Consequences of Money
An introductory primer.
Money is superordinate to law.
— Jeff Booth
Money is supremely superordinate. The type of money utilized in a given market, that is to say, the special characteristics of a particular type of money utilized within a given market, will both dictate and necessitate, firstly, the governance model of that market, and secondly, the means and methods taken by producers participating within that market to maximize profits for themselves.
— Anon Bitcoiner
INTRODUCTION
Fiat is one type of money. It is indeed, one of countless types of money, which have been utilized by countless markets, in countless states, tribes, and communities throughout the last 10,000 years of human history.
What makes fiat of great interest to me (and after you have finished reading this article, dear reader, will be of great interest to you as well) is that fiat is the primary type of money currently utilized in the marketplace. And what is more, now that humanity is globally interconnected, our marketplace is the entire global human population.
And by the way, “fiat money” is simply a fancy way of referring to government decreed money, be it US dollars, European Euros, Japanese Yen, Chinese Yuan, or any other government monopolized money.
So what is the special characteristic of fiat money?
And, as quoted from the anonymous bitcoiner at the top of this article, what governance model and profit methodologies does that special fiat characteristic dictate and necessitate for global markets?
Before addressing these questions, I want to bring into our discussion one other type of money that we can compare and contrast against fiat money. The other money we will consider is a relative new comer, introduced in 2009, known as bitcoin.
A brief sidenote here about bitcoin. Don’t confuse bitcoin the monetary unit with Bitcoin the payment network. For sake of clarity, going forward we will refer to bitcoin with a lowercase “b” as the monetary unit, and Bitcoin with an uppercase “B” as the payment system upon which the bitcoin units are transacted. You can think of the Bitcoin payment system as something similar to the SWIFT payment system that the fiat US dollar is transacted upon. Both fiat and bitcoin payment systems are essentially nothing more than text messaging systems. The only difference between the two is that fiat uses a permissioned system, while bitcoin is a permissionless system. This distinction is indeed relevant, however, for our discussion, these payment systems won’t be considered as we are only concerned with comparing and contrasting the actual monetary units, not the transactional systems they utilize. To be sure, the value transfer systems of each type of money are interesting in their own right and deserve analysis, but we’ll leave that for another day.
Now then, let’s get back to the discussion...
UNLIMITED FIAT v. LIMITED BITCOIN
So what special characteristic is imbued within the fiat monetary units? The suspense is too much, I’m sure!
Without further ado then, fiat’s special characteristic is that it has an UNLIMITED supply. We will compare fiat’s unlimited supply characteristic to the special characteristic of bitcoin.
And what is bitcoin’s special characteristic? Well you would be correct if you already identified that the special characteristic of bitcoin is that it has a LIMITED supply of monetary units.
This subtle difference between fiat’s unlimited supply and bitcoin’s limited supply is seemingly inconsequential, yet the consequences are of such seismic magnitude, of such profound enormity, that it truly is difficult to overstate this difference. Although, fear not dear reader, for I will certainly try my best to overstate the significant consequence of this difference in supply characteristic. It is nothing less than a matter of freedom or slavery, of life and death.
THE FUNCTIONS OF MONEY
Allow ourselves a brief moment here for a quick refresh on the functions of money.
Obviously we use it to buy the things we need, or to have a stockpile of it as savings for the unknown future, but we also use it as our unit of account, as a way to measure the subjective value of everything that we might be thinking about buying or selling.
It’s these three functions that money serves for us. Stated differently, money provides us with three specific types of utilities including:
it’s ability to elicit voluntary trade by increasing the “coincidences of wants” allowing for anyone to have something of saleable value — money — in exchange for any other good or service desired at anytime, by anyone, and anywhere on the planet,
it is a storehouse for value into the unseeable and unknowable future which therefore quenches our thirst for certainty in uncertain times ahead, and lastly
it is a measuring stick or “unit of account” that establishes a market-wide standard for economic calculations in both short term immediate life decisions, and long term multi generational planning, as well as for all the choices made inside and outside of those time frames by each and every market participant, independently and dependently of each others choices.
If goods and services are the instruments of the market orchestra, money is the melodic vibrations of the grand concerto that weaves itself into all the beauty and magnificence that is human action upon this place we call Earth. Money is like the ubiquitous air we breathe without thinking twice about it. It is like the water the fish of the sea swim through without giving it a moments thought.
