On the Sharpening of the Tools Necessary As a Computational Shortcut for Understanding Hayek’s Proposal The Denationalization of Money in The Context of the Existence of Bitcoin

That Bitcoin Exists

In our previous essay we gathered some tools that will allow us to both understand Hayek better from our present day perspective and also to alleviate unsuspected filters that various groups have narrated over top of Hayek’s work the Denationalization of Money.

Our first tool is that Bitcoin exists.

This changes the necessary framing that Hayek could have relied on to help his readers enter into his argument and to bring them along throughout it.

The special point about this is that the metaphorical device Hayek constructed, called the ducat, is thus now only PARTIALLY necessary for Hayek’s argument.

This frees the ducat from one part of its implicit dual role, allowing us to make a modification of it, altering its perceived nature to the reader and ultimately simplifying the argument for the present day time.

We also noted that Hayek unintentionally wrote himself into a role that is awkward for the reader of the present day to enter into-the issuer of currency.

The observation that bitcoin changes the necessary nature of the ducat, later allows us to re-frame Hayek's role into a present day framework that is much more natural for the present day reader.

The Birth of the Bank of Hayek as The Representation and Enforcement of Hayek’s Two Implicit Axioms

Hayek’s argument implies and thus requires two premises. The first being that there is no government monopoly on money creation.

He is specific about this being about different brands of money rather than having the rights to issue the same money:

Most people seem to imagine that any proposal for private agencies to be allowed to issue money means that they should be allowed to issue the same money as anybody else (in token money this would, of course, simply amount to forgery) rather than different kinds of money clearly distinguishable by different denominations among which the public could choose freely.

The second, which is derivable from the first, is that there should be competing currencies such that the properly managed one’s will out-survive the lesser well managed ones.

Hayek, therefore, needed a metaphor that captured these axioms.

Thus by writing himself into the script as a private banker of his own private bank (we can call the Bank of Hayek) that issues it’s own private currency (he called the ducat) he could both impose to the reader’s implicit framework that government doesn’t have a monopoly issuance of money and he could also thus explain the concept of what is a ‘well-managed currency’ by explaining how he himself would manage it.

We take with us then the concept of the Bank of Hayek which implies that ducat monies have supply managers.

Bitcoin Versus the Ducat

The scheme would indeed seem to satisfy all the requirements of a common market better than a common currency

From a Bitcoiners perspective the ducat is confusing. This is because the Bitcoiner’s first goal is to show that whatever money is ideal in Hayek’s argument must be Bitcoin.

But the ducat and Bitcoin are polar opposite in Hayek’s argument.

Bitcoin is finite in supply, and thus by Hayek’s account could never serve the global economy as the only money for it. In fact the orientation that it might is exactly the framework Hayek’s argument means to dispel:

The usual assumptions of monetary theory, that there is only one kind of currency, the money, and that there is no sharp distinction between full money and mere money substitutes, thus disappear. So does the applicability of what is called the quantity theory of the value of money-even as a rough approximation to a theoretically more satisfactory explanation of the determination of the value of money, which is all that it can ever be.

Hayek is very clear about the problem with Bitcoin only world where money one money is only finitely supplied:

A stable price level and a high and stable level of employment do not require or permit the total quantity of money to be kept constant or to change at a constant rate. It demands something similar yet still significantly different, namely that the quantity of money (or rather the aggregate value of all the most liquid assets) be kept such that people will not reduce or increase their outlay for the purpose of adapting their balances to their altered liquidity preferences. Keeping the quantity of money constant does not assure that the money stream will remain constant, and in order to make the volume of the money stream behave in a desired manner the supply of money must possess considerable elasticity.

On the Necessary Supply Management Properties of the Ducat that Bitcoin Doesn’t Have

The private Swiss 'ducat'

Since readers will probably at once ask how such issues can come to be generally accepted as money, the best way to begin is probably to describe how I would proceed if I were in charge of, say, one of the major Swissjoint stock banks.

Because of the present day circumstances of bitcoin and an insight we had we upgraded the ducat to instil in it the concept of a ‘range’ by add - and + signs. We claim this is perfectly inline with Hayek’s original intentions and he would approve of it in the context of his time and ours.

This helps the reader conceive that the ducat as a type of money that is managed to have a supply that can be either too much (ducat+) or too little (ducat-) but in relation to the demand for it (and at the perfect balance we considered maybe calling it ducatH for Hayek’s intention of a perfectly balanced money).

