The Secret Behind Bitcoin's NumberGoUp® Technology
Is that a money printer in your pocket, or are you just happy to see me?
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.