Understanding the Power of Printing

How an understanding of the fiat system provides a foundation to understand Bitcoin.

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AN OLIVE BRANCH

There are many proponents of the current global monetary, economic, and financial bedrock of the world — in a word, the “fiat” (dollar) structure — with the Federal Reserve System at the center, and it’s largest customer, the US government by its side, along with the hundreds of smaller central banking satellites and their governmental counterparts, and all of the businesses scattered around the globe that rely upon the system.

All told, in one way or another, the fiat system has most all of the human population of the Earth under its significant influence. And that is not necessarily a bad thing.

At one point in the not too distant past the same could be said of the gold standard. And no doubt the proponents of Bitcoin surely hope to be able to say the same of their beloved system some day.

Given the wide spread ubiquity of the current fiat system, unsurprisingly there are many outspoken adherents of the system, because those adherents, in some shape or form, benefit from the system. And no doubt they assume, or have “logically” concluded, that they are not unique in this benefit, that without their favored fiat system, not only would there lives be negatively impacted, but the lives of everyone else around the world would necessarily be worse off as well.

Unfortunately, this reasoning tends to lend itself to an immediate dismissal of any other competing systems, like the return to a gold standard, or attempting to embrace a new innovative upstart, such as Bitcoin, for example.

And admittedly, that fiat world view is a rational view.

For if something is working for them, obviously, they would happily go out of their way to loudly share with others why everyone would be worse off without their beneficial fiat. That’s a fairly reasoned self interested, self preservative reaction to anyone suggesting an alternative replacement to their system.

With that in mind then, as the saying goes, you can catch more flies with honey than you can with vinegar.

It’s easy for us bitcoin adherents to rail against the negative aspects of the fiat system, without coherently explaining our position on the purchase power dynamics, in an effort to win over the fiat proponents, but little good that vinegar is going to do us if we’re not communicating clearly those purchase power dynamics.

Fiat dogmas are not going to be defeated through demands, but rather through the sweet subtleness of truth, and with it, allowing the alternative practical world view, the bitcoin view, one that denies the ability of anyone to unilaterally reallocate purchasing power, to be seen voluntarily.

So how do we show the fiat proponents this truth?

The reality is that most fiat system proponents are simply not aware of the theft that underpins their system through the purchase power dynamics of monetary inflation.

In case you missed it too, it is worth repeating… the fiat proponents just don’t comprehend how money printing is theft, they haven’t conceptualized the shifting of purchasing power, the devaluation of each monetary unit.

And it is of no surprise that this is the reality.

Understanding these purchase power dynamics within their system is at first very challenging to understand, but unless and until it is understood, there is no chance of getting a fiat proponent to see the light of bitcoin with it’s stable purchase power dynamic.

Thus, it’s time we elucidate these purchase power dynamic laws, for one and for all.

The first step in seeing the light, is seeing the darkness.

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THE DARKNESS

Humans are incredibly clever. We can rationalize most any atrocity into a net positive. Our ability to theorize abstract ideas is unparalleled. But the ability to theorize can also get us into trouble now and again, because theory is not practice.

The theoretical world is not reality, it is not the practical world.

In theory, if we have a money printer, we can solve any problem that confronts us, but in practice, does this theory hold true? Well, it depends. What is the scope and scale. Are we dealing with a systemic money printer running for generations that everyone is coercively forced to use without the ability to opt out voluntarily?

In theory debt is money we owe to ourselves, but in practical application, is this just pedantic double speak? Can we increase our credit card balances indefinitely, or will the lenders someday tell us “no mas” (hint: they will).

In theory we can inflate our way out of high debt to GDP percentages, but what are the practical costs of this inflation, perhaps the inflation is not so good for everyone, perhaps the inflation solution is in fact only good for a small minority at the expense of the many?

In theory the cost of a stable economy is 2% inflation, but in practice, perhaps anything more than the cost of 0% inflation exceeds the benefits.

All of these questions around monetary policy. So much debate and effort and rationalization and posturing. The Robin Williams sketch from a Charlie Rose interview comes to mind, where he is itching for his next capital injection like a crackhead looking for his next fix, trying to rationalize his circumstance.