Without money, voluntary trade would come to a grinding halt, and violent trade would soon take center stage in every neighborhood on the planet. There is nothing more vital to a peaceful and prosperous existence for humanity than a well functioning, voluntarily exchanged, consensually adopted, monetary medium.
UNLIMITED UNITS NECESSITATE VIOLENT GOVERNANCE
The unlimited supply of fiat is a special characteristic which demands and dictates a particular governance model. Remember, the special characteristics of a particular type of money utilized within a given market, will dictate and necessitate, firstly, the governance model of that market.
And what governance model is dictated by an unlimited supply of fiat money?
Nothing less than complete control is the required governance model under fiat. A top down, iron fist of totalitarian governance is required in the fiat market. For in order to allow an unlimited supply of money to exist there must be absolute control. All things being equal, no rational human would voluntarily choose to accept a money of unlimited supply, for that which has an unlimited supply, and by definition, cannot hold value.
And yet here we are. Living in a world of fiat money, a money without value due to its unlimited supply characteristic, a world in which the market must brutally and violently impose itself through an all-powerful state, ready, willing, and able to crush the slightest scent of disobedience.
Whether your state is China, Russia, Brazil, Belgium, the United Kingdom, the United States, or any other state, total control is required, necessitated, and dictated because of the unlimited money utilized within these markets.
Oh, your state won’t kill you if you don’t use their fiat money, you say?
Imagine trying to pay your annual income tax with beaver pelts, glass beads, salt, gold, or some other type of money. The state will place you in prison for not using their fiat money. Of course you could fight the totalitarian state, fight for your freedom from the cage, but they will undoubtedly initiate prompt action to pull you into their cage.
Should you continue to resist, deployment of heavily armored and weaponized soldiers will ensue, and they will find you and violently extract you to prison. And should you resist, and match their firepower, you will be murdered, and the state’s ultimate supremacy will remain intact and unscathed. This is the all-powerful governance model required of fiat money.
This totalitarian model is not well understood. In fact, I dare say that you, dear reader may have flinched at this candid survey of your fair state and its violent affairs with disobedient citizens. Give it a moment of reflection.
The point here is the cold reality that unlimited supplies of fiat money necessitates a singular all-powerful authority to enforce the otherwise unacceptable worthless money, and to seek and destroy any that oppose.
This is your world on fiat. No matter your state this is your position. You can paint it rosy or ignore the reality, but you are here, locked in a nightmare, of violent aggression, ready to destroy you at a moments notice, should you step out of line.
Oh but don’t worry these fun times get even better. Let’s next discuss the means and methods of producers in this fiat market, and the resultant products that these means and methods necessitate in order to maximize profits for the producers.
UNLIMITED UNITS NECESSITATE INFERIOR GOODS
The other capriciousness with which fiat dictates, is the means and methods that producers must implement in order to maximize their profits.
A simple summation of the means and methods of producers is one which you may well already be aware of and no doubt have experienced in your daily life — the implementation of “built in obsolescence.”
In other words, when Apple makes their next iPhone, they design the phone to stop working within two years. The battery will give out or the data plan mysteriously slows, or the plug for the battery charger has changed. Something will require you to buy the next marginally improved iteration, at a sales price equal to or greater than your current phone.
There is no doubt that technology is available now for Apple to develop an iPhone that would operate flawlessly for the next ten years or more. And at the very least, provide some platform to interchange and upgrade parts as needed, at discounted prices from purchasing the entire phone. The company would of course never offer such an abundance of quality, it could kill their business in the fiat world.
What is important to note here is that producers must take an obsolescence enforcing approach in order to maximize profits and build market share. For if a competing producer were to make a phone with a lifetime warranty, that competitor would soon be bought out by Apple, the larger “obsolescence enforcing producer.” Apple, being a large company with a bigger balance sheet is able to secure a lower interest rate loan, available only because of an unlimited fiat money supply, and the lifetime warranty competitor would quickly be bought out and destroyed once under the ownership and control of Apple.
Of course if the buyout approach was not available because for example, the competitor producer was not interested in “selling out,” the larger “obsolescence enforcing producer” would find other solutions to destroy the lifetime warranty.
For example, the obsolescence enforcing producer could choke out the supply chain of the smaller competitor, or work with state regulators to create regulatory and licensing hurdles, under the auspices of “customer protections,” such that the smaller competitor would be forced out of business due to overburdening paperwork and red-tape requirements.
Both of these solutions would be available to the larger producer through access to large loans at lower interest rates than the smaller competitor, only because the supply of fiat money is unlimited. This source of funds can be applied to manipulate regulators and pass these “consumer protections” or be used to price out the smaller competitor by running at losses to take market share.
