- Thoughts about the book
- Bits of Information
- Chapter 1: Money
- Chapter 2: Primitive Moneys
- Chapter 3: Monetary Metals
- Chapter 4: Government Money
- Chapter 5: Money and Time Preference
- Chapter 6: Capitalism’s Information System
- Chapter 7: Sound Money and Individual Freedom
- Chapter 8: Digital Money
- Chapter 9: What Is Bitcoin Good For?
- Chapter 10: Bitcoin Questions
- Final Thoughts
I would recommend anyone interested in Bitcoin or Sound money, to read this Gem of a Book at least once. The Bitcoin Standard, is filled with great bits of information not only about Bitcoin and monetary history. But, about why Sound Money is so important, essential for humanity to thrive and why governments only want unsound money that which they alone control, forcing their citizens to trust them and use it. The author also gives examples throughout history of why goods, commodities, or things become money and how they were destroyed. How Keynesian thought processes took over, it’s views, its failures, and its consequences due to short-sightedness, high-time preference.
The list below will be bits of information, nuggets of knowledge, quotes of inspiration that I found throughout the book, that help solidify, build a base of understanding of why Bitcoin is sound money and why it should be used as the global reserve currency.
The list is in chronological order, according to chapters, from the book; The Bitcoin Standard.
• Having a single medium of exchange allows the size of the economy to grow as large as the number of people willing to use that medium of exchange. The larger the size of the economy, the larger the opportunities for gains from exchange and specialization, and perhaps more significantly, the longer and more sophisticated the structure of production can become.
• A slow drain of its monetary value over time will slowly transfer the wealth of its holders to those who can produce the medium at a low cost.
• A money that is easy to produce is no money at all.
• Easy money does not make a society richer; on the contrary, it makes it poorer by placing all its hard earned wealth for sale.
• The gold standard allowed for unprecedented global capital accumulation and trade by uniting the majority of the planet’s economy on one sound market based choice of money.
• By centralizing the gold in the vaults of banks, and later central banks, it made it possible for banks and governments to increase the supply of money beyond the quantity of gold they held, devaluing the money and transferring part of its value from the money’s legitimate holders to the governments and banks.
• This is a historical lesson of immense significance, and should be kept in mind by anyone who thinks his refusal of Bitcoin means he doesn’t have to deal with it. History shows it is not possible to insulate yourself from the consequences of others holding money that is harder than yours.
• With the simple suspension of gold redeem ability, 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.
• This dilemma took money away from the market and turned it into a politically controlled economic decision.
• Bitcoin, as a currency native to the internet superseding national borders and outside the realm of governmental control, offers an intriguing possibility for the emergence of a new international monetary system.
• If the problem was the gold standard, then its suspension should have caused the beginning of recovery.
• The nations that had prospered together 40 years earlier, trading under the gold standard, now had large monetary and trade barriers between them, loud populist leaders who blamed all their failures on other nations, and a rising tide of hateful nationalism that was soon to fulfill Otto Mallery’s prophecy.
• Thanks to the popularity of the most dangerous and absurd of all Keynesian fallacies, the notion that government spending on military effort would aid economic recovery.
• All spending is spending, in the naïve economics of Keynesians, and so it matters not if that spending comes from individuals feeding their families or governments murdering foreigners: it all counts in aggregate demand and it all reduces unemployment!
• Everyone and everything was blamed for the rise in prices by the U.S. government and its economists, except for the one actual source of the price rises, the increase in the money supply of the U.S. dollar. Most other currencies fared even worse, as they were the victim of inflation of the U.S. dollars backing them, as well as the inflation by the central banks issuing them.
• Hyperinflation is a form of economic disaster unique to government money.
• Hyperinflation is a far more pernicious phenomenon than just the loss of a lot of economic value by a lot of people; it constitutes a complete breakdown of the structure of economic production of a society built up over centuries and millennia.
• Sound money as the money that is chosen by the market freely and the money completely under the control of the person who earned it legitimately on the free market and not any other third party.
• Value does not exist outside of human consciousness.
• As Friedrich Hayek put it: I don’t believe we shall ever have a good money again before we take the thing out the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.
• Sound money is chosen freely on the market for its salability, because it holds its value across time, because it can be divided and grouped into small and large scales. It is money whose supply cannot be manipulated by a coercive authority that imposes its use on others.
• Human beings’ lower time preference allows us to curb our instinctive and animalistic impulses, think of what is better for our future, and act rationally rather than impulsively. Instead of spending all our time producing goods for immediate consumption, we can choose to spend time engaged in production of goods that will take longer to complete, if they are superior goods.
• The only reason that an individual would choose to delay his gratification to engage in risky production over a longer period of time is that these longer processes will generate more output and superior goods. In other words, investment raises the productivity of the producer.