The new $20 bill motto will replace “In God We Trust” with “Trust Me”

Typically this inflation talk is focused on prices; gas prices, housing prices, food prices, commodity prices, etc. Depending upon the circle of influence, the inflation discussion is usually squarely pointed at the inflation of these prices, and rarely is it aimed at the inflation of the money supply.

Of course, if ones paradigm for inflation is in favor of the fiat system, which has as its core tenet the necessity of money printing, of inflating the money supply, there would obviously be no reason to discuss the problems of money printing.

However, amongst other spheres of influence, for example those in favor of a gold standard system within the Austrian school of economics, the printing of money tends to be at the center of the discussion on asset price inflation, as the underlying theory of the Austrians is that money printing is the direct cause of price inflation, and that price inflation is a bad thing, thus money printing is a bad thing to do.

And while the Austrians might be correct as to the cause of price inflation, the fiat rationalizers will tell us; “what’s wrong with a little price inflation, especially if things like your stock portfolio and home prices are increasing in value, that would be a good thing for retirees.”

True, but it is a very bad thing for the majority of the world, priced out of home ownership, and without access to brokerage accounts.

And then the fiat proponents will go on to fiatsplain more counter arguments — that the Austrians are a minority of people that are delusional about the problems of maintaining a 2% inflation rate. These proponents of the fiat system have already soundly concluded upon this matter citing their lord and savior the Federal Reserve, which preaches that a 2% inflation rate helps to moderate economic booms and busts, maintains full employment and stabilizes prices over the long term.

Lol.

Listening to the Federal Reserve explain the positive benefits of money printing is like listening to a swarm of mosquitoes explain to you why their poking and prodding into your flesh to suck out your blood is actually good for you.

The proponents and adherents of the fiat system just don’t understand the mechanics of money printing, the law of purchasing power dynamics, because they can’t answer this one simple question —

• Why do newly printed fiat dollars, be they physically or digitally printed, have any value at all, where is their purchase power derived from?

The lack of clarity around this purchase power question and it’s answer, the lack of clarity around the fluid dynamics of purchasing power is ultimately what causes so many fiat advocates to dismiss alternative systems, because those alternative systems, including gold and bitcoin, specifically address the fluid dynamics of purchasing power.

Yet no where is anyone discussing these fluid dynamics.

It is therefore no wonder that the entire circle of influencers supporting the fiat system are so staunchly in favor of their system, for they are entirely unaware of the fluid dynamics of purchasing power within their beloved system.

Unfortunately for everyone, an ignorance of the practical mechanics of those fluid dynamics, an ignorance of the darkness that it is, allows for tremendous errors in the understanding of money printing, and the perpetuation of a tremendously poor monetary design.

Perhaps for everyone’s sake, we take on together, the courageous monumental task of outlining, here and now, the nature of the fluid dynamics of purchasing power within the fiat system.

As Copernicus enlightened the world on the orbits of heavenly bodies and broke us free of dogmatic church tyranny, Simply Bitcoin Unfiltered is here to enlighten the world of purchase power dynamics and break us free of dogmatic fiat tyranny.

This is one small step for Simply Bitcoin Unfiltered, and one giant leap for Purchase Power Dynamics...

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THE LIGHT

According to Wikipedia:

In physics, physical chemistry and engineering, fluid dynamics is a subdiscipline of fluid mechanics that describes the flow of fluids—liquids and gases. It has several subdisciplines, including aerodynamics (the study of air and other gases in motion) and hydrodynamics (the study of liquids in motion). Fluid dynamics has a wide range of applications, including calculating forces and moments on aircraft, determining the mass flow rate of petroleum through pipelines, predicting weather patterns, understanding nebulae in interstellar space and modelling fission weapon detonation.¹

There is an entry missing from the subdisciplines of this discussion on fluid dynamics, namely the subdiscipline of purchasing power dynamics.

The following will illustrate purchase power dynamics — how the sum total value of all purchasing power held within the various monetary units of an economy, remains fixed relative to the total supply of goods and services in an economy, unless and until the supply of those monetary units changes, which then necessitates the purchasing power of each singular monetary unit to adjust itself through price inflation and deflation as the total number of monetary units within the economy increase and decrease, respectively. And further, that this purchase power adjusting within each unit occurs with a lag in time, such that the initial appearance of more monetary units in an economy first gives the illusion of more purchase power, and then finally and inevitably goods and services repricing occurs, which brings purchasing power back into equilibrium such that total purchase power value returns back to equal the total supply of goods and services in the economy.

