by Saifedean Ammous
Saifedean's The Bitcoin Standard is widely regarded as the most concise compilation on money, and rightly so. From the history of money and monetary metals to sound money and government money, all the way down to sovereignty and digital money, you'll find a wealth of financial education. If only for Chapter 5 on Money and Time Preference, this section alone is worth the read. Anyone who doubts Bitcoin but hasn't studied the history of money and the interaction between money and government will have their doubts quelled after reading this acute tome about the topic. Fascinating and exciting as we step into the next cycle of digital monies. - Nicholas Beaird
Favorite Quotes from The Bitcoin Standard
Should you come out of reading this book thinking that the bitcoin currency is something worth owning, your first investment should not be in buying bitcoins, but in time spent understanding how to buy, store, and own bitcoins securely.
A good that assumes the role of a widely accepted medium of exchange is called money.
Throughout human history, many things have served the function of money: gold and silver, most notably, but also copper, seashells, large stones, salt, cattle, government paper, precious stones, and even alcohol and cigarettes in certain conditions
I like to call this the easy money trap: anything used as a store of value will have its supply increased, and anything whose supply can be easily increased will destroy the wealth of those who used it as a store of value. The corollary to this trap is that anything that is successfully used as money will have some natural or artificial mechanism that restricts the new flow of the good into the market, maintaining its value across time. It therefore follows that for something to assume a monetary role, it has to be costly to produce, otherwise the temptation to make money on the cheap will destroy the wealth of the savers, and destroy the incentive anyone has to save in this medium.
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.5
Byzantium survived for 1,123 years while the solidus became the longest‐serving sound currency in human history
This inconvenient bimetallism continued for centuries across Europe and the world, but as with the move from salt, cattle, and seashells to metals, the inexorable advance of technology was to provide a solution to it.
The demonetization of silver in effect left the Chinese and Indians in a situation similar to west Africans holding aggri beads as Europeans arrived: domestic hard money was easy money for foreigners, and was being driven out by foreign hard money, which allowed foreigners to control and own increasing quantities of the capital and resources of China and India during the period. This is a historical lesson of immense significance, and should be kept in mind by anyone who thinks his refusal of Bitcoin means he doesn't have to deal with it. History shows it is not possible to insulate yourself from the consequences of others holding money that is harder than yours.
Gold offered no mechanism for restraining the sovereigns, and had to rely on trust in them not abusing the gold standard and the population remaining eternally vigilant against them doing so.
People fight the gold standard because they want to substitute national autarky for free trade, war for peace, totalitarian government omnipotence for liberty.15
The majority of countries maintain some gold in their reserves, and those countries which do not have gold reserves maintain reserves in the form of other countries' fiat currencies, which are in turn backed by gold reserves. No pure fiat currency exists in circulation without any form of backing.
The introduction of Bitcoin, as a currency native to the Internet superseding national borders and outside the realm of governmental control, offers an intriguing possibility for the emergence of a new international monetary system, to be analyzed in Chapter
A precursory understanding of economics will make it clear that price controls are always counterproductive, resulting in surpluses and shortages.
It was the abandonment of sound money and its replacement with government‐issued fiat which turned the world's leading economies into centrally planned and government‐directed failures.
The conclusion obvious to anyone with a basic understanding of money and economics is that the cause of the Great Crash of 1929 was the diversion away from the gold standard in the post‐WWI years, and that the deepening of the Depression was caused by government control and socialization of the economy in the Hoover and FDR years
History has shown that governments will inevitably succumb to the temptation of inflating the money supply. Whether it's because of downright graft, “national emergency,” or an infestation of inflationist schools of economics, government will always find a reason and a way to print more money, expanding government power while reducing the wealth of the currency holders.
Sound money, then, according to Mises, is what the market freely chooses to be money, and what remains under the control of its owner, safe from coercive meddling and intervention.
I don't believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can't take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can't stop.25
In its infancy, Bitcoin already appears to satisfy all the requirements of Menger, Mises, and Hayek: it is a highly salable free‐market option that is resistant to government meddling. - salability - value across time - transfer value effectively across space.
divided and grouped into small and large scales first, it protects value across time, which gives people a bigger incentive to think of their future, and lowers their time preference. Second, sound money allows for trade to be based on a stable unit of measurement, facilitating ever‐larger markets, free from government control and coercion, and with free trade comes peace and prosperity. Finally, sound money is an essential requirement for individual freedom from despotism and repression, as the ability of a coercive state to create money can give it undue power over its subjects
While microeconomics has focused on transactions between individuals, and macroeconomics on the role of government in the economy, the reality is that the most important economic decisions to any individual's well‐being are the ones they conduct in their trade‐offs with their future self
The sobering reality to keep in mind is that a man's lot in life will be largely determined by these trades between him and his future self. As much as he'd like to blame others for his failures, or credit others with his success, the infinite trades he took with himself are likely to be more significant than any outside circumstances or conditions.
Had government money been a superior unit of account and store of value, it would not need government legal tender laws to enforce it, nor would governments worldwide have had to confiscate large quantities of gold and continue to hold them in their central bank reserves.
And having lived off of his family's considerable fortune without having to work real jobs, Keynes had no appreciation of saving or capital accumulation and their essential role in economic growth
the only cause of economic growth in the first place is delayed gratification, saving, and investment, which extend the length of the production cycle and increase the productivity of the methods of production, leading to better standards of living.
As H. L. Mencken put it: “Every election is an advanced auction on stolen goods.” It was hard money that financed Bach's Brandenburg Concertos while easy money financed Miley Cyrus's twerks.
Imagining that central banks can “prevent,” “combat,” or “manage” recessions is as fanciful and misguided as placing pyromaniacs and arsonists in charge of the fire brigade.
The fundamental scam of modernity is the idea that government needs to manage the money supply.
While this debate over tax cuts versus spending increases rages on, the reality is that both policies result in increased government deficits which can only be financed with monetized debt, effectively an increase in the money supply
If society were a little girl in that marshmallow experiment, Keynesian economics seeks to alter the experiment so that waiting would punish the girl by giving her half a marshmallow instead of two, making the entire concept of self‐control and low time preference appear counterproductive.
Societies with money of stable value generally develop a low time preference, learning to save and think of the future, while societies with high inflation and depreciating economies will develop high time preference as people lose track of the importance of saving and concentrate on immediate enjoyment.
This may help explain why Murray Rothbard said, “There is only one good thing about Marx, at least he was not a Keynesian.”
But the average academic paper is rarely ever read by anyone except the small circle of academics in each discipline who approve each other's grants and enforce the standards of groupthink and politically motivated conclusions masquerading as academic rigor.
Due to the systemic risks involved in running a bank, any failure of a bank can be viewed as a liquidity problem and will very likely get the support of the central bank. No other ostensibly private industry enjoys such an exorbitant privilege, combining the highest rates of profitability in the private sector with the protection of the public sector. This combination has made bankers' work as creative and productive as that of public sector employees, but more rewarding than most other jobs.
Bitcoin takes the macroeconomists, politicians, presidents, revolutionary leaders, military dictators, and TV pundits out of monetary policy altogether.
More of any good can always be produced if human time goes toward it. The real cost of a good, then, is always its opportunity cost in terms of goods forgone to produce it.
online equivalent of banks will issue Bitcoin‐backed tokens to users while keeping their hoard of Bitcoins in cold storage
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