Bitcoin Songsheet: Fiat Money Debases Charity

Everyone loves charities. They provide assistance for the poor. They help the poor. They alleviate suffering. They make society more peaceful… right? Every year, billions of dollars are donated to charities all over the world and most people see charities as a win for society. You might not like what you discover if you dig deeper. Charity is a deeply Christian idea. Charity is the act of loving your neighbor and providing assistance when they are in greatest need. For example, Christian charity institutions were some of the first hospitals. Most philosophies, including those of Nietzsche and the Romans, did not consider the principle that the poor and the needy should be treated with dignity and love. Charity is one of the markers of Western civilization.Unfortunately, charity has been debased. Charity is a Christian virtue. It is more than almsgiving. Unfortunately, the term “charity” no longer refers to almsgiving. Instead of being about helping the poor or vulnerable neighbors when they are in greatest need, charity now refers to giving money to a central organization to help them. Charity has become a monetary gift to a central organization, rather than a concrete action to help someone. Charity In The PastCharity was once very local. You had a relationship to your neighbor and helping them was part of the communal experience. You already had a network of relationships that connected you, and charity was always received with gratitude. Both the giver and the receiver knew that charity was not something they could take as a given. Harmful use of charity could have severe consequences. To take advantage of charity would mean breaking the very relationships that provide it and causing more damage. To abuse charity would be like cutting off a branch. Few people would be foolish enough not to. Relationships are now disposable. People don’t have the incentive to do good because ultimately, the bad reputation it should generate doesn’t come back to bite. People are dependent on their governments and employers so as long as they have good relationships, it’s okay to let other relationships go. Relationship dynamics are more important than ever. A relationship with a person can be very different from a relationship with an organisation. Organizations are easier to fool than people and rely on bureaucratic processes to determine your neediness. Because of the centralization of our relationships with large organizations, charity has become more economic and less effective. The original purpose of charity was to fulfill all human needs. Now, it is primarily about monetary aid. Fiat mentality, which is a belief that money can solve all problems, is a disease. Real charity is difficult. It requires sacrifice on the part the giver as well as their effort, whether that’s time, relationship capital, or personal skills. Charity has become very impersonal because it is outsourced all of this in an economic transaction. These giant organizations are in the middle of almsgiving. These organizations are very convenient to the altruist. It is possible to outsource the hard work of virtue. You can buy love for your neighbor for money. If you have a sound money economy, the money will likely produce a lot of goods or services. However, money earned in a fiat currency economy may have been obtained through Cantillon effects (that is, theft). Cantillon winners generally have bad reputations. Consider the reputation of an investment banker. It’s true that many people want to become investment bankers. However, their reputations are not great. They need to repair their reputations and charity is a great way to do this. This is a proven strategy that many billionaires have used to build a positive reputation. They can focus on “charity” and get a huge reputation boost. Many of their fiat abuses will be put on the back burner. Fiat money has such strong incentives that it encourages almsgiving. Aren’t we all keen for charities to be well funded? Aren’t we all looking for good things from charities? Let me disabuse of that notion. Charities have Terrible Incentives. The goals of most charities are noble. They aim to end hunger, reduce pollution, cure diseases, and promote the arts. They may have noble goals, but can they actually achieve their goals? The charities would like you to believe so. Unfortunately, the incentives are so weak that they can only tell you about their failures. If they told you they spent millions on a scheme that didn’t work, would they ask you to donate? There must be many failures. If charities were all successful, wouldn’t all their noble goals be accomplished if there was sufficient funding? This should sound familiar. These same incentives exist in a completely different area: government. They want to be proud of their achievements. It is in their best interest to make it appear that they aren’t wasting money, even though they are. We all know that the government is a huge waste of money. There are no market incentives and funding is provided by political means. We see a lot more rent-seeking than we do charity work. Barack Obama’s autobiography “Dreams From My Father” describes his experiences as a community organizer. He was frustrated by the fact that many charities meant to help these communities were run by people who didn’t do anything. This was a common occurrence, and people from these areas would often approach him to ask for work at the charity. Charities are a haven for rent seekers. They have a structural problem. There is little proof that people like charity. It’s the original virtue signaling. It makes you appear altruistic to donate money to a cause. This is something I say somewhat cynically because many people who donate money to charity don’t follow up and verify that the money has been spent properly. If people truly cared about the results, they would focus their efforts on verifying the charitable endeavors. Unfortunately, you only get verification from charities, and they have a lot of incentive to make it look like they are doing huge good. Unfortunately, most charities lack accountability. If we truly cared about what charities were doing, we would scrutinize each charity more closely. But, as we have seen with fiat monetary system, there is much less scrutiny overall. VC due diligence is a joke. This has been proven time and again by FTX, WeWork, and Theranos. The money isn’t real, so the more important job of a VC to get in on investments that everyone else has made and dump. They may give lip service but don’t care about the boring things like profit or loss. Because there isn’t an endless stream of money coming in, sound money systems are subject to greater scrutiny. This pattern of less scrutiny extends to charities. Charity work is closely scrutinized in a sound-money economy. This is because