I’m going to try and worry less about the perfect post, and instead try and maybe try to develop a habit of posting at all. We’ll see. In any case, today’s post is short, but has an important message: What you spend your money on today could instead be spent on Bitcoin.

Once upon a time, I bought two steaks for $12.96 at Uwajimaya in Seattle. I cooked them for lunch for me and my date, and they were delicious! But were they worth buying instead of Bitcoin? Let’s take a look.

Ordinarily, I try not to post too much about Bitcoin prices because the story is always the same: The earlier you bought, the higher your return on investment could have been (in dollars). I also don’t want to encourage people to think about dollars as their unit of account, but that will have to be a post for another day.

Bitcoin Pizza Day, May 22 each year, celebrates one of the earliest transactions involving Bitcoin in which a guy paid 10,000 BTC for two pizzas. 10,000 Bitcoin, as is now obvious, makes for pretty expensive pizza. Most people who hear the story for the first time conclude that the guy must feel pretty dumb now. I won’t go into detail on why I think that is the wrong conclusion (because I have a deadline on this post), but those details are beside the point.

For anybody who knows the future of Bitcoin—it’s going up forever—the point is that we all should feel dumb whenever we’re not buying Bitcoin right now. Because in ten years, you’ll wish you’d bought Bitcoin today.

On 4/11/2015, the price of Bitcoin was $237.73, meaning that the $12.96 on two New York strip steaks (prepared with argentinian steak rub, of course) could have instead been a purchase of 0.054515626972 BTC, which would be worth ~$4,823.38 today.

In ten years, Bitcoin’s USD price will be over $1,000,000, so if you choose to buy yourself a steak today, make sure it is not at the expense of buying yourself some nice, juicy, satoshis.

I knew enough in 2015 to know that maybe I should have bought Bitcoin. If my unit of account had been Bitcoin at the time, I might’ve instead achieved a 2,000% return on investment by foregoing a delicious steak lunch.

Who says you can’t eat Bitcoin?

I am 5’11” tall, in today’s inches. With inflation—and without growing any taller—I can expect to measure 6’2” next year.

I am 220 pounds as of now. If my real weight stays the same, then I should be about 227 pounds in next year’s pounds, after adjusting for inflation.

To break the sound barrier today, you must be going 767 MPH. Next year it will probably require about 790 MPH—because inflation.

As of today, a rotisserie chicken is done when its internal temperature reaches 165 degrees Fahrenheit. Next year, bet on 170 degrees.

This year, each day is 24 hours long. Next year, each day is likely to be nearly an hour longer after inflation. With 365 days in a year (as of now…), that’s about 11 more days we’ll need to add to the calendar.

Etc, etc, etc.

Obviously, all of this is absurd. What is the point of measuring things if the measurements keep growing, even though there’s no actual change in the object being measured? What if this happened in real life? Strangely enough, that’s exactly how fiat money works.

Isn’t it strange that dollars have model years? Why? Is each new dollar-model-year an improvement on the last one? Are we getting more features with each successive release, like we do with new cars or smartphones? No. Each new version of the dollar always has less purchasing power than the last.

Why does this happen? What is it about the fiat dollar that we know it will be worth less tomorrow than it is today? To answer that, let’s think back to how we measure length.

Suppose I need to replace a broken window in my house. In order to buy the correct size to replace it, I must measure its length and width. The tape measure I use will show the length in inches or centimeters, depending on where I live. It will fit neatly into my pocket, so I can take it anywhere and enjoy accurate measurements. Because length is objective—a fact with a single correct value that exists independently of how you feel about it—each measurement can be independently verified by anybody else with their own tape measure.

Unlike the dimensions of the window, the value of the window is subjective. Since my window at home is broken—letting in wind, rain, and pests—my subjective value for a replacement window is relatively high. You, on the other hand, probably have no broken windows in your home, making a new window essentially worthless to you. Whereas I may be willing to shell out hundreds of dollars for a window, you probably wouldn’t want one even if it was given away for free. So, the value of a window is subjective to each of us based on a variety of factors like how many windows are available (supply), how much you need one (demand), and how much it costs relative to your available budget (affordability). There are other factors, but let’s leave them aside for simplicity.

The subjective nature of pricing makes it easy to overlook a critical factor: the size the measuring tool itself. While an entire tape measure can fit in your pocket, dollars are distributed unevenly throughout the world. No single person—with the possible exception of the leaders of the Federal Reserve—knows exactly how many dollars exist. All we know is how many we personally have, and that we always need more of them tomorrow to afford the same groceries we bought today.

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But the size of the money supply is of paramount importance!

The number of total dollars in circulation—its market capitalization—determines the size of any individual slice of the economy. The more dollars there are in circulation, the less each individual dollar is worth.