The intention of the constancy of this ratio is to manage the Bank of Hayek ducat such that it will have an asymptotically stable purchasing power in a competing market of currencies (remember it’s critical that there are multiple and not just one currency!):

I would announce at the same time my intention to regulate the quantity of the ducats so as to keep their (precisely defined) purchasing power as nearly as possible constant.

It is on Hayek’s intention then, not just ours, that we bring with us, that we highlight and keep in mind, that the metaphorical device Hayek uses in his argument, the ‘ducat’, has the concept of supply management.

Bitcoin is the opposite of this. No one, not even its creator, can manage its supply. That we have bitcoin to point to as exactly what the ducat is NOT is helpful.

On Saifedean’s Wrapping of Hayek To Sell Lies About Hayek

We noted that Hayek’s concerns about the misapplication of the quantity theory of money are unfortunately found in prominent Bitcoin’s celebrity and thought leader's arguments most notably including Saifedean Ammous’ The Bitcoin Standard. In it Saifedean crafts a very sneaky and snakey argument that acts AS IF it doesn’t rely on the limited framework of the quantity theory money (ignoring the subjective theory of money that Hayek’s argument relies on).

In this sentence he starts off as if saying “What matters is Hayek’s subjective theory of value, not the quantity theory of value….

What matters in money is its purchasing power, not its quantity…

But he goes onto to misapply the principle in a way that Hayek would immediately recognize as a wolf in sheep's clothing:

...and as such, any quantity of money is enough to fulfil the monetary functions, as long as it is divisible and groupable enough to satisfy holders' transaction and storage needs. Any quantity of economic transactions could be supported by a money supply of any size as long as the units are divisible enough.

It’s necessary then as we traverse Hayek’s work we bring Saifedean’s arguments along in order to dispel them and lift the damage they have done. We bring along then the fact that Saifedean has nefariously warpped Hayek:

saifedean{Hayek}

Inflationists and the Hardness of the Ducat

Our ducat syntax thus allows us to state that either centrally banked money, or a privately issued money, that has a properly managed supply/demand ratio, ie a ducatH money, is hard money in this accusation of Hayek’s (doubling the usefulness of the H but we aren't partial to this syntax for longer than useful for):

The inflationists would protest because in the end only very 'hard' money would remain.

We see it is Saifedean then and anyone that argues that bitcoin can, should, and will, inflate or hyperinflate the existing central banked currencies that are the inflationsist Hayeks warns us about.

Yes we dare point out into the abyss, against the Saifedeanian laws of blasphemy, that Hayek was so against the global (hyper-)inflation of the major national currencies that he professed against it rather than for it!

It is Saifedean and the maximalist who are inflationists and worry any money that has ducatH hardness (ie well managed central banks) will remain in competition with theirs (bitcoin).

Inflationists, revel on the idea of hyperinflation of the global economy, it is their goal to remove the competitive ground of the Hayekian landscape that guards the quality of all the monies that serve us:

Money is the one thing competition would not make cheap, because its attractiveness rests on it preserving its 'dearness'.

On Bitcoin Maximalism as a Natural Sybil Cartel of Thieves Tax Evaders Inflationists and Saifedean

We noted that the maximalist citation of Friedman to wrap Bitcoin as an example of the ideal currency is a framework that Hayek would never enter into:

As regards Professor Friedman's proposal of a legal limit on the rate at which a monopolistic issuer of money was to be allowed to increase the quantity in circulation, I can only say that I would not like to see what would happen if under such a provision it ever became known that the amount of cash in circulation was approaching the upper limit and that therefore a need for increased liquidity could not be met.

The limitation of a finitely supplied currency, he points out, would be the cause of social panic:

1 To such a situation the classic account of Walter Bagehot [3, penultimate paragraph] would apply: 'In a sensitive state of the English money market the near approach to the legal limit of reserve would be a sure incentive to panic.

The ENTIRE purpose of the introduction of the concept of ducat money is to show the management of the supply in the face of competition optimize the elasticity with respect to the demand:

A stable price level and a high and stable level of employment do not require or permit the total quantity of money to be kept constant or to change at a constant rate. It demands something similar yet still significantly different, namely that the quantity of money (or rather the aggregate value of all the most liquid assets) be kept such that people will not reduce or increase their outlay for the purpose of adapting their balances to their altered liquidity preferences. Keeping the quantity of money constant does not assure that the money stream will remain constant, and in order to make the volume of the money stream behave in a desired manner the supply of money must possess considerable elasticity.

