The Bitcoin Standard: The Decentralized Alternative to Central Banking

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A modern economy with a central bank is built on ignoring this fundamental trade‐off and assuming that banks can finance investment with new money without consumers having to forgo consumption. The second challenge for Bitcoin is that it needs to grow. But eventually, Bitcoin would need to rely on centralized institutions to continue growing. Unfortunately, there doesn’t seem to be a viable way around this: the more transactions that happen, the more copies of the ledger need updating.

its mere existence is an insurance policy that will remind governments that the last object the establishment could control, namely, the currency, is no longer their monopoly. This gives us, the crowd, an insurance policy against an Orwellian future.” Civilization is not about more capital accumulation per se; rather, it is about what capital accumulation allows humans to achieve, the flourishing and freedom to seek higher meaning in life when their base needs are met and most pressing dangers averted. Note: You need a single or few monies to allow specialization. This is part of memetic fitness. The people who adopt a money which facilitates greater specialization will outcompete those who don’t. See Lydia. This is an entertaining polemic on behalf of the Austrian School economists and against Keynesianism, with the tweak only coming at the end that Bitcoin offers a way to return to a world before money was delinked from gold and began its inflationary spiral. I hardly feel qualified to evaluate these arguments as a layperson but Ammous offers food for thought about how the type of money that a society uses tends to prefigure all of its values. Inflationary money that loses value with time incentivizes high time-preference behavior and thus superficiality, whereas money that holds its value for the long term and cannot be inflated (lets say gold, or bitcoin) leads people to think in terms of generations. One can see how money influences values not just in investments but in the type of culture that a society produces and the things that it places value upon – building a thousand-year cathedral seems almost incomprehensible to modern Europeans and Americans but its something that people once did. That we live in an ephemeral culture today and have even built 50-year ammortized monuments to its ephemerality is clear enough. I'm sure there are counterarguments to Ammous' pro-Austria School polemic against Keynes, but he raises interesting points regardless.Further, decentralization is incredibly appealing for the grassroots power it brings to people. That's politically neutral. It's facilitative and enabling for whatever end. Where I disagree with libertarianism is in the social aspect. None of us live in a vacuum and history is relevant. We aren't all fungible nodes in a network. Humans are unique and individual which will involve prejudices that lead to historical injustices involving economic disparities NOT simply accounted for by the market. Societies are rather complex on the macro it turns out. Someone who knows the history of the Great Depression and Bretton Woods era may well recognise the characterisation of this era as a fairy tale. Stylistically, it’s essentially an extended, but bad, undergraduate essay: ranting and polemical. At its low points it’s moronic. Everything Ammous doesn’t like about the period is lumped into the devil incarnate, ‘Keynesian economics’, presented as one homogenous, sub-intellectual blob of stupid ideas, driven by the vanity of self-serving bureaucrats and academics. Any subtlety about the notion of good or bad political governance is simply a manifestation of the ‘Keynesian deluge’. The fact that many high-profile followers of Keynes actively refer to this ‘Keynesian Economics’ as ‘Bastard Keynesianism’—for more nuanced reasons—completely escapes Ammous.

These historical facts are still apparent in the English language, as the word pecuniary is derived from pecus, the Latin word for cattle, while the word salary is derived from sal, the Latin word for salt. The book’s 10 chapters are essentially in three parts: the first three chapters outline a particular theory and history of money; the next four intermix between a history of the gold standard and post-gold standard era, politics, and a kind of cultural anthropology of the impact of ‘sound money’ and time preference on society; the final three chapters are a more mundane description of the digital money vision of ‘ Bitcoin.’ Sin embargo, nada más comenzar su lectura comprendí que su autor había dado otro enfoque totalmente diferente. In other sections, the arguments were highly ideological. The argument about Keynes would more convincing if it was more disciplined particularly in describing specific positions. The argument that the gold standard could be characterized by price stability is made by comparing prices at the endpoints of gold standard periods. This doesn't mean there were stable prices during the periods and closer examination would, in fact, show otherwise.But it is in this same chapter that I started to see some of Saifedean’s bias or overindulgence: he seems to believe that a monetary standard is almost the sole determinant of a society’s fate. Describing Europe after the fall of Rome, he says “…the absence of a widely accepted sound monetary standard severely restricted the scope for trade, closing societies off from one another and enhancing parochialism as once-prosperous and civilized trading societies fell into the Dark Ages of serfdom, diseases, closed-mindedness, and religious persecution.” (pg. 29) Surely, there were many other factors at play beyond just the monetary standards of the time. Furthermore, how can this claim co-exist with the modern state of affairs, in which we have no sound monetary standard but worldwide trade is busier and richer than ever? Note: Argument is that this monetary nationalism administered by central banks created more upside as well as more downside. In an asymmetric world, AKA Extemistan, that is not worth it.

One of the interesting side effects of the rise of Bitcoin is that suddenly a lot of people are interested in Austrian economics. Bitcoin is also the first example of absolute scarcity, the only liquid commodity (digital or physical) with a set fixed quantity that cannot conceivably be increased. Sound money allows people to think about the long-term and to save and invest more for the future. Saving and investing for the long run are the key to capital accumulation and the advance of human civilization. As a dollarised economy, the US dollar will continue to serve as fiat currency alongside Bitcoin, but the move positions Bitcoin—the world’s leading cryptocurrency—as a transactional standard in the country. Note: Gold, by comparison, is harder to mine – even with price increase it is hard to mine more thus hard to inflateWith all the hype in the crypto space, it’s gratifying to read a book about Bitcoin which (apart from a brief prologue) contains only incidental mention of Bitcoin for the first two-thirds of the book. Ultimately, as you’ll gather from the title, Bitcoin plays a fairly grand role, supplanting gold as the historical reserve standard, but by building a groundwork understanding of money’s emergence, history, and evolution, Ammous makes a sober arrival at his final destination. money whose supply is hard to increase is known as hard money, while easy money is money whose supply is amenable to large increases. Note: Credit gets allocated to least efficient middlde of supply chain rather than more productive fringes

The larger the market, the more the opportunities for specialization and exchange, but also the bigger the problem of coincidence of wants—what you want to acquire is produced by someone who doesn’t want what you have to sell.

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The 61-year-old who thinks that Bitcoin is just another passing craze, the 33-year-old that wants to invest in cryptocurrencies and isn’t sure what they’re doing, and anyone who wants to know the history of money and where our current technologies could be taking us in the future. For anything to function as a good store of value, it has to beat this trap: it has to appreciate when people demand it as a store of value, but its producers have to be constrained from inflating the supply significantly enough to bring the price down. differentiating between a good’s market demand (demand for consuming or holding the good for its own sake) and its monetary demand (demand for a good as a medium of exchange and store of value). Note: Argument is that money is key technology of civilization. Presumably, because it enables social scalability.