If prices are subjective and nobody has any idea how many total dollars exist, how do we know that next year’s dollars will slice the economy into more and smaller slices? Because there is no constraint on fiat money that enforces its relative scarcity. If, for example, the number of dollars in circulation was limited according to the amount of gold held in Fort Knox, then it would be virtually impossible to grow the money supply at a pace faster than gold could be mined.

Without this constraint, the temptation to print new dollars, and paper over ever-increasing deficits, is too great for any government to resist over the long term. Each new dollar printed is a dollar stolen from the collective savings of the entire world. But because nobody’s dollar balance decreases, they never even notice the heist.

Imagine a measuring stick that keeps on cramming more and more markings into the same length, making each “inch” shorter over time. Fiat money is like a one-foot ruler that will span only six inches (in today’s inches) tomorrow.

The following originally appeared as comment on “What kind of financial asset is Bitcoin?”.

I’m a Bitcoin maximalist, so I believe it is short-sighted and mostly wrong, but I understand and appreciate the intellectual honesty of the analysis here.

In my opinion the timeline for universal adoption is terribly misunderstood. For thousands of years money has existed, but never once has it been voluntarily adopted by its users. This process of monetization takes many years, and requires that trillions and trillions of dollars get allocated to Bitcoin. Anybody who expects a new voluntary global currency standard to take over the world in less than twenty years has set an unreasonably high bar for success.

A frequent criticism of Bitcoin is that nobody uses it as a medium of exchange. “Checkmate, maximalists!” But as Noah laid out, it makes sense to hold Bitcoin as it tends to appreciate in value. It should go without saying that people hold Bitcoin as an alternative to “savings” accounts with negative real yields. With the unprecedented levels of money-printing, the case for Bitcoin as a store-of-value is stronger than ever, which will ultimately drive the trillions of dollars of wealth into it that it needs to become a global monetary standard. The higher market cap that accompanies this newly monetized asset will inherently reduce the volatility associated with it, making it more suitable as a medium of exchange.

And, lest we forget, Bitcoin already supports instantaneous global final transaction settlement. The Lightning Network has definitively solved scaling issues. If you don’t know about Lightning Network and how it works, you’re not qualified to discuss Bitcoin’s scalability. Want proof? Go buy something at CVS, Chipotle, Walgreens, Starbucks... or any number of retailers connected to Strike’s Bitcoin payment network. If it’s transactions you think Bitcoin lacks, then go there and use it yourself.

But most importantly, Bitcoin represents freedom. If you are a trucker in Canada, you learned first hand that you don’t own any of the dollars in your bank account-- you can only use them at the pleasure of your prime minister. Bitcoin fixes this.

If you are a sovereign country who watched as Russia’s assets denominated in USD were seized, you probably made a note to yourself that your money is not necessarily safe in a non-neutral asset like USD. Bitcoin fixes this.

In sum, I believe that the case for Bitcoin as money is WILDLY underestimated, while the case for “blockchain not Bitcoin” is generally overstated (but still complementary). Blockchain is not a new invention, and it’s not the killer app here. Protecting money from the inevitable theft of inflation is a killer app.

As long as inflation is inevitable, so is Bitcoin.

Here’s economist Justin Wolfers, professor of economics and public policy at the University of Michigan:

I, too, know that flash of resentment when grocery store prices feel like they don’t make sense. I hate the fact that a small treat now feels less like an earned indulgence and more like financial folly. And I’m concerned about my kids now that house prices look like telephone numbers.

But I breathe through it. And I remind myself of the useful perspective that my training as an economist should bring. Sometimes it helps, so I want to share it with you.

Bless your little heart, Justin! This whole time I thought inflation was a stealth tax on the poor and middle class specifically designed to be invisible and unaccountable. What a relief to know I must be wrong!

Wolfers’s advice continues:

Simple economic logic suggests that neither your well-being nor mine depends on the absolute magnitude of the numbers on a price sticker.

To see this, imagine falling asleep and waking up years later to discover that every price tag has an extra zero on it. A gumball costs $2.50 instead of a quarter; the dollar store is the $10 store; and a coffee is $50. The 10-dollar bill in your wallet is now $100; and your bank statement has transformed $800 of savings into $8,000.

Importantly, the price that matters most to you — your hourly pay rate — is also 10 times as high.

What has actually changed in this new world of inflated price tags? The world has a lot more zeros in it, but nothing has really changed.

Uh, professor? I have questions!

If everything remains equal, why did all the numbers go up? How is it even possible for every price to rise simultaneously? Wouldn’t that require a substantially larger money supply? So how is the money supply growing?

And on what planet are wages keeping up with inflation?

These important questions will never be answered in the New York Times. Instead, take a moment to understand how and why economists like Wolfers have attempted to rebrand inflation as mere “rising prices”.