On the Comparability of Central Banking and the Bank of Hayek as a Node In a Network of Similar Banks

As we bring along Saifedean and the Bitcoin Maximalists as Inflationists who misrepresent Hayek’s argument for their own twisted gain, in order to show the truth of their lies, we are better be able to understand the Bank of Hayek and his example of ducat money:

And I would announce that I proposed from time to time to state the precise commodity equivalent in terms of which I intended to keep the value of the ducat constant, but that I reserved the right, after announcement, to alter the composition of the commodity standard as experience and the revealed preferences of the public suggested.

It’s as if from the land of Hayek, he is the manager of the central bank and he has declared the monetary policy of his land. The only point we mean to convey saying this is that there is ‘tinkerer’ with the ducat. Bitcoin doesn’t have a ‘tinkerer’. There is no manager.

Obviously then to the bitcoin Maximalist and Saifedean it must be the holy property of bitcoin that it needs no manager-even though Hayek says ideal money does.

The management, in the face of competition, is necessary grounds for the following:

(a) a money generally expected to preserve its purchasing power approximately constant would be in continuous demand so long as the people were free to use it

(b) with such a continuing demand depending on success in keeping the value of the currency constant one could trust the issuing hanks to make every effort to achieve this better than would any monopolist who runs no risk by depreciating his money

(c) the issuing institution could achieve this result by regulating the quantity of its issue

(d) such a regulation of the quantity of each currency would constitute the best of all practicable methods of regulating the quantity of media of exchange for all possible purposes.

On the Machiavellian Perspective as a Game Theory Device

Thus Saifedean and the Maximalist perspective of Inflationism that wraps central banking considerations as blasphemous precludes our ability to properly apply Hayek’s work.

The Machivellian perspective of considering blasphemous views thus allows us to bring with us the framework of central-banking.

On the Apparent Lack of Complexity Distance Between Hayek’s Proposal and John Nash’s Proposal Ideal Money

We noted the two inconsistencies in Saifedean’s wapping of Nash (as a “ridiculous” theorist) when Saifedean said of Nash’s proposal:

It's just another centrally planned currency, based on ridiculous price stability index measurements. And he's extremely naive to imagine it can be done internationally apolitically. It's far closer to an international CBDC than Bitcoin.

We showed, something Nash himself alluded to, Hayek and Nash’s proposal’s are improbably similar:

The concept I developed of "Ideal Money" became, in my view of it, sufficiently advanced when I conceived of a practical basis for a standardization of the comparison of the value of a currency with an appropriate standard or ideal.

Saifedean can't see they are similar and doesn't understand the 'ridiculous price stability index measurements', the ICPI, is the crux of the observation required to enter into the Nashian orientation of Bitcoin which is identical in this sense to the Hayekian orientation which uses the concept of the ducat in a not coincidentally comparable way.

That Saifedean asserts:

nash{!hayek}

And we show:

nash{hayek}

We take with us.

On the Grand Nash Equilibrium

The Nash equilibrium is a formal game theory concept very often misapplied to phenomena that don’t properly fit within the confines of its axioms. We announced we are going to knowingly misapply it in this way in order to still draw out a special insight.

We claim Nash would approve of the use of this as a reasonable application of it.

And then we derived from Nash’s Equilibrium proof the corollary that if we can render Hayek’s problem down to that of a game we can prove it to be solvable (albeit perhaps only by the mathematics and confines of game theory).

On the Field Equilibrium of a DucatH Dominant Currency Space

Another burst of energy releases now when we consider a landscape of competing currencies each with their own ducat rating that falls somewhere on the range of ducat- to ducat+.

Then to re-synthesize, and begin the formalization of Hayek we simply suggest that there is a Nash Equilibrium such that if all currency providers did in fact manage to provide ducatH stable currencies no issuer would be able to change their issuance strategy and gain.

This metaphor should be so easy to enter into that there is no need to produce the rigorous math to suggest it to be formalizable.

Nor should the math implied be thought of, at least at the outset, as being deep or complex topological math.

On the Ducat Nature of Our Existing Centrally Banked Currencies

We can understand this field of equilibrium is implicit in Hayek’s argument:

The scheme would, to all intents and purposes, amount to a displacement of the national circulations only if the national monetary authorities misbehaved

From this framing, the Nash equilibrium maps perfectly to Hayek’s proposal:

The purpose of this scheme is to impose upon existing monetary and financial agencies a very much needed discipline by making it impossible for any of them, or for any length of time, to issue a kind of money substantially less reliable and useful than the money of any other.