it’s difficult to find the money. There is more verification and less trust. Fiat money economies have more money and more trust. A charity is in some ways an investment. Investments are not made for your own profits, but for the benefit of society. Those who invest in social causes need to be accountable at least as much as regular investments. Most people instead outsource this verification to others, often the charity themselves. The Politicization of CharityThe money printer is a special player in the fiat currency economy. This is why charity has become so political. Charities do not just receive money from wealthy people; they also often get money through government coffers. San Francisco has granted over $1 billion to non-profits fighting homelessness since 2018. This is one issue in one city. With prejudice, I will say that the homelessness problem has only gotten worse in San Francisco since 2018. Would you continue to do a workout if it made your body weaker? What are all these non-profits doing? As you might expect with fiat currency, the charities that survive tend to be those that have political connections. Access to government funds is secondary to the outcome. These charities are funded by the government to provide an informal verification system for donors who can’t bother to verify their identities. Charities are not perceived as being driven by money. But if you examine their organizational structure, it becomes clear that money is at center of everything they do. Instead of making money by selling useful goods and services to the market, they turn to donors like local governments to get money. Although they sound noble and have abandoned capitalism, the reality is that they are playing dirty politics to obtain the money they need. These charities don’t depend on markets or outcomes, so people who work in them aren’t good at managing money. This means that they are not capable of achieving the charity’s goals or making things more efficient. Their area of expertise is in politics, marketing, and public relations. Many are good at throwing $20,000-per person parties to raise funds, but not great at actually building wells. Many charities waste a lot of money. This is because fiat money makes it easier for charities to use political skills instead of economic ones. They are adept at gaining the respect of others and being viewed in a certain way. They are considered a marketable commodity. Donors get a status boost in return for their donation. Because of their political positioning, charities survive despite being ineffective. I just said that many charities trade money for virtue signaling. How can this be reversed? Do charities really need to exist? There is hope. There is a way to do good charity. Given that many of you will be able to give a lot of money in the future, here are some thoughts. Unfortunately, today’s charitable giving is characterized by too little verification and too much trust. It’s not easy to give money away for the greater good. It’s often more difficult than earning it, I would venture to say. Fiat money has created a culture where people trust salesmen rather than verifying facts for themselves. Just like our money, we must verify charities we give to. It is not enough to just give your money. You must also put in the effort to make sure they are receiving it effectively. This does not mean you should be in the same country club with the president of the non profit, but it does mean that you need to do some research on the people the charity is supporting. Humans are built to be in relationships, and charity should focus on that. The real virtue of charity is love, and money should be secondary. Another option is to eliminate the middleman and reduce the politicization in charitable giving. Although the giant charity organization makes it easy to give monetary money, it can also add a lot of costs. We reduce the chance of rent-seeking by removing the middleman. There are fewer middlemen than ever. Bitcoin makes it much easier to give direct contributions to those who need them. Without a real relationship, verification is also difficult. If you truly care about charity, make sure you have a relationship with the people you wish to help. Instead of ranting about oppressed groups, make friends with them. While I don’t think it will be easy, having a relationship will help you verify your efforts. This is why I love going to Oslo Freedom Forum. Second, you can interact with those who need it. Charities often think they are above economic incentives. How can you make sure the money goes to the right places and is spent in an efficient manner? The charity that pays more than the market price for a good will have second- and even third-order consequences. Many local clothing manufacturers in developing countries are forced to close their doors when charities give clothes away for free. While it is gratifying to help people, you are also hindering entrepreneurship in the area. You could be doing more harm than good. Third, you may be doing more harm than good by outsourcing the calculation to charity. Many altcoins use charities to hide the fraud they are involved in. Because they are clearly scamming, they virtue signal. This is a very common signal that I find to be a terrible sign. If you feel the need for charity to erase your gains, these gains are most likely not well-earned. Your motivation is important because it will affect how much you verify. Don’t tell anyone that you are giving. Give to people you already know. If you don’t already know someone in need, make new friends outside your circle. Bitcoin fixes this. Bitcoin is a great way to strengthen charity. Fiat money makes trusting others to do the right things a norm, and unfortunately, that trust is often misused. Bitcoin makes charity much easier by removing the middleman and allowing us to have direct relationships with those we wish to help. Charity should not end with a donation. It should continue until the people it is supposed to help are helped. We need to have a deeper understanding of the meaning of helping the vulnerable and poor. Charity is not only about money, but also requires our time and effort. Fiat charity has been debased by fiat money. Real charity is more difficult than the fiat version which is a way to outsource virtue to a single organization. It is difficult to give money away in an efficient way. It is just as difficult or more difficult to make money in the marketplace. Give as much thought to it as you would to earning. Otherwise, you’ll just be enabling rent seekers. Verify the organization, you and the people you are helping. Jimmy Song contributed this guest post. Charity demands more from you than you think. These opinions are not necessarily those of BTC Inc. or Bitcoin Magazine.

 

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