It is this lag in time of purchase power adjustment that creates all the confusion, and in this confusion resides the ignorance of the proponents of the fiat system.

Let us apply a simple set of facts, upon which we can observe the fluid purchase power dynamics in action.

Suppose the following; all things being equal and constant, that there is an imaginary tiny economy, within which there are 10 units of money, and houses sell for 1 unit of money in this tiny imaginary economy.

Let us also assume that there are no home sales because everyone is happy with their housing situation, and besides, nobody has 1 unit of savings that they are willing to exchange for another house, they are keeping their 10 units of money in their long term savings for other uses.

Our imaginary tiny economy is in equilibrium, if you will.

From these givens we can conclude at the outset, that the total available goods to purchase in this economy have a value equal to the value of the 10 monetary units in the economy, and that the purchasing power of each monetary unit in this economy has, therefore, a value of 1/10 of the total purchasing power.

What we will show and prove in the following example is the slow viscosity of purchasing power, how the monetary unit value decreases as total monetary unit supply increases, but not in an immediate fashion, instead at the speed of which price information travels through the economy. And this speed limit on repricing, this lag, is the law of purchase power dynamics, which lends itself to mass confusion on the nature of price inflation, and the nature of money printing, on the theft that it is.

If money printing is lightning, purchase power adjustments vis a vis asset price inflation is the thunder. And the further you are from the lightning (the money printing) the longer it will take to understand that the thunder (the price inflation) was because of the lightning.

Now then, back to our tiny economy. Suppose someone decides to create 10 more units of money within our tiny economy, and suppose this someone decides to start buying houses at the purchase price of 1 unit per house.

After the purchase of the first house, and then the second house for 1 unit of money, the sellers of the houses begin to think they are selling their houses for too cheap a price, so they raise up their selling prices to 2 monetary units, and now the house selling slows down, and comes to a halt, back to equilibrium.

What has happened!?

When the new money was created,, when the lightning struck, it was unknown to the rest of the economy, the new information (the thunder) had not yet reached the rest of the economy. As far as the rest of the economy was concerned there were still only ten units of money available to buy goods and services, but as the new money entered the market, as the thunder rolled through the economy, it became apparent that housing prices were too low, that someone had more money willing to buy the houses, and so the sellers increased their prices to 2 units per house, which brought the sales price back to 1/10 of the total supply, because 2/20 the new price relative to total new supply, was now equal to 1/10 which was the old price relative to old supply.

In other words, the housing price increased to 2 units, but this increase in price brought the purchase power price back to the original 1/10 of the money supply.

The people finally heard the thunder of higher prices. But they didn’t see the lightning of the money printing, and therefore don’t associate the price inflation thunder, with the lightning bolt of new money. They are oblivious to the fact that someone maliciously printed the money.

This is the law of purchase power dynamics, that purchase power per unit is redistributed at the speed of which new price information travels through the market. It doesn’t occur at the moment of the money printing, it occurs with a delay, with a lag.

As new money enters the economy, the initial sellers assume the money they are receiving holds the same purchasing power as before the new units of money were introduced in the economy. However, in time, the economy identifies an imbalance in prices relative to the supply of monetary units, so prices adjust, in this case they rise as more units enter the economy, which brings prices relative to total purchasing power back to the original level.

In summary, the total purchase power in an economy is always equal to the total goods and services available for sale, and therefore the price of those goods and services is always equivalent to the fraction of total goods and services for sale, except that there is a delay in reprising in the event of new money added to the system. And this delay, this lag in time of information spreading is the missing dynamic of purchasing power that goes unseen by everyone, especially by those fiat proponents who don’t realize there system is based on this dynamic.

This dynamic is seen in the real world. Housing prices rise, not because the house is getting newer with time, and therefore better. In fact the house is getting older and worn down with time, but the supply of money is increasing, pushing the house price up, but it is not the house price per se that is rising, instead it is the devaluation of the monetary units, each unit is worth less, to maintain the same purchase power ratio, which requires more units to buy the same house.