• Hans-Hermann Hoppe explains that once time preference drops enough to allow for any savings and capital or durable consumer-goods formation at all, the tendency is for time preference to drop even further as a “process of civilization” is initiated.
• It is only through the lowering of time preference that individuals begin to appreciate investing in the long run and start prioritizing future outcomes.
• The factor affecting time preference that is most relevant to our discussion, however, is the expected future value of money.
• Such a money would also work perfectly well as a store of value, by preventing others from increasing the money supply, the wealth stored into it would not depreciate over time, incentivizing people to save and allowing them to think more of the future.
• Keynes complained about goldmining being a wasteful activity that consumed a lot of resources while adding nothing to real wealth.
• 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.
• Hard money, whose supply cannot be expanded easily, will likely be more stable in value than easy money because its supply is largely inelastic while societal demand for money varies little over time as time preference varies.
• Sound money, chosen on a free market precisely for its likelihood to hold value over time, will naturally have a better stability than unsound money whose use is enforced government coercion.
• Keynesian economists assure citizens that debt is good for growth and that saving would result in recessions.
• Keynesian economic thought is the idea that the national debt “does not matter, since we owe it to ourselves.” Only a high-time-preference disciple of Keynes could fail to understand that this “ourselves” is not one homogeneous blob but is differentiated into several generations-namely, the current ones which consume recklessly at the expense of future ones.
• One of the key Keynesian misunderstandings of economics, which considers that delaying current consumption by saving will put workers out of work and cause economic production to stall.
• Having lived off his family’s considerable fortune without having to work real jobs, Keynes had no appreciation of saving or capital accumulation and their essential role in economic growth.
• The only cause of economic growth in the first place is delayed gratification, saving, and investment, which extend the length of the production cycle and increase the productivity of the methods of production, leading to better standards of living.
• Debt is the opposite of saving. If saving creates the possibility of capital accumulation and civilization advance, debt is what can reverse it, through the reduction in capital stocks across generations, reduced productivity, and a decline in living standards.
• “Every election is an advanced auction on stolen goods”
• Government control of money supply inevitably destroys incentives to save while increasing the incentive to borrow.
• Politicians sell people the lie the eternal welfare and retirement benefits are possible through the magic of the monetary printing press, the investment in a family becomes less and less valuable.
• Keynes was a libertine hedonist who wasted most his adult life engaging in sexual relationships with children, including traveling around the Mediterranean to visit children’s brothels.
• Scarcity is the fundamental starting point of all economics, and its most important implication is the notion that everything has an opportunity cost.
• The opportunity cost of capital is forgone consumption, and the opportunity cost of consumption is forgone capital investment.
• Unsound money makes such manipulation possible, but only for a short while, of course, as reality cannot be deceived forever.
• Monetary history testifies to how much more severe business cycles and recessions are when the money supply is manipulated than when it isn’t.
• The form of failure that capital market central planning takes is the boom-and-bust cycle, as explained in Austrian business cycle theory. It is thus no wonder that this dysfunction is treated as a normal part of market economies, because, after all, in the minds of modern economists a central bank controlling interest rates is a normal part of a modern market economy.
• The fundamental flaw of Friedman and Schwartz’s book is typical of modern academic scholarship: it is an elaborate exercise in substituting rigor for logic. The book systematically and methodically avoids ever questioning the causes of the financial crises that have affected the U.S. economy over a century, and instead inundates the reader with impressively researched data, facts, trivia, and minutiae.
The central contention of the book is that recessions are the result of the government not responding quickly enough to a financial crisis, bank urn, and deflationary collapse by increasing the money supply to re-inflate the banking sector. It is typical of the Milton Friedman band of libertarianism in that it blames the government for an economic problem, but the flawed reasoning leads to suggesting even more government intervention as a solution.
• The only cause of an economy-wide recession is the inflation of the money supply in the first place. Relieved of the burden of understanding the cause, Friedman and Schwartz can then safely recommend the cause itself as cure: governments need to step in to aggressively recapitalize the banking system and increase liquidity at the first sign of an economic recession.
• Keynesians and Monetarists injecting liquidity, increasing the money supply, and increasing government spending, the recovery was slower.
• The monetary expansion created illusory wealth that misallocated resources, and that wealth must disappear for the market to go back to functioning properly with a proper price mechanism.
• While the Federal reserve did alleviate the liquidity shortages in the banking sector, it could not stem the collapse, not because of a shortage of resolve, but rather due to the economy-wide collapse of misallocated capital investments, and the heavily interventionist policies
• As Rothbard explained, there is nothing inherent about the workings of a market economy that will create a persistent problem of unemployment. The normal workings of a free market will witness many people lose or quit their jobs, and many businesses will go bankrupt or shut down for a wide variety of reasons, but these job losses will roughly cancel out with newly created jobs and businesses.
