The fiat oligarchy of today will never understand Bitcoin, but their kids and grandkids will
Bitcoin solves a problem that's at least 400 years old. But if you've "made it" in the world of funny money, why should you care about fixing the money?
Why don't they get it? I hear this question a lot. Especially young Bitcoiners have a hard time understanding why politicians, economists, titans of industry, bankers, central bankers, investors and even tech bros don't "get" Bitcoin.
Why they don't see that Bitcoin is a fundamental innovation that can help move humanity forward in many ways? The answer to the "why" seems simple at first: If you are part of the fiat oligarchy, Bitcoin isn't for you. If you've "made it" in the world of funny money, why should you care about fixing the money?
You won't even think that anything needs fixing! You don't see the connection between inequality and fiat money. You don't realise how printing money leads to inflation, corruption and collapse.
Hell, you might even be part of this amazing bureaucratic machine called "central banking", part of that upper echelon of central planners who sit around tables, debating how to steer the lives of millions while convincing yourself that this is a "free market" or even "capitalism"
The cognitive dissonance must be frightening, but you get paid a lot, the media looks up to you, the public sees you as authority and your colleagues have just congratulated you on your last, groundbreaking paper on why price controls might just be the solution if you just get it right *this one time*.
You see yourself as part of the solution, not part of the problem. And in a way, you are. Or rather have been.
Bitcoin solves a very old problem
I'm no hot-shot economist so I might be missing something here, but it seems to me that Bitcoin solves a problem that's at least 400 years old. It might be older, in fact it's definitely older - but 414 years ago we started down the path of solving it by centralisation. In 1609 the Bank of Amsterdam was formed, the true precursor to what is today called "modern central banking". Ironically its first job was to solve the problem of private debasement of the circulating currencies by defining and defending coinage standards. Well, we all know how that worked out.
Three centuries later the Federal Reserve was founded and today, managing devaluation for the benefit of the few and to the detriment of the many has become the sole purpose of central banking and monetary economics as a whole. But we did go down this path because there was no real alternative. You might even argue that the world benefited from this arrangement - at least for a while.
In the absence of a way to literally fix the money supply, controlled debasement seems to be the better option as compared to chaotic debasement. That's why economists and central bankers like to point to the bank runs of old as arguments in favour of central banking.
Bitcoin fixes this by fixing the money supply. For the first time in history.
Yes, gold is scarce, but we don't actually know how scarce it is. We also have no idea how many Dollars exist. There is no way to audit the money supply, be it nature’s money (gold) or government's money (fiat). While gold acted as a yardstick for value over millennia - and still does so today, but indirectly - it was never a true measurement like a meter, a liter, a yard or a pound.
This opened us up to the manipulation of the unit of measurement: monetary debasement. First it was considered a problem and over the centuries it turned into the "solution" by corrupting those who profit the most by living close to the money printer.
They don’t actually believe in market solutions
So no, I don't expect them to ever truly "get" Bitcoin. In fact, this concept of a fixed money supply must be so foreign to them, that they consider it absurd. Even dangerous. Not dangerous for them and their institutions, but "society" and "the economy" as a whole. I don't think they see it as a threat, it's more of an inconvenience. Like Lagarde said, if there "is an escape, it will be used".
But she's not talking about an escape from fiat and a run on the central bank like Bitcoiners do. She's just worried about the effectiveness of financial repression in a world with alternatives. Just like Warren Buffet is worried about the effectiveness of monetary debasement to push up stocks and Augustin Carstens is worried about the effectiveness of "monetary policy" (propaganda, really).
These people truly think that the next step is going to be a digital version of the last 400 years (central bank digital currencies) - they don't see that the problem central banks where created to solve in the first place has now been solved in a way that is 100 times more effective. They don't actually believe in market solutions, so they can't even see the market obsoleting their institutions.
Of course I'm not naive. I don't expect them to go quietly. I expect a fight. Or at least a phase of transition where we try to reconcile the old world of fiat with the new world of Bitcoin for a while.
I just wanted to explain why "they" will never "get it". The fiat oligarchy of today will never truly understand Bitcoin. But their kids and grandkids will.
Until next time,
Niko
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