Thus far, Wolfers is just doing the same-old denial of inflation that we see from most economists. But in “comforting” the average worker, Wolfers takes it a hilarious step further:

I know that when I ripped open my annual review letter and learned that I had gotten a larger raise than normal, it felt good. For a moment, I believed that my boss had really seen me and finally valued my contribution.

But then my economist brain took over, and slowly it sunk in that my raise wasn’t a reward for hard work, but rather a cost-of-living adjustment.

Translation: Every raise you’ve ever gotten had nothing to do with your work. Haha!

Incidentally, Mr. Wolfers’ raise this year was a paltry 2%, so you know he’s feeling that sticker shock at the grocery store.

I don’t envy anybody their success, but it is hilariously out of touch for somebody making $675K to deny that inflation is a problem… especially when their line of work is subsidized by the money printer.

Wolfers is so eager to dismiss inflation as a problem that he goes on to make the issue partisan:

Social media is awash with (false) claims that we’re in a “silent depression,” and those who want to make American great again are certain it was once so much better.

Translation: If you’re concerned about inflation, you’re probably just a filthy MAGAT!

The income of the average American will double approximately every 39 years. And so when my kids are my age, average income will be roughly double what it is today. Far from being fearful for my kids, I’m envious of the extraordinary riches their generation will enjoy.

So… wait a minute. Inflation changes nothing at all… but your kids will have extraordinary riches because of it? You’re not making any sense!!!

He concludes with the following:

Psychologists describe anxiety disorders as occurring when the panic you feel is out of proportion to the danger you face. By this definition, we’re in the midst of a macroeconomic anxiety attack.

And so the advice I give as an economist mirrors that I would give were I your therapist: Breathe through that anxiety, and remember that this, too, shall pass.

Translation: If there was any doubt left… you’re the problem! Breathe, you idiot! 🤣

I’ve been reading a lot of Noah Smith lately. I discovered his newsletter when he posted a candid Twitter thread about feeling alienated from the West-coast liberal scene. In his thread, I saw a common Seattle eye-sore: the dreaded “In this house we…” sign (then chuckled at the obvious hypocrisy of the NIMBY sign next to it).

At the end of the thread, he says he wishes to escape somewhere. After fleeing Seattle for Phoenix, it’s safe to say I agree.

Much to my surprise, upon reading his work, I realized that we disagree, philosophically. That is, like Paul Krugman, Noah Smith is a Keynesian economist. But unlike Krugman, Smith doesn’t immediately evoke cynical-piece-of-shit vibes.

And that’s good. We need more understanding in this world. Which means that I need to follow his example, and do my best to steel-man his perspective. He has done the same for Bitcoiners. (Before going any further, buy a subscription to Noahpinion!)

To catch you up quickly, I have been an annoying comment-bomber. Noah, if you ever read this… I’m not trying to be a troll. I’m trying to figure out how to make my words match my intentions, and convey my knowledge and opinions without judgment. It’s hard, especially for a newbie. (That was true when I originally wrote this, but I’ve lost faith in Noah’s good faith when it comes to monetary policy and inflation.)

Anyway, that’s a very long introduction for me just to say that I consider Noah Smith to be a relatively honest broker, albeit with some obvious blind spots. (Unlike, say, Captain Word Vomit and his band of merry shills.)

Nevertheless, while Smith may be my favorite Keynesian (there’s no competition), he still suffers from a childlike naiveté when it comes to the perceived benevolence of government policy.

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At a minimum, if governance during Covid is any indicator of trustworthiness, we must reconcile with the fact that the State— at every level— has overstepped its boundaries, and done so with consistent hypocrisy. Covid has been a generous benefactor to state power.

You know those people who would rather die than live in captivity? That’s me. I’m here to tell you that you may have all of the most high-minded ideals, and support reasonable and well-intentioned policy reforms aimed at saving idiots exactly like me. But that doesn’t make them righteous or right.

If your governance strategy requires me to donate any of my time (even as little as 2%) without my consent, then debating the righteousness of any policy whatsoever is out-of-order. You must first defend reappropriating my means to your ends.

Monetary policy has been the most intractable monopoly of all time. (Will the real anti-trusters please stand-up…?) When it comes to money, statists don’t even remember what it’s like to attempt to reach human consensus using persuasion. People like Elizabeth Warren and Anthony Fauci believe they’re better than us. Unfortunately for us, whether they are worthy of the trust placed in them is largely irrelevant; they have real power. And, in practice, might makes right.

What should I do when my concerns are continuously ignored by a government that grows like cancer? Vote harder?