• As Hayek put it: “The cause of waves of employment is not ‘capitalism’ but government denying enterprise the right to produce good money.”
• The Bank of International Settlements estimates the size of the foreign exchange market to be $5.1 trillion per day for April 2016, which would come out to around $1,860 trillion per year. The World Bank estimates the GDP of all the world’s countries combined at around $75 trillion for the year 2016. This means that the foreign exchange market is around 25 times as large as all economic production that takes place in the entire planet. It’s important to remember here that foreign exchange is not a productive process, which is why its volume isn’t counted in GDP statistics; there is no economic value being created in transferring one currency to another; it is but a cost paid to overcome the large inconvenience of having different national currencies for different nations.
• The combination of floating exchange rates and Keynesian ideology has given our world the entirely modern phenomenon of currency wars: because Keynesian analysis says that increasing exports leads to an increase in GDP, and GDP is the holy grail of economic well-being, it thus follows, in the mind of Keynesians, that anything that boosts exports is good. Because a devalued currency makes exports cheaper, any country facing an economic slowdown can boost its GDP and employment by devaluing its currency and increasing its exports.
• Reducing the value of the currency does nothing to increase the competitiveness of the industries in real terms. Instead, it only creates a one-time discount on their outputs, thus offering them to foreigners at a lower price than locals, impoverishing locals and subsidizing foreigners.
• In a Keynesian economic order, foreigners are actively subsidized to come buy the country at a discount.
• This brings us to the current state of affairs in the global economy, where most governments attempt to devalue their currencies in order to boost their exports, and all complain about one another’s “unfair” manipulation of their currencies. Effectively, each country is impoverishing its citizens in order to boost its exporters and raise GDP numbers, and complaining when other countries do the same.
• None of this would be necessary if only the world were to be based on a sound global monetary system that serves as a global unit of account and measure of value, allowing producers and consumers worldwide to have an accurate assessment of their costs and revenues, separating economic profitability from government policy.
• The fundamental scam of modernity is the idea that government needs to manage the money supply.
• Whatever historical quibbles the proponents of the state theory of money may have with these facts, their theory has been obliterated before our very eyes over the last decade by the continued success and growth of Bitcoin, which has achieved monetary status and gained value exceeding that of most state-backed currencies, purely due to its reliable salability in spite of no authority mandating its use as money.
• There are three ways of stimulating aggregate spending: increasing the money supply, increasing government spending, or reducing taxes. Reducing taxes is generally frowned upon by Keynesians. It is viewed as the least effective method, because people will not spend all the taxes they don’t have to pay-some of that money will be saved, and Keynes absolutely detested savings. Saving would reduce spending, and reducing spending would be the worst thing imaginable for an economy seeking recovery. It was government’s role to impose high time preference on society by spending more or printing money.
• There may be consequences in the long run, but there was no point worrying about long-term consequences, because “in the long run, we are all dead,” as Keynes’s most famous defense of high-time-preference libertine irresponsibility famously stated.
• Having the ability to print money, literally and figuratively, increases the power of any government, and any government looks for anything that gives it more power.
• By constantly expanding the money supply, central banks’ monetary policy makes saving and investment less attractive and thus it encourages people to save and invest less while consuming more.
• For Mises, the absence of control by government is a necessary condition for the soundness of money, seeing as government will have the temptation to debase its money whenever it begins to accrue wealth as savers invest in it.
• According to the Austrian view, if the money supply is fixed, then economic growth will cause prices of real goods and services to drop, allowing people to purchase increasing quantities of goods and services with their money in the future.
• An economy with an appreciating currency would witness investment only in projects that offer a positive real return over the rate of appreciation of money, meaning that only projects expected to increase society’s capital stock will tend to get funded.
• The fact that government 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. It is also the root cause of all business cycles’ booms and busts.
• First, unsound money is itself a barrier to trade between countries, because it distorts value between the countries and makes trade flows a political issue, creating animosity and enmity between governments and populations. Second, government having access to a printing press allows it to continue fighting until it completely destroys the value of its currency, and not just until it runs out of money. With sound money, the government’s war effort was limited by taxes it could collect. With unsound money, it is restrained by how much money it can create before the currency is destroyed, making it able to appropriate wealth far more easily. Third, individuals dealing with sound money develop a lower time preference, allowing them to think more of cooperation rather than conflict,
• They nationalized the means of production and shifted to syndicalist and corporatist modes of societal organization, all while suppressing ideas viewed as opposed to the national interest, as well as the promotion of nationalism in what he termed “the organization of enthusiasm.”
• Government simply increases the money supply to finance any harebrained scheme it concocts, and the true cost of such schemes is only felt by the population in years to come when the inflation of the money supply causes prices to rise, at which point the destruction of the value of the currency can be easily blamed on myriad factors, usually involving some nefarious plots by foreigners, bankers, local ethnic minorities, or previous or future governments.
