Interesting piece, Dave. But, you left out the optimistic vision entirely!
Societies run generally better on fiat systems; the economic data is fairly clear on that. In an average year, fiat economies have slightly higher growth and significantly less volatility than hard money economies, including less volatility in inflation (something hard money advocates rarely recognize).
But the flaw in fiat systems is that they historically end in disastrous failure. They are great, great, great, great, great, and then absolutely spectacularly bad. The flexibility they offer is valuable and helpful during economic volatility, but they are too tempting to abuse, so they end in runaway inflation and debt crises. The US hasn't had one in a while, but people are worried we're getting there, what with the limitless explosion of debt, rising political volatility, the weaponization of fiscal/trade/payments policy, and the disastrous state of DC. And those end-state catastrophes are terrible for people, both short-term and long-term.
If bitcoin grows large enough to offer a viable alternative to the fiat system, by way of its existence, it could create a natural curb on the excesses of fiat abuse. Right now -- particularly in the US -- there is no real force for restraint on fiat abuse because there is no viable alternative. So we trip along slowly ... or, recently, quickly ... until it's too late. A robust alternative might constrain the US from being too egregious in its monetary and fiscal policies and, as such, allow society to reap the benefits of having a flexible fiat system without us ever stepping over into the abuse-failure case. And if we still can't resist the temptation to abuse the fiat system, well then, at least we have an alternative.
I don't disagree with anything you say, yet I can't bring myself to completely discount the idea that some not-insubstantial fraction of bitcoin millionaires/billionaires are quietly putting their thumb on the scales with politicians and governments and quietly funding save-the-planet type ventures. Their silence may be because 1) crypto money may still have some stigma associated with it, 2) many big philanthropists/planet-savers prefer to be anonymous rather than show off how charitable they are., or 3) some combo of both. IDK how much scale tipping they're actually doing, versus buying lambos and so forth. All I know is that the biggest, most influential money usually talks only in whispers.
lol the moral authority. i just vomited. I hope that your bicycle stash is well over 1% of your NW because if you think there is a less than 99% chance that fiat won't collapse, or some version of that... well i have a bridge to sell you.
I’m interested in Bitcoin because I’m a pacifist and I want to stop funding endless wars. You talk about “who’s going to help people on food stamps under a Bitcoin standard?”, but what about the millions of people who are oppressed and/or murdered because of some bullshit war pretext? “Weapons of mass destruction…” NEVER AGAIN
Sure, maybe the government welfare state will be cut back. But also maybe millions of brown people around the world won’t get genocided every few years. Might be a benefit there, eh?
A monetary system run with BTC as its anchor would be akin to operating under a fixed exchange rate. Fixed exchange rate systems force adjustment onto the real economy. Flexible systems adjust via the exchange rate. See Italy under the EUR or Argentina under the currency board. The above doesn’t even begin to touch on what would have to happen for BTC to be usable in the quotidian world. Fun fact: Milton Friedman advocated for floating exchange rates.
Very interesting article. But it seems you didn’t consider new possible forms of governance enabled by the Internet and blockchains technologies. Did you study the concepts of Free Cities (like Prospera) and Network States ?
Don't know if it will ever catch on, but I had this idea for a new narrative for bitcoin based on it being a energy-based currency or exchangeable energy credit, which would be a much more optimistic view of the future of bitcoin. Changes how it is used and viewed in the future.
Would make sense to add it to the commodity bucket of a portfolio if viewed as a measure of energy surplus, in the same category as other energy commodities.
Interesting piece, Dave. But, you left out the optimistic vision entirely!
Societies run generally better on fiat systems; the economic data is fairly clear on that. In an average year, fiat economies have slightly higher growth and significantly less volatility than hard money economies, including less volatility in inflation (something hard money advocates rarely recognize).
But the flaw in fiat systems is that they historically end in disastrous failure. They are great, great, great, great, great, and then absolutely spectacularly bad. The flexibility they offer is valuable and helpful during economic volatility, but they are too tempting to abuse, so they end in runaway inflation and debt crises. The US hasn't had one in a while, but people are worried we're getting there, what with the limitless explosion of debt, rising political volatility, the weaponization of fiscal/trade/payments policy, and the disastrous state of DC. And those end-state catastrophes are terrible for people, both short-term and long-term.
If bitcoin grows large enough to offer a viable alternative to the fiat system, by way of its existence, it could create a natural curb on the excesses of fiat abuse. Right now -- particularly in the US -- there is no real force for restraint on fiat abuse because there is no viable alternative. So we trip along slowly ... or, recently, quickly ... until it's too late. A robust alternative might constrain the US from being too egregious in its monetary and fiscal policies and, as such, allow society to reap the benefits of having a flexible fiat system without us ever stepping over into the abuse-failure case. And if we still can't resist the temptation to abuse the fiat system, well then, at least we have an alternative.
I don't disagree with anything you say, yet I can't bring myself to completely discount the idea that some not-insubstantial fraction of bitcoin millionaires/billionaires are quietly putting their thumb on the scales with politicians and governments and quietly funding save-the-planet type ventures. Their silence may be because 1) crypto money may still have some stigma associated with it, 2) many big philanthropists/planet-savers prefer to be anonymous rather than show off how charitable they are., or 3) some combo of both. IDK how much scale tipping they're actually doing, versus buying lambos and so forth. All I know is that the biggest, most influential money usually talks only in whispers.
lol the moral authority. i just vomited. I hope that your bicycle stash is well over 1% of your NW because if you think there is a less than 99% chance that fiat won't collapse, or some version of that... well i have a bridge to sell you.
nice article. "longterm institutional allocators, and the random car wash attendant who took a flier in ***HIS*** IRA hoping to get lucky."
Great article, very interesting take on all this.
I’m interested in Bitcoin because I’m a pacifist and I want to stop funding endless wars. You talk about “who’s going to help people on food stamps under a Bitcoin standard?”, but what about the millions of people who are oppressed and/or murdered because of some bullshit war pretext? “Weapons of mass destruction…” NEVER AGAIN
Sure, maybe the government welfare state will be cut back. But also maybe millions of brown people around the world won’t get genocided every few years. Might be a benefit there, eh?
A monetary system run with BTC as its anchor would be akin to operating under a fixed exchange rate. Fixed exchange rate systems force adjustment onto the real economy. Flexible systems adjust via the exchange rate. See Italy under the EUR or Argentina under the currency board. The above doesn’t even begin to touch on what would have to happen for BTC to be usable in the quotidian world. Fun fact: Milton Friedman advocated for floating exchange rates.
Very interesting article. But it seems you didn’t consider new possible forms of governance enabled by the Internet and blockchains technologies. Did you study the concepts of Free Cities (like Prospera) and Network States ?
Don't know if it will ever catch on, but I had this idea for a new narrative for bitcoin based on it being a energy-based currency or exchangeable energy credit, which would be a much more optimistic view of the future of bitcoin. Changes how it is used and viewed in the future.
Would make sense to add it to the commodity bucket of a portfolio if viewed as a measure of energy surplus, in the same category as other energy commodities.
https://furballfinancial.substack.com/p/bitcoin-isnt-digital-gold-its-an
Also did a podcast with Jeremy Schwartz about it:
https://open.spotify.com/episode/6C50LhRVNu88vhlRUJA09n?si=BPyKkOV7Qa2OpMNMoUVOFQ