Every super-duper-inclusive American who has ever told a libertarian to “move to Somalia if you want anarchy”… look around at the country you inhabit, and understand that it is you driving the culture of distrust. If you’ve ever been frustrated by economic policy, understand that Keynesians have been driving it for decades. If you are upset by a fairly obvious lack of upward mobility, perhaps you’d better examine the role fiat money plays in all of this. If you’re disappointed in the present results, it’s best to look in the mirror before blaming libertarians for your follies.

Do you think it is going well? If so, great! You may be one of the many beneficiaries of the status quo. But that doesn’t make it right for the rest of us.

Opting out of an exploitative system does not make me a rent-seeker. Dumping my fiat does not make me a speculator. Storing food does not make me a hoarder. Taking back the power over my money does not mean I’m trying to establish myself as the “new aristocracy.”

And fuck anybody who says so. You are out of order. I would never force anybody to live their life according to my values, and I do not intend to let anyone impose their morals on me. Just the same, I respect the dignity of any person who respects mine.

My choice to buy Bitcoin is almost certainly better informed than any act of Congress in the last 20 years. Let’s get into why, and I’ll be sure to point out any misconceptions of economic misconceptions that I notice.

Misconception #1:
Cash is a form of long term savings

Here’s Noah Smith (emphasis mine):

“Inflationary” simply means that the dollar’s value — in terms of real useful commodities like bread, gasoline, and doctor’s appointments — goes down over time. The Fed targets a 2% inflation rate, and usually inflation stays fairly close to that numbers (though not right now). This is why a dollar is less valuable than it used to be— $1 dollar in 1913 was about as valuable as $30 in 2022.

To many Bitcoiners, this represents an injustice. Why should unaccountable, unelected bureaucrats in distant Washington, D.C. get to devalue your hard-earned cash? To these folks, Bitcoin seems to represent individual autonomy, because the Fed doesn’t get to decide how much your money is worth. And the idea that Bitcoin appreciates rather than depreciates over time seems to value personal frugality and probity, because it promises that people who work hard and save money will be able to keep the fruits of their labors.

But this idea rests on a fundamental misconception: The idea that cash should rise in value over time. In fact, cash was never meant to be a form of long-term savings.

False.

Here Smith falsely conflates the idea of “saving” with “nominal appreciation”.

That’s an interesting leap of logic. Why would he make that leap? Is it because, deep down, he knows that without nominal appreciation you are by definition losing purchasing power to inflation? Probably.

…but what’s that got to do with Bitcoin?

Consider a world where cash goes up in value over time — where simply because you stuffed some money under a mattress, you can afford more and more of society’s production every year. This sounds like a pretty good deal, right? In fact, it is a good deal — too good, really. In this sort of deflationary world, you’re getting wealth for nothing — society is continually transferring you more and more of the fruits of its labors in exchange for you doing absolutely bupkis.

If money earns a positive real return over time, that return doesn’t represent a reward for hard work done; it represents a freebie. A handout. In economic terms, this is called “rent”.

Here Smith seems to be saying that Bitcoin shouldn’t appreciate—in dollar terms— because he considers it to be “rent”. Talk about conflating a moral argument with an economic one…

In fact, the reason why Bitcoin appreciates in value is a little thing called supply and demand. There are more dollars chasing fewer bitcoin. Just like more dollars chasing scarce pizza, this results in higher dollar bids for Bitcoin.

QED. This argument is a straw man.

I think we would all be hard pressed to find anybody dumb enough to treat US dollars as their long-term savings vehicle. If that cash is denominated in Bitcoin though, it makes sense to me to hold onto it—and accumulate more!—while this brand new asset goes through its once-in-history monetization phase.

You may not find Bitcoin’s use cases particularly compelling. You may not find Bitcoin to be a particularly effective store of value. You may believe that Bitcoin’s volatility makes it a particularly lousy money. You may believe that Bitcoiners are guilty of extrapolative thinking. You may believe that Bitcoiners are delusional, or wildly overestimate the odds of a Bitcoin standard replacing the fiat standard.

That is all wrong, but of no real consequence.

Yes, the modal retail investor is dumb money compared to the modal investment professional. There is a continuous information asymmetry that makes it hard for typical retail investors to succeed. But I would argue that most people, investors or not, are smart enough to avoid holding fiat currency, either as cash or in a bank account.

It doesn’t really take a lot of knowledge to see the abuses of trust that have become rampant in our government. These breaches of trust are most frequently driven by a shocking level of incompetence.

They don’t necessarily understand how, but they know the government doesn’t pay for anything. Like, ever. And they may be fuzzy on the distinctions between million, billion, and trillion, but they roughly know that roughly, a couple shitloads have been spent recently. And they’ve been following along as multiple administrations have now considered minting a $1T coin to “pay” down the debt, and muscle past any fiscal hawks holding the line on whatever today’s debt ceiling is.