• Unsound money has eradicated the notion of trade-offs and opportunity costs from the mind of individuals thinking of public affairs.
• Had these firms been productive to society, free individuals would have willingly parted with their money to pay for their products. That they cannot survive on voluntary payments shows that these firms are a burden and not a productive asset for society.
• The move toward digital payments was reducing the amount of sovereignty people have over their own money and leaving them subject to the whims of the third parties they had no choice but to trust. Further, the move from gold, which is money that nobody can print, toward fiat currencies whose supply is controlled by central banks further reduced people’s sovereignty over their wealth and left them helpless in the face of slow erosion of the value of their money as central banks inflated the money supply to fund government operation.
• Bitcoin is the hardest money ever invented: growth in its value cannot possibly increase its supply; it can only make the network more secure and immune to attack.
• The decreasing rate of growth, however, means that the first 20 million coins will be mined by around the year 2025, leaving 1 million coins to be mined over one more century.
• Had Bitcoin been created with an easy-money policy, such as what a Keynesian or Monetarist economist would recommend, it would have had its money supply grow in proportion to the number of users or transactions, but in that case it would have remained a marginal experiment among cryptography enthusiasts online.
• The only limited resource, and in fact the only thing for which the term resource actually applies, is human time. Each human has a limited time on earth, and that is the only scarcity we deal with as individuals. As a society, our only scarcity is in the total amount of time available to members of a society to produce different goods and services.
• The real cost of a good, then, is always its opportunity cost in terms of goods forgone to produce it.
• Raw materials are always the product of human labor and ingenuity and thus humans are the ultimate resource, because human time, effort, and ingenuity can always be used to produce more output.
• Bitcoin is the cheapest way to buy the future, because Bitcoin is the only medium guaranteed to not be debased, no matter how much its value rises.
• The existing stockpiles of Bitcoin in 2017 were around 25 times larger than the new coins produced in 2017. This is still less than half of the ratio for gold, but around the year 2022, Bitcoin’s stock-to-flow ratio will overtake that of gold, and by 2025, it will be around double that of gold and continue to increase quickly into the future while that of gold stays roughly the same
• Around the year 2140 there will be no new supply of Bitcoin, and the stock-to-flow ratio becomes infinite, the first time any commodity or good has achieved this.
• Gold’s physicality made it vulnerable to government control.
• Bitcoin, having no counterparty risk and no reliance on any third-party, is uniquely suited to play the same role that gold played in the gold standard. It is a neutral money for an international system that does not give any one country the “exorbitant privilege” of issuing the global reserve currency, and it not dependent on its economic performance.
• If bitcoin continues to appreciate while a central bank doesn’t own any of it, then the market value of their reserve currencies and gold will be declining in terms of Bitcoin, placing the central banks at a disadvantage the later it decides to acquire reserves.
• The first central bank to buy bitcoin will alert the rest of the central banks to the possibility and make many of them rush toward it.
• As hard as it might be for central bankers to believe it, Bitcoin is a direct competitor to their line of business
• By requiring the expenditure of electricity and processing power to produce new bitcoins, PoW is the only method so far discovered for making the production of a digital good reliably expensive, allowing it to be a hard money.
• Bitcoin can thus be understood as a technology that converts electricity to truthful records through the expenditure of processing power.
• In January 2017, the processing power behind the Bitcoin network is equivalent to that of 2 trillion consumer laptops. It is more than two million times larger than the processing power of the world’s largest supercomputer, and more than 200,000 times larger than the world’s top 500 supercomputers combined.
• Bitcoin has become the largest single-purpose computer network in the world.
• To destroy Bitcoin, an attacker needs to expend very large sums of money with no return at all.
• The defense of the Bitcoin network is not just that attacking it has become expensive, but that the attack succeeding renders the attackers’ loot worthless.
• Miners are only Bitcoin miners to the extent that they produce blocks with valid transactions according to the current consensus rules.
• Bitcoin’s value comes from it having an immutable monetary policy precisely because nobody can easily change it. Any coin that begins with a group of individuals changing Bitcoin’s specification has with its creation lost arguably the only property that makes Bitcoin valuable in the first place.
Hope everyone, enjoyed the bits I provide and Thanks for reading through the bits of information, nuggets of knowledge, and quotes of inspiration I found within the book; The Bitcoin Standard. These are only some of the great bits hidden within the book that everyone should know. Reading this book will help one understand what the future holds for the world when Bitcoin engulfs the financial sector, which has yet to be disrupted by the internet. Bitcoin is our way of slowly draining all monetary value out of fiat currencies over time and transfering that wealth to Bitcoin holders.
