BitcoinStandard

• Very good. Too aggressive Austrian vs Keynes at times. First time I learned the differences. Would like to see a rebuttal.
• A problem that has existed for all of humanities existence: How to move economic value across time and space.
• A good that assumes the role of a widely accepted medium of exchange is called money.
  • It is primarily used for the sake of being exchanged for other goods.
• Salability - the ease with which a good can be sold on the market whenever its holder desires.
• There is no need for a government to impose the hardest money on society; society will have uncovered it long before it concocted its government.
• Money also serves as a unit of account: a metric with which to measure interpersonal value.
• Historically, different media served the function of money during a period which it had one of the best stock-to-flow ratios available to its population, but stopped when it lost that property.
• Gold is so chemically stable that it is virtually impossible to destroy; gold is impossible to synthesize from other materials and can only be extracted from its unrefined ore, which is extremely rare on our planet.
• Silver may maintain its sporting connection for second place, but with notes that allow payments without having to move the monetary unit itself, second place in monetary competition is equivalent to losing out.
• It should be of interest to modern Keynesians economists, that although the emperors of Rome frantically tried to "manage" their economies, they only succeeded in making matters worse.
• Florence 1252 minted the florin, the first major European sound coinage since Julius Caesar's aureus.
• Britain was the first to adopt a modern gold standard in 1717, under the direction of Isaac Newton. Britain would remain under a gold standard until 1914 (although it not during the Napoleonic wars)
• Claim: the failure of China and India to catch up to the West during the 20C is linked to the destruction of wealth and capital brought about by the demonetization of silver used in these countries.
• History shows that it is not possible to insulate yourself from the consequences of others holding money that is harder than yours.
• The gold standard had its flaws, governments and banks were always creating media of exchange (notes/checks) beyond the quantity of gold in their reserves. Fatal flaw of the gold standard was that settlement in physical gold is cumbersome, expensive, and insecure, which meant that it had to rely on centralizing physical gold reserves in a few locations – leaving them vulnerable to being taken over by governments.
• The network of gold settlement used by banks became valuable enough that its owners credit was effectively monetized. As the ability to run a bank started to imply money creation, governments gravitated to taking over the banking sector through central banking.
• Even as central banks repeatedly declare the end of golds monetary role, their actions in maintaining their gold reserves ring truer.
• WWI saw the end of the era of monetary media being the choice decided by the free market, and the beginning of the era of government money.
• No fiat money has come into circulation solely through government fiat; they were all originally redeemable in gold or silver, or currencies that were redeemable in gold and silver.
• No pure fiat currency exists in circulation without any form of backing.
• When comparing different national currencies, we find that the major and most widely used currencies have a lower annual increase in their supply.
• The major difference between WWI and the previous limited war was neither geopolitical nor strategic, but rather monetary.
• With the simple suspension of gold redeemability, governments' war efforts were no longer limited to the money that they had in their own treasuries, but extended virtually to the entire wealth of the population. A sovereign now had access to its people accumulated wealth expropriated through inflation.
• Academic economics stopped being an intellectual discipline focused on understanding human choices under scarcity and instead became an arm of the government.
• 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 the deepening of the Depression was caused by government control and socialization of the economy in the Hoover and FDR years. Neither the suspension of the gold standard nor the wartime spending did anything to alleviate the Great Depression.
• In the presence of fiat money to finance government, political differences between parties disappear as politics no longer contains trade-offs and every candidate can champion every cause.

Politics

• Hyperinflation is a form of economic disaster unique to government money. There was never an example of hyperinflation with economies that operated a gold or silver standard.
• The problem with government money is that its hardness depends entirely on the ability of those in charge to not inflate its supply. Only political constraints provide hardness, and there are no physical, economic, or natural constraints on how much money government can produce.
• Everyday a person will conduct a few economic transactions with other people, but they will partake in a far larger number of transactions with their future self. A mans lot in life will largely be determined by these these trades between him and his future self.
• The reduction in purchasing power of money due to inflation is similar to a form of tax on real value, even while the nominal value is constant.
• Any supply of money is sufficient for an economy of any size (as long as it can be split finely enough) Unlike other goods, money's functions as a medium of exchange, store of value, and unit of account are completely orthogonal to its quantity. What matters for money is its purchasing power, not its quantity, so any quantity of money is enough to fulfill the monetary functions.
• Increasing the supply of the monetary medium does not increase the wealth of the society using it.
• Golds monetary role is a result of it being the metal likely to attract the least human and capital resources toward its mining compared to all others. Mining monetary gold would be less profitable than mining any other metal assuming a monetary role. If any other metal were used as the monetary medium, savings would be effectively stolen form the savers to reward people who engage in mining metals at quantities far beyond their economic use.
• The folly of Keynes condemning gold as money because its mining is wasteful is that it is the least wasteful of all potential metals to use as money. The folly is doubly compounded by Keynes' "solution" to this shortcoming being to propose a fiat monetary standard which has ended up dedicating far more human time, labor and resources toward the management of the issuance of the money supply and the profiting from it.