It’s helpful when people point out that they “could be wrong, of course” or that they “run the risk of straw-manning”. That’s true, you could be wrong, or guilty of straw-manning. My goal is to avoid focusing on petty distractions of labels, and attempt to actually communicate. And those acknowledgements seem to say, “Hey, I’m trying to come at this in good faith, but know I’m not perfect.”

Fair enough. One cannot be expected to have a perfect track record understanding beliefs that are so alien that they automatically seem suspicious, particularly in today’s climate of precipitously declining trust. I’m certainly no exception. Seemingly every human who gains power continuously raises the bar in demonstrating their lack of trustworthiness. I will try to set a better example, starting now…

Noah Smith’s first point is a total straw man!

People who can afford to save don’t use fiat currency because it does not hold its value, let alone avoid the continuous siege of inflation. And if you can’t afford to save, then you’re spending cash as quickly as it comes in… like everybody living paycheck to paycheck.

Misconception #2: Scarcity creates value

Here’s Noah Smith:

Much of the crypto world is based on the idea that the way to make something valuable is to make it scarce. This is one of the basic theses of Bitcoin — the idea that because the total number of Bitcoins will ultimately be algorithmically limited, Bitcoin will rise in value over time.

Again… supply and demand. The world is awash in dollars while Bitcoin is provably scarce and in high demand. What else, except appreciation in dollar terms, should you expect for Bitcoin?

Nothing! Bitcoin’s price will continue to appreciate compared to fiat because fiat will continue to be printed until it becomes worthless. Supply and demand is Satoshi’s NumberGoUp® technology in action.

Here’s Noah Smith to back me up on this point:

Some sloppy high school economics teachers might tell you that scarcity creates value, as a way of debunking the old utility theory of value. But in fact what creates demand is a combination of usefulness and scarcity — it’s how scarce something is relative to how useful it is, on the margin.

That’s just a wordy way of saying “Value is determined by supply and demand”. Simply restricting the supply of something doesn’t automatically make it valuable, because demand might be zero — this is why while some kids’ drawings become famous expensive NFTs, your own kid’s drawings are highly unlikely to command any positive price in the market.

QED. Bitcoin’s value is determined by how scarce it is relative to marginal demand. That’s why it’ll keep on going up and up and up compared to our monopoly money.

Value is in the eye of the beholder. In a free market, sometimes that can lead to weird products like Pet Rocks, and Dogecoin. And if I say that Bitcoin is a purpose-built savings technology, you might dismiss it. But unless you credibly refute my thesis, it’s unlikely to change my subjective valuation.

In a monopolized market, end users have little power except to exit. You may not like your cable provider, but if you want fast internet, then you'd better suck it up like the rest of us. But hey, I could hardly blame you for opting out of broadband just to stick it to Comcast. Fuck ‘em in the nostrils!

But what if you couldn’t exit the market? If you think your local cable monopoly is bad, wait until you meet the most intractable monopoly of all time: government-issued monopoly money.

There are countless examples of currency debasement wrecking entire countries, and millions upon millions of lives along with it. Rome, the Weimar Republic, Zimbabwe, Greece, Cyprus, Venezuela, Turkey, Argentina, Sri Lanka… and there are a LOT more names I’m leaving off this list. So much human potential has been destroyed by hubris in policy, and corruption in government. Without exception, it has been funded by expropriating the savings and productivity of every citizen using every statist’s favorite tool: the fiat money printer. This would never be possible without a monopoly on money, and a monopoly in the use-of-force to preserve it.

Will the REAL anti-trusters please stand-up?

As a reminder, every fiat currency that has propped up large long-term deficits has failed. 100% of them. We can’t afford to be this naive about long-term currency debasement.

If you’ve already dismissed the utility of savings as a use case for money, there’s probably not much I can do to change your mind. You may think it’s an economic argument, but comparing Bitcoiners to worthless rent-seekers seems like a very charged moral claim to me. In point of fact, I’m escaping the rent-seeking of a government that presumes to allocate my time (which is to say, my life) by slowly degrading the purchasing power of my dollars. By any fucked-up standard of a so-called “social contract”, this is a breach of trust unless it is honestly and transparently debated, and actual social consensus is reached.

That is not happening. What is happening is the exact opposite, in which powerful politicians demonize any available scapegoat in order to get reelected. Yesterday it was corporate greed. Today it’s Vladimir Putin. Tomorrow it’s probably Jerome Powell. Next week, it’ll be those filthy Bitcoiners, who have already been labeled rent-seeking speculators, tax-dodgers, probable criminals, etc.

But if you’re kind enough to believe me when I say that I’m not running some sort of criminal enterprise with Bitcoin, please don’t remind me that I cannot eat Bitcoin during the unfolding apocalypse. If you’re eating your paper money for nourishment, then I’ll be the first to say that’s not a good use case for Bitcoin.