Thus we take with us that central banks, as issuers of money with managed supplies, are issuers of ducat +/- money.

On the Cantillon Framework of Central Banking and The DucatH as a Measure of Idealness

Our Cantillon framework, and thus previous removal of the nefarious wikipedia framing of ‘the Cantillon effect’ (that we note swan Bitcoin is at least partially responsible for), allows us to then represent the ducat deviation from the equilibrium field a as comparison to the Hayekian concept of idealness.

Cantillon considered the landscape of a countryside with farms and markets, cities and farms, provinces and capitals etc.

We can think of the same of a landscape of central banks ( even though its blasphemy to Saifedean’s system) and how if their currencies were forced onto a stage of competition like Hayek imagines, that they themselves we have ducat ratings.

They would otherwise over-serve or under-serve the population that uses them.

This is a framework that every central banker and every academic in the world can easily and wholly enter into.

Thus we take with us the Cantillon framework of central banking:

cantillon{central-banking}

Which is wholly opposite and different than the implicit framing from the commonly referred to Cantillon effect:

cantillonEffect{cantillon}

On the Resurrection of Satoshi the Benevolent Extension of Human Wisdom

An interesting book on game theory, Negotiation Games, by Steven Brams, reinterprets several Torah/Old Testament stories as games between the characters in the stories.~ Szabo Objective Versus Inter-subjective Truth

We also metaphorized Satoshi using a Szabonian construction of a Szabonian construction. This allowed us to make reference to implicit statements that we feel are not only baked into its design, and the intentions of its design (for the parts of it that can thermodynamically handle intentions) but also implicit statements we feel the people most primarily responsible for the implementation of AN OPTIMAL PROBABILISTIC PROTOCOL FOR SYNCHRONOUS BYZANTINE AGREEMENT would each enter into.

Rather than further the damaging superstition that Satoshi infallibly bestowed on society the end of elastically supplied money we have purposefully metaphorized the religious connotations the Satoshi Complex inspires.

The construction of Satoshi as a metaphorical deity is thus useful in its own right for the wisdom we can draw out of it.

This is also useful as satire (but not cynical satire) as a reminder that Bitcoin exists from the efforts and mind from one human only as much as also the culmination of the struggles of the history of humans and the totality of the efforts of mankind's economic philosopher's considerations of those struggles-or as much as an alien deity like figure to this world if we consider Szabo's framework for intersubjective truths:

Gods are objectively imaginary, but serve as a very useful metaphor for the theory of the intersubjective I have outlined.

And so here are Satoshi’s tenants, we drew in our previous essay, that we bring with us, that are not constructed as nefarious additions to the intent either of Satoshi, Hayek, Szabo, etc., and not constructed against the consistency of Hayek’s arguments, and not constructed to prove any argument that doesn’t rest on the natural truth of bitcoin’s existence:

Let there be no government monopoly on the issuance of currencies.

From here on out let there FOREVER be MANY competing currencies

Let it be that good currencies will survive and bad currencies will not

Bitcoin is not the Hayekian optimal supply of money, nor is any inelastically supplied money in the face of an increasing demand for it.

Central Banks will exist to compete with Bitcoin Everyone shall consider how central banks will exist to compete with Bitcoin

Bitcoin shall protect the world from inflationists and the harm they mean to cause.

A New Light

And so Satoshi Said:

The world shall have Ideal Money by Hayek's account of it, which is Nash's account of it

And so when we traverse Hayek's proposal, we will bring the Nashian orientation of Bitcoin with us, by Jal's account of it (not by those that have built forged constructions of it), and so we can synthesize the two proposals, and show they are in fact effectively the same:

I learned of the work and publications of Friedrich von Hayek. I must say that my thinking is apparently quite parallel to his thinking in relation to money and particularly with regard to the non-typical viewpoint in relation to the functions of the authorities which in recent times have been the sources of currencies (earlier “coinage”).)

Rather they are the except that Nash makes a special extension of Hayek.

That as we traverse Hayek we will lay the grounds to extend the Hayekian framework to explain the insight that is in Nash's proposal. We will arrange our understanding of Hayek, in order to arrange Nash's proposal like this:

nash{Hayek}

This will signify a dramatic reduction in complexity distance for an untold amount of readers.