The name of the game with unlimited fiat money is finding ways to manipulate the market in order to make quality products scarce. For minimizing quality, maximizes profits in this fiat market. Keep in mind also that producers will and must take every means necessary to continually increase scarcity in order to maximize profits and grow in size. For should they not, they will be swallowed up by an even larger “obsolescence enforcing producer” with even more access to larger loans and financing at ever lower interest rates. All of which is only possible with an unlimited money supply, which is only allowed by fiat and its special unlimited supply characteristic.
To summarize then, just as market governance demands one all-powerful authority, the long term trend of producers is a consolidation into one market producer for a given market product, ensuring maximum control and minimizing abundance of quality thus ensuring maximum profits. These are the results of unlimited fiat. A world of life expectancy declines, child mortality increases, consumer and employee dissatisfaction, living in bondage to unlimited cheap money.
Fantastic.
Human collaboration creates division of work, which increases specialization, which increases quantity and quality of product, which increases discoveries and inventions, which expands human civilization, which increases human collaboration…a grand unending cycle of growth, onwards and upwards.
— Anon Bitcoiner
LIMITED UNITS NECESSITATE VOLUNTARY GOVERNANCE
The limited supply of bitcoin creates an unusual and not well understood governance model. For we have never in our known history of humanity, had such a governance model, precisely because we have never had a limited supply monetary system.
In the limited monetary unit world, governance systems collapse down to self governance, for the cost to embark on anything more would come at too great an expense. Representative governance become too costly in a limited money economy.
An example of this blossoming governance model is in the governance of bitcoin itself. I myself decide the governance of bitcoin. I voluntarily choose the rules that govern the bitcoin that I prefer. And the bitcoin that I prefer is one of limited supply, and therefore, there is only one option available for me, bitcoin with a capped 21 million supply. And the way I choose this is by running the bitcoin protocol I prefer.
This simple idea of self governance, of self representative governance is not well understood, for there has never been such a model in modern humanity. The last time self representation existed was when humans lived in small tribes where each tribe member had themselves to represent their preferences. In other words, bitcoin is governed not by some group of all powerful violent totalitarians, but by voluntary individuals like me and you, dear reader. We individually, and voluntarily, choose to self govern.
This ability to self govern is also the only viable solution to maintain the limited supply of money within the bitcoin monetary system. For only through our self governance can a money maintain its limited supply. The desire to create more wealth for oneself through the creation of more money is such a powerful force that no custodial governance model could maintain a limited supply over time. Only one of self enforcement can perpetuate a limited supply, for the incentive is only aligned with the self governed to not dilute his own supply.
Another example that may help to color this fascinating and exotic idea of self-governance is to compare and contrast the governance models of the computer code that is bitcoin, against the governance model of the computer code that is fiat.
Who among us has the ability to control the amount of fiat money our governments and their central bank partners create everyday? The decision making on the amount of money created by the government and their central bank partner is conducted by the government and their central bank partners. This is a representative model, and in this model, the decision is ultimately always one of increasing the supply, agreed upon by a privileged few, and distributing it to the privileged few. Within fiat, the governance model on money printing is an oligopoly where a small number of individuals decide for the many. It is anything but a democracy or republic, as your friendly government might have you convinced of.
Conversely, who among us has the ability to control the amount of bitcoin money our governments and their central bank partners create everyday? The decision making for this is held by all of us, individually. Each of us has an equal opportunity to run whatever bitcoin protocol we choose, and many of us choose to reduce our future uncertainty by running the same 21 million unit protocol that began in 2009, because this constant known supply is the best solution to limiting future uncertainty for us holders of bitcoin.
With bitcoin, the governance model is determined by each individual, there is no privilege individuals within bitcoin. There is only a one to one representation by each individual whom voluntarily chooses to run the governance policy they prefer. Within bitcoin, some would consider the governance model on money printing an anarchy where there is no rulers, but this is not accurate. Everyone is the ruler of themselves should they so choose to rule themselves to be the master of themselves. This governance model for bitcoin is more of an aristocracy, where the best rulers become the consensus, and for bitcoin, the best rulers are those that rule with consistency, where uncertainty is reduced to a minimum, where the supply stays limited to 21 million bitcoin, forever. No more, and no less, as defined from the beginning of the system in 2009.