I love it when patronizing know-it-alls presume to tell me about Bitcoin’s lack of “legitimate” use cases. Perhaps they’re just trying to be “good leaders,” like Justin Trudeau (lol).

How does Bitcoin help, here? What exactly is the use case I’m trying to spell out for you?

I would never judge a person who prefers fiat currency over Bitcoin. If it is centralized, opaque, censorable, seizable, unauditable surveillance money you want, you're in luck! There is an *abundant* and ever-growing supply of fiat. Perhaps you somehow have no reason to distrust government, in spite of *abundant* evidence of its lack of trustworthiness. Like a fish unaware of water, your frame of reference shapes your perception. I could forgive a person for failing to understand why everybody hates fiat.

On the other hand, fiat currencies have a 100% failure rate, which seems relevant.

You'd be hard pressed to find a regular schlubb holding fiat for the long term. Or really, ANY kind of schlubb, ESPECIALLY elite schlubbs.

Regular schlubbs aren't holding cash for the short term, let alone the long term. They are living check-to-check in spite of rising nominal wages. I wonder what could be driving that. I wonder if creating 40% of all dollars in the past few years had anything to do with that. Worth pondering.

But what about the smart money, those elite schlubbs? They are too educated and well-to-do to make the mistake of holding cash over the long term. It seems fair to say that elite schlubbs prefer to invest in assets that tend to appreciate over time, like stocks and real estate. That’s because elite schlubbs are more likely to be aware of the relationship between the money supply, and increasing asset prices.

If the entire economy were a pizza with 10 slices, and there were a total of $10 in circulation, each slice of the economic pizza would have an expected value of $1. If the money supply were to contract by 50% (fat chance...), then each slice of the pie would have an expected value of $0.50. But if it expanded 50%, that would mean $15 in circulation, and each slice of the pie would have an expected value of $1.50.

When thinking about it this way, it seems misguided to blame the pizza for its price going up. The supply of money obviously impacts the price of the pizza. If the price of Bitcoin rises continuously in dollar terms, it's not because of NumberGoUp technology. It is because fiat money creation is totally unconstrained by the laws of physics. Unlike Bitcoin, which has unforgeable costliness underwritten by energy and hashpower. As long as the supply of dollars continues to increase relative to Bitcoin, it is an all-but-certain bet that Bitcoin’s dollar price will continue to rise.

I'm sure this runs afoul of the definition of "cash" or "savings" or some other word game. But that doesn't matter. Utility is what matters, and the pizza model has enough predictive power to make a Keynesian blush. (Side note: Isn't it weird that there are different "sects" in economics?)

But again, who are these peculiar schlubbs holding fiat for the long-term? I doubt many such people exist. But if they do, I can only warn them about the dangers of that decision. Namely, that unless you're well-connected with the government, it might make sense to think about what happens if the other (bad!) team gains power. If that happens (like it always does), then the (bad!) people might make you the denial of service flavor-of-the-month.

Like what happened to Chinese bank account holders. Or like what happened to Canadian truckers. Or like the "bail-in" in Cypress where the government unilaterally seized bank holdings. Or like when FDR violated the Constitution by seizing Americans' gold holdings.

So there are risks to holding government currency.

If somebody sees it as their civic duty to opt-in to currency debasement to fund a government they trust implicitly, then... ok whatever. Have fun staying poor.

But, if I may, I believe such a person could get all of the benefits of fiat (dat inflation!) without risk of involuntary confiscation, then consider switching to DOGE. To be fair, it is currently debasing by about 4% per year, roughly twice the current inflation target... and also twice again closer than fiat, as measured by to the Consumer Price Index.

Remember when the "inflation" target was up-to-2%? I remember. Maybe the pivot to a 2+% target was a concession about the worthlessness of the CPI. It takes real genius to turn a leading indicator (money supply) into a lagging indicator (prices). It makes me wonder if there is a perverse incentive to separate "price inflation" from its mother, "monetary inflation". Formerly known simply as "inflation".

So anyway, while DOGE is not ideal for somebody who prefers 2% inflation, it is at least reliable and transparent in its worthlessness. Central bankers, to put it mildly, are not. They are forever bound to react to whatever current administration monopolizes monetary policy.

But who am I to judge anybody's subjective values? If a person wants to hold fiat, that is a business decision. I would never dare to claim such a person endorses the rent-seeking (rent-seizing?) wealth-confiscation inherent in monopoly money.

Because if anybody wants to hold fiat, that is up to them. And they can luxuriate in the knowledge that, for the first time in history, that is their choice. Thanks to Bitcoin.

For many years, the word inflation was not a statement about prices but a condition of paper money—a specific description of a monetary policy. Today, inflation is synonymous with a rise in prices, and its connection to money is often overlooked.

