Thread by @anilsaidso

The Bitcoin Standard by @saifedean is arguably the most comprehensive book for explaining the value proposition and infallibility of Bitcoin in a fiat system.

This thread explores the relationship between money & time preference- the key to understanding incentives in our world.

The topics covered that are referenced in the book-

Sound money: “the money completely under the control of the person who earned it legitimately on the free market..

..makes service valuable to others the only avenue open for prosperity to anyone.."

“Sound money is chosen freely on the market for its salability, because it holds its value across time, because it can transfer value effectively across space, and because it can be divided and grouped into small and large scales..”

“One of the prime functions of the monetary unit is to serve as the unit of measure for economic goods, whose value is constantly changing.

A theoretically ideal money would be one whose supply is fixed..”

“[It’s] supply cannot be manipulated by a coercive authority that imposes its use on others.”

“Unsound money, being controlled by central banks whose express mission is to keep inflation positive, will offer little incentive for holders to keep it, as they become more likely to spend it or to borrow it."

The ability of the "coercive state to create money can give it undue power over its subjects, power which by its very nature will attract the least worthy, and most immoral,

..politicians who operate over short time-horizons of a few years, trying their best to get reelected."

sound money "gives people a bigger incentive to think of their future..

[because] the wealth stored into it would not depreciate over time, incentivizing people to save.

Sound money is a prime factor in determining individual time preference.”

“Time preference refers to the ratio at which individuals value the present compared to the future.

Because humans do not live eternally...there is always a discount on the future compared to the present."

“The sobering reality to keep in mind is that a man's lot in life will be largely determined by these trades between him and his future self. As much as he'd like to blame others for his failures.”

“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.”

1. Security of person (exposure to conflict or violence)
2. Security of property (exposure to criminal theft or govt expropriation)
3. Tax rates (does it incentivize working more or less at the margin?)
4. Expected future value of money (will it hold its value?)

The essence of investment: "as humans delay immediate gratification, they invest their time and resources in the production of capital goods which will make production more sophisticated or technologically advanced and extend it over a longer time‐horizon..”

"The fisherman who builds a fishing rod is able to catch more fish per hour than the fisherman hunting with his bare hands. But the only way to build the rod is to dedicate an initial amount of time to work that does not produce edible fish, but instead produces a fishing rod.."

“A society in which individuals bequeath their children more than what they received from their parents is a civilized society: it is a place where life is improving, and people live with a purpose of making the next generation’s lives better.”

“An economy with a depreciating currency incentivizes individuals to invest in projects that offer positive returns in terms of the depreciating currency, but negative real returns.”

“These investments are what Ludwig von Mises terms 'malinvestments'- unprofitable projects and investments that only appear profitable during the period of inflation and artificially low interest rates..”

"There can be no profit in a free market without the real risk of loss, and everyone if forced to have skin in the game..

Gov't issued unsound money can stall this process, keeping unproductive firms undead.. the economic equivalent of zombies.."

"The criteria for success in the market becomes more and more related to being able to secure funding at lower interest rates than to providing services to society.”

“In a world of fiat money, having access to the central bank’s monetary spigots is more important than serving customers."

“money whose supply is hard to increase is known as 𝘩𝘢𝘳𝘥 𝘮𝘰𝘯𝘦𝘺..”

"The relative difficulty of producing new monetary units determines the hardness of money"

“The best form of money in history was the one that would cause the new supply of money to be the least significant compared to the existing stockpiles..

The ratio between the stock and flow is a reliable indicator of a good’s hardness 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."

“Constantly increasing supply means a continuous devaluation of the currency, expropriating the wealth of the holders to benefit those who print the currency, and those who receive it earliest."

"Had government money been a superior unit of account and store of value, it would not need government legal tender laws to enforce it, nor would governments worldwide have had to confiscate large quantities of gold and continue to hold them in their central bank reserve.”

"With gold in the hands of increasingly centralized banks,.. it lost its property as cash money, making payments in it subject to agreement of the financial and political authorities issuing receipts, clearing checks, and hoarding the gold."

h/t @VisualCap

"In a free market where people are free to choose their money, they will choose the form of money most likely to hold its value over time.

History shows it is not possible to insulate yourself from the consequences of others holding money that is harder than yours.”

“..paper currencies continue to plumb new depths.

One of the key problems caused by a currency whose value is diminishing is that it negatively incentivizes saving for the future."

"100 years ago most people would pay for their house, education, or marriage from their own labor or accumulated savings, such a notion seems ridiculous to people today. Even the wealthy..will instead use their wealth to allow them larger loans to finance large purchases."

"While savings rates have plummeted across the western world, indebtedness continues to rise. The average household in the West is indebted by more than 100% of its annual income..

[Meanwhile] Keynesian economists assure citizens that debt is good for growth.."

"Credit cards and consumer loans allow individuals to borrow for the sake of consumption without even the pretense of performing investment in the future.

Debt-fueled mass consumption is as much a normal part of capitalism as asphyxiation is a normal part of breathing.”

"Debt is the opposite of saving. If saving creates the possibility of capital accumulation and civilizational advancement, debt is what can reverse it."

“the most mendacious fantasies that pervades Keynesian economic thought is the idea that national debt ‘does not matter, since we owe it to ourselves.’

..this ‘ourselves’ is not one homogeneous blob but is differentiated into several generations..”

"The twentieth century’s binge on conspicuous consumption cannot be understood separately from the destruction of sound money,.. In vilifying savings and deifying consumption as the key to economic prosperity.”

/END

🙏Thanks for reading.
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