On Monetary Socialism
A Chapter from Orange Metal, Orange Coin
It's important that those who make bad decisions be allowed to fail. The answer is not to issue lots of debt to keep them afloat. In a fractional reserve banking system, debt issuance results in expansion of the money supply. In a system that instead runs on a sound money, and also in which bankers are not needed in order to run the economy, lending in the way that was once done is neither possible nor desirable. If money gets more valuable over time, debt becomes more expensive to pay off. Only fools would provide or accept loans after Bitcoinization. Instead, it's better to save a little and start small. In a disinflationary economy, anything that isn't intrinsically scarce gets cheaper over time, as the economy grows, in addition to one's savings. There's concern this might cause people to slow their spending, but that's probably a healthy and good thing. Consumer culture has taken its toll on this planet and society, and shrinkflation results in things that don't last as long as they once did. Being more careful about spending, and more disciplined about saving, is the foundation of fiscal responsibility. That's important for things that do last, and for making long-term plans. Presently, this kind of long-term, low-time preference thinking is hindered by inflation and debt issuance. Price signals no longer have the same effect and same strength.
For example, according to this recent story on Ars Technica, MacBook Pros of the same price are being made worse over time, even though the technology used to make them is getting better. In an economy that isn't an inflationary nightmare, such remarkable efficiency innovations would result in lower-priced goods, commonly lumped in with "deflation" by quasi-socialist Keynesian ideologues, and associated with recessions and business failure. Their solution during such times is-- of course-- increased government intervention, spending at the expense of monetary expansion, through debt issuance to prop up such "zombie corporations" for as long as the system will allow before their poor performance from a failed business model becomes inexcusable in the market. And if the business model is successful, as it is in Apple's case, its success goes unrecognized amidst a wash of muddled price signals.
It took me a long time and a lot of study to understand why the current system that's commonly called "capitalism" is in fact monetary socialism. And this is the sad truth; it turns out, socialism in all its forms results in significant societal costs. The results speak for themselves, everywhere it's been tried. Monetary socialism is just much more subtle than most forms of socialism, and as a consequence, is much harder to explain why it affects as much as it does. Saifedean in The Bitcoin Standard and The Fiat Standard does an admirable job at providing a high-level overview, which draws much from Hayek's The Road to Serfdom and The Fatal Conceit.
This are the kind of things they don't teach in schools. Instead they teach, the government must intervene during economic crisis. How convenient for them.
Fortunately, the world is currently undergoing a transition to an internet of money. Those involved in this movement, the Bitcoiners, are on a mission to build a system that obsoletes money issued by government and big banks, with a system built on fairer, stateless, freedom money. The dream is, anyone could be their own bank. So, banks won't be needed, only wanted, perhaps if they offer superior convenience and customer support. But Bitcoin has no customers, Bitcoin is a tool, a protocol, that has no leaders or known creator.
Sats-- one satoshi is a hundred millionth of a Bitcoin-- earn no "risk-free" yield, they are not "backed by" any assets or entities, nor are they intrinsically valuable; sound money does not require yield to grow in value, and money doesn't need to be intrinsically valuable to be a good store of value. Many things develop extrinsic value and monetary premiums, especially in inflationary environments. In contrast, Ethereum has become a wealth concentration protocol. It becomes a system of those who can stake at preferential rates, and those who cannot, but must earn and spend their wei. If it were used as a reserve currency instead of speculating against Bitcoin as "gas that powers web3", it leads to a system of serfs and lords. Nobody else wants that. ETH's wei cannot become sound money if they aren't accepted as payment in the same way merchants are beginning to with Lightning sats. And that's why Ethereum is solving a fundamentally smaller problem than "supporting all global value transfer", and will always stand in the shadow of Bitcoin.
Bitcoin is fundamentally egalitarian. If the reserve currencies ever "go to zero" due to a debt spiral and/or hyperinflation, all dollar-denominated debts can easily be paid off (a de facto debt jubilee), there can't be unpopular forever wars financed through monetary debasement, and wealth would cease to concentrate into the hands of the elites due to preferential treatment, but instead would have a chance to distribute and normalize on a global level. All this, using an antifragile protocol that plays no favorites, no matter who you are or where you live. That's the dream, and that's why I've dedicated my career to working on Bitcoin, because I can think of no more ambitious and worthwhile thing to do with my time than to help rid the world of central banks, the Federal Reserve being nothing more than a monetary Politburo.