—Federal Reserve Bank of Cleveland, “On the Origin and Evolution of the Word Inflation”

I could not have summed up the problem any better. Thanks, Cleveland Fed!

Inflation can be defined as the overall general upward price movement of goods and services in an economy. The U.S. Department of Labor's Bureau of Labor Statistics has various indexes that measure different aspects of inflation.

—Bureau of Labor and Statistics, Overview of BLS Statistics on Inflation and Prices

Inflation is the act of debasing currency. The Consumer Price Index does NOT measure inflation. The Consumer Price Index measures an obvious symptom of inflation—the prices of consumer goods increasing.

But if you define inflation as “the general upward price movement of goods and services”, then suddenly you’ve muddied the entire discussion of who is to blame for rising prices. Asking, “Why did prices increase compared to last year at this time?” is very different from asking “How many new dollars were issued into the money supply compared to last year at this time?”

That difference is key!

Here again, is the Cleveland Fed to explain why:

What was once a word that described a monetary cause now describes a price outcome. This shift in meaning has complicated the position of anti-inflation advocates. As a condition of the money stock, an inflating currency has but one origin—the central bank — and one solution — a less expansive money growth rate. But as a condition of the price level, which may have originated from a variety of things (including a depreciating dollar, rising labor costs, bad weather, or a number of factors other than “too much money”), the solution to—and the prudence of—eliminating inflation is much less clear.

Whereas the first question has myriad potential causes, the second has only one: government monetary and fiscal policy. If you’re trying to impose a stealth tax on the poor and middle class, eliminating the vocabulary to identify the problem is an effective way to do it.

Referring to price increases as “inflation” is a contradiction in terms, and entirely counterproductive to policy discussions. We don’t need to invent a new term for rising prices. They’re called rising prices.

And the word for issuing new currency is inflation.

Suppose you order a pizza for you and a couple friends. Let’s say the pizza cost an even $10. (Pretend it’s the 70s.) Let us further stipulate that the pizza is evenly sliced into ten perfectly fungible pieces that are indistinguishable from one another. In this story, let’s say you’re a starving college student, and you’re trying to recoup your costs by charging your friends by the slice.

How much would you expect each slice of pizza to cost? If you said $1 per slice, then I agree with you!

In this metaphor, the “pizza” represents the entirety of the real goods and services in the economy. The $10 represent the entire money supply.

Now, let’s make it a bit more interesting. Let’s say that you also have a money-printer hooked up at home that can print money whenever you need it. Your friends have to do work—that is to say, earn—their money. But you—and you alone!—can print as many Pizza Bucks as you need.

What could you do with that kind of power? Think about it.

Now let’s go back to the $10 pizza economy. It’s just you and your two best friends, and you have all worked up a huge appetite after helping them move all day. You are all positively ravenous! Each of you devours the amount you can each afford—three slices for a dollar apiece.

But now, unlike your other pizza parties, you are ALL desperate for the last slice of pizza. Normally everybody is full, and saves that last slice of pizza, but not today! A bidding war erupts for the final slice.

No worries, you always knew it would come to this. You bust out your money-printer, and print yourself a new Pizza Buck, bringing your net worth up to $2. Each of your friends bids their last $1. Armed with $2 Pizza Bucks to their $1, you outbid them easily.

The pizza is hot; the cheese perfectly melted. The toppings are evenly distributed within a tapestry of taste! It is everything you’ve ever dreamed of in a pizza… and thanks to your trusty money-printer, it’s all yours, baby!

For dessert, nothing compares to the sweet taste of victory.

You devour the last slice of pizza, and count up all the Pizza Bucks in circulation. There are now $11 Pizza Bucks in the entire economy— $1 more than the previous $10 total.

How much would you expect each slice of pizza to cost, now? If you said, $1.10, I agree with you! It looks like the price of pizza just shot up 10%.

But that doesn’t matter to you. Why? Because you are the proud owner of a money-printer. You were able to eat an extra slice of pizza, and your “friends” didn’t even notice when you used it! It’s beginning to look a lot like Christmas…

EPILOGUE: You continue to abuse your “friends” for the next 50-70 years, printing counterfeit Pizza Bucks at every available opportunity. You get fat while your friends subjects get thin. They can afford less and less over time, while you can afford more and more. They don’t know how it is your fault… but they know.

Here’s Milton Friedman to back me up:

It’s been almost a year since I wrote my inaugural declaration of independence from fiat… and it’s been crickets ever since. Sorry about that. My summer resolution is to post at least once per week. Baby steps.

Why have I been gone so long?

My stated mission of debunking FUD seems to be handled by a bunch of really smart people who actually do this for a living. Rather than reinventing that particular wheel, I think it makes more sense to distill and aggregate that into a knowledge base, like Wikipedia.

Where’s this knowledge base you speak of?