Of course people are free to change the supply of bitcoin, and many have done so. One such example is Litecoin, which was a copy of the bitcoin protocol with some minor changes, including an increase of the supply of coins to 84 million coins. The well loved creator (read: “scammer”) of Litecoin, Charlie Lee, famously sold his “altcoin” (read: “crypto shitcoin”) in late 2017 at the top of the market. And since then, the market has continued to beat the coin back from whence it came, namely, hell.
All scamcoins priced in bitcoin look like this litecoin chart. Why? Because people prefer certainty to uncertainty. And there is nothing more certain than the unchanging supply of the original bitcoin. Go F yourselves, scammers. And let this be a lesson for you, dear reader. Don’t get conned into ‘crypto’.
There is only bitcoin, the rest, including Vitalik Buterin’s copy of bitcoin, ethereum, including Richard Heart’s copy of bitcoin, hex, including Charles Hoskinson’s copy of bitcoin, cardano, etc. etc. etc. All 20,000 copies of bitcoin trend to zero priced in bitcoin, because they all break the most important element of bitcoin, its certainty.
The certainty of bitcoins unchanging supply, cannot be repeated. To copy bitcoin, and create a new version, is by the very creation of the copy, introducing uncertainty into the ecosystem, thus all copies of bitcoin fail over the long term. This is an important concept, don’t forget this.
LIMITED UNITS NECESSITATE SUPERIOR GOODS
With regards to producers, heretofore the world has no history of a limited supply money and therefore no historical illustrative examples to provide for elucidating the means and methods with which producers will take to maximize their profits.
However, with the quickly growing bitcoin market of self governance we can begin to identify anecdotal evidence emerging which points us to the notion that this limited supply characteristic is forcing producers to pump an abundance of quality into their products. Quite the opposite of an obsolescence enforcing producer as we concluded for the unlimited supply model of fiat.
Consider one of the most popular bitcoin signing devices, the COLDCARD. The producer of this product has shared through open source channels the entire design specifications of their product as a way to ensure a maximum abundance of quality.
Imagine Apple sharing in an open source way their design specifications to the iPhone. And yet the Coldcard is wildly popular because of its openness and drive towards maximum abundance of quality.
The reason that maximum quality is achieved in a market of limited supply money is precisely because a money of limited supply has the maximum possible value relative to all other types of money and therefore, consumers using this money will only exchange their limited supply valuable money for a product of maximum quality.
This is rather intuitive in retrospect.
As an example you can consider going shopping with your fiat money compared with going shopping with your retirement savings. You are not going to buy another pair of low quality shoes or the newest iPhone with your 401k because it is too valuable to you. Instead you will exchange your relatively cheap fiat for some marginally more valuable pair of shoes or marginally improved over priced phone.
So what then we see beginning to emerge in the market of limited supply bitcoin money are producers that can only achieve profits through the pursuit of providing maximum quality, demanded by consumers of low time preference, established and dictated by a limited supply money.
CLOSING THOUGHTS
This article took many months to write. The original intent of this discussion was to draft a framework for good and bad decisions. However as I wrote, I found no sure arguments, no sound logical positions to stand upon. After many months of writing I reached a break through when I stopped looking at money as something good or evil. Money is simply a tool. And there are many types of money, each its own type of tool with special characteristics which will dictate the life that you and I live.
There are many people in this world swimming in the monetary waters of fiat, unaware of the blessings of bitcoin. These fiaters don’t like bitcoin. They don’t like it because it changes their way of life. They have done well for themselves in their fiat world and they are incentivized to keep their fiat in control of the world, which makes bitcoin and bitcoiners their enemy. But us bitcoiners do not see them as our enemy. We see them as our ignorant, misguided, wayward neighbors. In time the fiat world and those that swim in it will eventually dry up their influence and clout. In time, these fiat maxi’s will dwindle in number as they one by one see the bounty of the bitcoin way. Do not fear the fiat maxi’s. Pity them, for they know not of the waters they swim within.
We have known of a life of fiat. We once knew of no other life. We have stories and fables of times when gold money had dictated life in the past, and other stories of stones, and seashells dictating life for other peoples of the past.
What we are now beginning to see take shape before us is the life that bitcoin will dictate. One of self governance, and abundance. One of thoughtfulness, conviction, and awareness. One of personal fulfillment, of the sharing of ideas, of the deep relationships forged, and of the making of dreams into realities. I look forward to the bitcoin life with my friends and family, and I think you, dear reader, can look forward to it with you and yours as well.
Cheers!