UnpopularImportantTruth

• Moneys marginal utility declines far slower than any other good, because it declines along with the utility of wanting any good, not one particular good.
• Friedrich Hayek's "The Use of Knowledge in Societies" inspired the development of Wikipedia
• Only with accurate prices expressed in a common medium of exchange is it possible for people to identify their comparative advantage and specialize in it.
• Without a price mechanism emerging on a free market, socialism would fail at economic calculation, most crucially in the allocation of capital goods.
• In the current capitalistic democracies, there is a central planning board for the most important market of all, the market for capital.
• Banks create money when they engage in lending. This underlies the relationship between money supply and interest rates: when interest rates drop, there is an increase in lending, which leads to an increase in money creation and a rise in the money supply.
• Scarcity is the fundamental starting point of all economics, and its most important implication is the notion that everything has an opportunity cost.
• The central banks meddling in the capital market is the root of all recessions.
• The central planning of the money supply is neither desirable nor possible.
• Why is it that the US had never suffered a financial crises in the 19C during the period when there was no central bank, expect in the two instances when Congress had directed the Treasury to act like a central bank.
• Only when a central bank manipulates the money supply and interest rate does it become possible for large-scale failures across entire sectors of the economy to happen at the same time.
• The term "free trade" came to refer to trade carried out between two individuals across borders, according to terms agreed upon by their respective governments, not by the concerned individuals!
• "Governments believe that when there is a choice between an unpopular tax and a very popular expenditure, there is a way out for them – the way toward inflation. This illustrates the problem of going away from the gold standard" - Ludwig von Mises
• If Keynes was right, there can be no example of a society experiencing high inflation and high unemployment at the same time.
• The Austrian school argues that the quantity of money itself is irrelevant.
• The projects that beat inflation but do not offer real returns effectively reduce societies capital stock.
• For Keynesians, the fact that the whole worlds central banks run on fiat currencies is testament to the superiority of their ideas. For Austrians, the fact that governments have to resort to coercive measures of banning gold as money and enforcing payment in fiat currencies is at once testament to the inferiority of fiat money and its inability to succeed in a free market.
• Sounds money makes the form of government a question with limited consequences; All forms of government are restrained by sound money, allowing most individual a large degree of freedom in their personal life.
• In a world of fiat money, having access to the central banks monetary spigots is more important than serving customers.

• Bitcoin as Digital Cash

  Cash payments: Advantages: immediate and final, require no trust on the part of either transacting party. No delay in the execution of the payment. no third party can effectively intervene to stop such payments. Disadvantages: need for two parties to be physically present in the same place at the same time.

  Intermediated payments: Advantages: allow payment without two parties in the same location at the same time. payer can make payment without carrying their money on them. Disadvantages: Require a third party. Costs to make and clear payments

  Bitcoin has the upsides of both with out the disadvantages.

  Crypto

• As more transactions take place at a distance (eg: over the internet) physical cash transactions become impractical
• Difficulty adjustment is the most reliable technology for making hard money and preventing the stock-to-flow ratio from declining, and it makes bitcoin fundamentally different from every other form of money.
• Bitcoin is the hardest money ever invented. growth in its value cannot possibly increase its supply; it can only make the network more immune to attack
• Bitcoin is the first example of absolute scarcity.
• What constitutes the practical and realistic limit to the quantity of a resource is always the amount of human time that is directed toward producing it.
• If annual production of the rarest metal in the earths crust goes up every year, then it makes no sense to talk of any natural element as being limited in its quantity in any practical sense.
• Ingenious ideas are rare, and only a small minority of people can come up with them. Larger populations will thus produce more technologies and ideas than smaller populations, and because the benefit accrues to everyone, it is better to live in a world with a larger population.
• It is a misnomer to call raw materials resources. Raw materials are always the product of human labor and ingenuity and thus humans are the ultimate resource.
• Bitcoin, and cryptography in general, are defensive technologies that make the cost of defending property and information far lower than the cost of attacking them.
• Golds physicality made it vulnerable to government control.
• Bitcoin can be seen as the new emerging reserve currency for online transactions, where the online equivalent of banks will issue bitcoin-backed tokens to users while keeping their hoard of bitcoins in cold storage.
• Bitcoin has the advantage of bringing final settlement to the digital world.
• Central banks reserve currencies are used to settle accounts between central banks and to defend the market value of their local currencies.
• A real case for central banks owning bitcoin is as insurance against the scenario of it succeeding.
• Electricity is generated worldwide in large quantities to satisfy the needs of consumers. The only judgment about whether this electricity has gone to waste or not lies with the consumer who pays for it. If people find something worth paying for, the electricity has not been wasted.
• Bitcoins value comes from it having an immutable monetary policy. It is straightforward to use and nearly impossible to change.
• The majority of bitcoin transactions today are already carried out off-chain. eg: exchanges, casinos or gaming websites use their own internal ledgers and only do final settlement on-chain. In effect, bitcoin is already being used as a reserve asset in the majority of the transactions in the bitcoin economy.
• Deposit banking is a legitimate business which people have demanded for hundreds of years. People have happily paid to have their money stored safely so they only need to carry a small amount of money on them and face little risk of loss. This will likely also happen for Bitcoin.
• The only way a technology can be stopped is by inventing a better replacement or by obviating the need for its use. Banning it will not work.
• Its not the currency or the transactions that require so much processing power; make the entire system trustless does.
• Any change in bitcoins protocol that increases the size of the blockchain is highly unlikely to pass it would likely prevent most node operators from managing to run their own nodes.