Well, see, I’ve actually been prototyping something much more grand. And probably impossible. So… it’s not ready yet.

What’s next?

I’m getting my shit together to work on the third and most important mission of all: To save as many people as possible from the hell of currency debasement.

How? Here are my ideas for what to deliver to you, fair reader:

• Define the problem
  In plain English, spell out the real-world harms that central bankers inflict on everybody through fiat.

• Take back the language!
  “Inflation” is when the government creates new dollars. A “bubble” is when asset prices rise to irrational levels because investors try to stay ahead of the government money-printer. And isn’t it a “ponzi-scheme” to issue trillions of dollars in new debt just to pay off old debt…?

• Share the vision of our Bitcoin future
  Government control over currency is the most powerful, most entrenched monopoly power of all time. Now that power has been wrested away, permanently. What will happen in the absence of heretofore ubiquitous government theft? We will witness a glorious flourishing of civilization unmatched in all of history.

Since I’m still new to this, I figured I should ask you:

(No, I’m not about to ask you to pay for a subscription. That requires honest work, which I have yet to deliver.)

On April 5th, 1933, FDR seized Americans’ gold holdings in order to debase the dollar by 75% (by resetting the gold exchange rate from $20 to $35). That was the first dollar default.

On August 15th, 1971, Nixon closed the gold window in order to stop foreign dollar holders from redeeming their holdings in gold. That was the second dollar default.

On February 24, 2022, the US treasury department held its own credibility at gunpoint, and pulled the trigger, mortally wounding the dollar. By taking away Russia’s ability to spend its reserves, the dollar’s “risk-free” global reserve currency status has ceased to be. It is no longer the neutral store of value that most continue to believe it is— and which it never really was. It is, and always has been, a tool for the administrative class to seize power and wealth at the expense of the plebs.

While not sufficient on its own to cause a third default, the dollar losing its global reserve currency status is an ominous milestone on the highway there. The third dollar default—hyperinflation—will be its last.

But so few people are aware of what is happening. So few are aware of the insidious nature of fiat currency. So few are aware of the inherent conflicts of interest and corruption it enables. Even among a skeptical public, few people understand the endemic lying, name-calling, and gaslighting required to keep the fiat ponzi-scheme afloat. And fewer still have any idea of what to do about it.

Therein lies my mission:

• To evaluate Bitcoin criticism, honest and dishonest alike

• To document and properly frame the story of fiat’s slow death

• To save as many people as possible from the hell of currency debasement

Even as I glibly assert that fiat is dead, billions of people remain prisoners to its caprice. Day after day they work in futility for a better life that is perpetually out of reach. What should we call that, if not slavery?

But there is hope in Bitcoin. The implications of a Bitcoin standard are awesome!

• War will become much harder to finance.

• Bitcoin’s mutually-assured preservation of wealth will lower the return on violence.

• Nations all over the world will be able to shrug off the political chains of predatory international loans.

• Bitcoin will usher in a new era of clean, cheap energy. Seriously!

Before we can get there though, the plebs have to declare independence from the fiat monetary system. Until they do, they remain subject to fiat. And it is no accident that there is a daily barrage of FUD hit-pieces published criticizing Bitcoin.

FUD stands for fears, uncertainties, and doubts. You can recognize FUD by its shrill fear-stoking tone, and its lightness on evidence. There are a few honest critiques of Bitcoin, but the bullshit that is pedaled is ubiquitous because it is comparatively easy to produce.

I aim to increase the tail risk of publishing bullshit.

But in the meantime, these zombie narratives promoted by your masters will continue to persist. Here are just a few Bitcoin FUD greatest hits that I intend to tackle:

• “Bitcoin is backed by nothing”

• “Bitcoin is bad for the environment”

• “Bitcoin is a ponzi scheme / scam”

• “But who invented Bitcoin?!”

• “Bitcoin is for criminals”

• “Bitcoin will get banned”

• “Bitcoin will get regulated”

• “Bitcoin is speculative”

• “Bitcoin has no inherent value”

• “Bitcoin can’t scale”

• “Bitcoin will get hacked”

• “Bitcoin is centralized”

• “Bitcoin has no privacy”

• “Bitcoin is the same as ‘crypto’”

• “Bitcoin is a solution in search of a problem”

• “Bitcoin is useless, but blockchain is innovative”

• “Bitcoin could have a backdoor in it”

• …and whatever else the craven academics, bankers, bureaucrats, demagogues, and totalitarian technocrats cook up next!

In this inaugural declaration, I will close by saying that I take my mission very seriously. Even my own family is susceptible to these false narratives. There is a lot of work to do.

None of this is or ever will be financial advice. This is not the newsletter to read for hot Bitcoin trading tips. I simply aim to increase the signal-to-noise ratio.