When new units of money are created, it does not increase the total purchasing power of the economy.

But it does certainly appears to do so!

And this is the ignorant error by the fiat adherents!

Initially the new units of money do hold the same purchase power as the old units, because the speed of information of prices travels slower than the new money is spent. But after some time the new pricing information spreads. In our example as sellers saw houses selling faster than usual they decided to raise their prices after the new monetary units begin to circulate through the economy. The rising prices signaled a larger supply of money, and everyone at that point falls into a natural consensus, automatically readjusting prices so that the number of units for each house goes back to the proportion of their value relative to the original purchase power total.

In our example, when 1 new unit of money could initially buy one house, it appeared that the 10 new units of money increased the total purchasing power in the economy from 10 to 20 units of money, however, as people identified houses were selling too quickly at 1 monetary unit per house, the prices for houses was quickly raised to 2 monetary units per house, which brought the total price of each house back to its original ratio relative to total purchase power, 2/20 is equal to 1/10.

Incredible!

This delay in the reallocation of purchase power of newly created money is the primary driver of the ignorance of money printing.

There is a misguided belief that money printing increases purchasing power, and this is true, but it is true in the same way that a dream is real, it is real until you awaken and realize it was only a dream. The same is true of newly printed money, it does increase purchasing power for the initial users of the money, but only so long as the rest of the economy is asleep on the reality that the total amount of goods for sale in the economy have not changed, and therefore the total purchasing power has not changed, the only change has been a new supply of units, which will in time cause all goods to reprice up in order to maintain the original ratio of purchase power required to buy the goods.

This purchase-power-dynamic is exceedingly difficult to convey and articulate, but once you see it, you can’t unsee it.

However, even those in the fiat system that already do see this, they take the smug midwit position that the reason there are counterfeit laws in place is precisely because of this purchase-power-dynamic. The fiat proponents maintain that we don’t want just anybody in society printing money and reallocating purchase power to themselves, and that’s why we only allow banks with licenses to conduct this type of “money printing.” And then they will go on to tell you that “additionally there are many laws, rules and regulations that those with banking licenses must follow that limits their ability to do this type of activity, which are set in place in order to keep the economy functioning properly.”

There are lots of half truths here in this fiatsplaining.

Let’s return to our imaginary economy one more time briefly to get the full truth!

There were 10 units of money in the system before the money printing occurred. And those 10 monetary units were earned through hard work and were kept in savings in case of an emergency, or to pass on to the next generation, or in anticipation of purchasing something specific in the future.

But then the money printing occurred, and after the repricing of the monetary units, those 10 units, that once held 100% of the total purchase power now only held 50%.

In other words, through no action of their own, those savers lost 50% of their purchase power because of the creation of the 10 new additional monetary units by someone else.

Those savers had no vote in that money creation, it was simply taken from them, through the purchase power dynamics of fiat money printing.

Is that fair?

Of course it is not fair.

It would be no different than had the money printing person simply stolen half of the original 10 units, the same economic outcome was the conclusion. Through purchase-power-dynamics, money printing is simply a more clever way of stealing someone’s monetary savings.

It is theft. With a lag.

Money printing is economic lightning to the thunder that is purchase power theft.

Yet the fiat system proponents have an answer for this as well. The ability to expand the money supply is necessary in emergency situations they will tell us.

Suddenly their goal posts and narratives shift from “well it’s okay because it’s regulated” to, “well yeah it’s bad, but its okay if its for an emergency.”

Lol.

No, its not okay.

Not ever.

Especially not for an emergency.

If there is a real emergency you don’t need to pay people money to solve the problem, you just need people doing something about it. If alien invaders attack Earth, people are not going to stand around waiting to get paid to do something about it, their going to get their shotguns out and start shooting.

The pandering for the need of money in an emergency is a false god.

Stop it.

And stop the money printing.

It’s a thunderous theft.

Welcome to Purchase Power Dynamics… Law!

Simply Bitcoin Unfiltered has spoken.

Cheers.

1. https://en.wikipedia.org/wiki/Fluid_dynamics