the day trades. People treating it like the stock market of hedging bets. “Oh, it’s getting to a point, let me sell high, buy low,” and not seeing it as the monetary system that it’s made to be. As the mass adoption continues to take and we see more people looking at it, then I think that’s where it levels out when people are not trying to get rich quick off of it and playing the peaks and valleys.

Buster Nicholson: That’s a good segue to my next question, because I believe mass adoption and the actual use of Bitcoin is critical to its health, its financial health, in the future. And you know, El Salvador just did that. So I’d like to talk a little bit about them. The International Monetary Fund, they called for El Salvador to drop Bitcoin as legal tender. And it seems that using Bitcoin as legal tender seems to ruffle the feathers of the money printers. And we know the dollar is losing purchasing power every year due to inflation. So why would you think that the IMF is so concerned about El Salvador and how can a town like Jackson possibly join El Salvador in spreading Bitcoin as legal tender?

Scott Conger: Well, I think it challenges the way we’ve always done it. The short answer. That’s the rub. I don’t know that specific cities can look at legal tender. We can look at adoption and the education, but that would have to be, like I said, the adoption piece and the regulation piece would have to be federal down, just because we all do so much interstate commerce. I try my best. I’m not a shopping person. I don’t go to the store. Even my local shopping, I do online. But there’s so much interstate commerce through online purchases and business now. I think one locality here in the United States adopting legal tender different from others would create an issue. And we see that with other laws too, that we do this here, it doesn’t work over here because no one’s adopted anywhere else. And so there has to be a reciprocity to it.

Buster Nicholson: Yeah. I agree. Reciprocity is key in many areas of government and definitely in the financial sector. So I’m going to put you on the spot here. What is Bitcoin worth, one coin, five years from now?

Scott Conger: Five years from now I would probably say half a million dollars at least.

Buster Nicholson: Hey, I like that. That’s good. And you know what? You’re probably not too far off because right now Bitcoin has, I think, a one and a half trillion dollar market cap. I saw a statistic or just a numbers projection that if it hit $7 trillion market cap, a Bitcoin will be worth $300,000. So right now gold is $12 trillion I believe. So that’s not too far off from gold. And considering Bitcoin is digital gold, maybe five years from now we’ll hit $7 trillion, $8 trillion market cap.

Scott Conger: I think we’ve seen the lowest floor right now. Once we reach our new floors, I think the lowest 39 maybe in the past couple months. So the floors are getting higher, which means that the ceilings will continue to get higher as well.

Buster Nicholson: Right. Right. So you want higher and as you move along and just keep that incline moving over the long run.

Scott Conger: Absolutely. I think, just going back to the arguments of Bitcoin, the skepticism. I had someone tell me, “You know what? It’s not real money. It’s all digital. You can’t hold it.” And I ask them, “Well, when was the last time you held $5 in your hand?” What we’re doing now is all digital. If everyone in town went to the bank and went to withdraw all their money, then it would cause mass chaos.

Buster Nicholson: No, I agree. And that portion of every blockchain, every coin, every connection of blocks in the data, they are unique and they can’t be counterfeited. And I think that’s a critical piece of this, the explanation of blockchain and how that works. And I think that would cause people to even get more confidence when they say, “Well, it’s not backed by anything.” Well, not really. Because electricity had to validate these transactions and that’s what mining is. So yes, proof of work, work was put into this. Energy and time.

Scott Conger: Absolutely.

Buster Nicholson: Did you have anything else you wanted to say about crypto or any parting thoughts?

Scott Conger: It brings people together. One question was I asked at one point, somebody asked me about party lines. This is one thing I think in a divided, politically divided nation, especially as we are today, where every issue I think seems to go to politics for whatever reason now, this is one issue where you see both people on both sides of the aisle that can see the monetary value of it and what’s going on with our monetary system.

There’s a huge viability to it. But those at the federal level, see those bipartisan caucuses popping up and they’re looking at how we can move forward. The state level as well. I’m actually headed to the Capitol Hill in Nashville this week to talk about what we’re doing here locally and what that can look like potentially across the state. And so, I think this is one of those unifying ideas that goes beyond what we’ve ever known.

This is something very new in our lifetime, but I think something that can unify people, what they have been separated on, on many issues. Knowing that we need to fix our monetary system is one issue I think we all can agree on. And then finding a way to repair that monetary system I think is going to look at the evolution of our monetary system.

And we just want to be a small part of it here in Jackson. We want to look at that next generation economy, the next generation of jobs, whether that be Bitcoin miners, those that deal in the blockchain, those that look in those tech industries. And that’s what we’re here for. My goal as Mayor of Jackson is to get up every day and make sure when I go to bed at night, that Jackson’s just a little bit better than it was when I woke up.

Buster Nicholson: I like that. Awesome, Mayor. That’s a great way to end our conversation. And I really appreciate you taking the time to sit down with me. Talk about a subject that’s near and dear to my heart. I will definitely be keeping tabs on Jackson, seeing where you’re going with that. And I would love to speak to you again in the future, maybe about a year from now and check in to see how that’s going.

Scott Conger: Absolutely. No, thanks for having me on and look forward to talking to you again.

Buster Nicholson: Absolutely. Thank you. And thank you to everybody for listening to the conversation out there. I hope you have a wonderful day and stay safe.

Buster Nicholson is a manager of Public Sector Outreach. He has an M.A. in Public Administration and has worked as a public school teacher, analyst for the U.S. Secret Service, a town administrator, and a director of public works. At AMU, he works with directors and staff in state and local government to facilitate leadership growth through education and professional development.

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