1.) Short thread on the unseen costs of evading resource costs of money; many are the educated economists that in their naive attempts to design and implement clever schemes to evade resource costs of money, find themselves unwitting creators of much worse monsters.
2.) John Law saw the high costs of gold- and silver mining as a curse for that money. And at a glance, the argument seem to make sense. Is it not true that annual precious metal mining costs must be deducted from the general economic growth in a world under such standards?
3.) Friedman shared Law's view of the wasteful nature of such money, and contrasted it with the negligible cost of producing paper money. Similar arguments are now again echoing strong in countless newspapers, and among many PoS-altcoin camps. 'Bitcoin is boiling the oceans'.
4.) Here is what they all miss: even though a low resource cost leads to a smaller deduction from economic growth (meaning higher surpluses, all else equal), the economic growth itself is subject to a new type of risk. This risk may hide in the shadows, for years or decades.
5.) It is called 'easy money'. Law and Friedman said it; the new, modern money is easy to produce and thus cheap. From history we know that this property sporadically will manifest itself in money production that destroys wealth, meaning the efficiency improvements are offset.
6.) But the clever economists never think so far ahead. They see the short term cost cuts, not the long run, low probability, massive cost increases. Bitcoin's PoW is not wasteful; it secures the long term mitigation of much higher costs stemming from easy money production.
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