Bitcoin Songsheet: How Fiat Money Ruins Civilization

This opinion editorial is by Jimmy Song, a Bitcoin developer and educator, programmer, entrepreneur, and programmer with more than 20 years of experience. We want nice things. We want to live in a nice home, eat great food, and have satisfying relationships. We want to travel, enjoy great music, and have fun. We want to create something lasting, achieve something great, and leave a better future for all of humanity. Fiat money can ruin all of these things and many more. We all want nice things but can’t get them because of fiat currency. Governments want the power to create prosperity, fulfillment, and progress into existence. They are like the alchemists from yesteryear who wanted to transform lead into gold by some formula. They’re actually worse. They are worse than that. This is where the word “fiat”, comes from. Literally, the word “fiat” means “Let there Be.” In Latin and English, it has become an adjective to describe creation through decree. This is best illustrated in Genesis 1:3 Latin. It is called “fiat Lux” and it means “let there been light.” Creation by decree doesn’t work the same way as Genesis. You can’t just say “Let there be building!” Digging, pouring a foundation, adding framing, and so on are all necessary steps. Without capital and labor, decrees can’t do much. In order to make decrees, people and resources must be enlisted. In other words, even though governments may wish for things to be different, a decree doesn’t do anything. A decree by itself is as useless as an old man shouting at the sun. To fulfill the decree, there must be coercion. Fiat decrees are a way to describe using force and violence. For buildings, it is obvious that a decree can’t create anything. But for money, a decree putting it in existence seems legitimate, perhaps even compassionate. Keynesian economists view fiat money as something that does something by itself. They are wrong, and they don’t have to call it “debt that we owe ourselves.” It’s theft. This is about as honest as Enron’s accounting. Fiat money makes government violence seem like a market process. Fiat money printing is a way to steal from other currency holders and pay people to do the government’s bidding. This theft is disguised and combined with Keynesian propaganda makes fiat currency seem benign, even benevolent. This is like saying that street thugs are more violent than mobsters who give you the chance to pay them off. Dictators use violence to force their citizens to follow their dictates. These societies are characterized by poverty, war, and forced conscription. They also live in miserable conditions with very little freedom. Fiat rule is bad for humanity, as is evident in the backwardness of the Soviet Union and how far North Korea is now. Progress is difficult in a society that relies on slave labor. Fiat money, however, looks voluntary. It is still very harmful to society in many ways. Fiat money is more like organised crime, which makes it seem that everything is voluntary. Fiat money destroys market incentives. This is because there is a buyer on the market with a lower price sensitivity. This buyer is the fiat money creator. They can and do print money for many reasons, some benevolent (welfare to the poor), others not (military building up). They spend like drunken sailors who have just found pirate treasure. The problem with a buyer such as the government is that someone always sits at the middle. It’s not the government that buys a fighter plane or an office building. This buying is done by an agent for the government. The agent works on behalf of the government to procure various goods and services and the government entrusts the agent with the authority to spend on its behalf.Unfortunately, this arrangement is ripe for abuse. Agents are effectively spending money on behalf of other people, so they don’t get incentivised to trade efficiently. Their incentives are as distorted as the Leaning Tower Of Pisa. When we buy and sell in the market using our own money, we do complex economic analyses to determine if we will benefit enough from the product or service to be willingly part with our money. We will be price sensitive and try to get the best value for our money. However, for a government bureaucrat who is in charge of procurement, this is not their priority. They are incentivized not to spend for the benefit of the government but their own. This does not have to be done in the same way as bribes. They may spend less time looking at the goods and services or buy from people they like. This is a bad trade, where the agent gains a small benefit at a greater cost to the government. In a sound money economy, such people would be fired by the government. But in a fiat currency economy, the government doesn’t care as much because money is plentiful and they aren’t price-sensitive. This is possible if you have a cookie jar that’s always available for you to steal from. These people are called rent seekers. They do not add any value, but they still get paid. It’s not just for government bureaucrats. Rent seekers can also be investment bankers who take extremely leveraged bets. They get the profits from winning investments, but they are bailed out when they lose. They also don’t contribute anything and take advantage of society. Worse, they are often among the most driven and talented people in society. They are engaged in grand larceny, instead of building things that would benefit society. They’re not the only ones guilty rent-seeking theft. Unfortunately, many jobs in a fiat currency society have a large rent-seeking component. We’ll be discussing this later in the article. One rule of thumb to determine if a job is rent-seeking is to look at how political and not value-adding. Rent-seeking jobs are more likely to be political than those that do not have the same incentives. Online gaming is a good example of this. Cheating is appealing because it’s much easier than hard work. If cheating is accepted as normal, which it is today, there is little moral impediment. It’s easy to become the soccer player who pretends to be in pain in order to influence the referee. Rent seeking is understandable as creating a product or service that the market wants can be very difficult and fickle. You are one innovation away from making obsolete what you produce today. Even though they offer less compensation, rent-seeking jobs are more attractive because of their certainty. It’s no surprise that rent-seeking jobs are so popular. Think about how many people want the opportunity to become venture capitalists, investment bankers, or politicians. They are much more profitable than providing a product or service, require less effort, and offer more certainty than Sam Bankman-Fried. Fiat Money Ruins MeritocracyThe existence so many rent-seeking positions indicates that the economy is not governed by normal supply-demand market forces. Even the possibility that rent seekers exist, goods and services must account for a tilting in the playing field. Fiat money destroys meritocracy. The best products win in a normal market system. Not the most politically-connected products. Not the products that employ most people. Because they meet the needs and wants more people, the best products win. Fiat money adds politics to the equation. The government can print money and the people who have access first are the ones that benefit most. This is known as the Cantillon Effect. It’s why rich people become richer without actually adding much. How does the government decide who gets the money? Politics is the key to deciding who gets what money. Everything else becomes political when the money printer becomes political. Politics is a disease that spreads throughout the market. They know how to get new money directed at them, and they have a significant advantage over those who don’t. Companies that are politically savvy will perform better than those who don’t have the same skills and produce better products. Politically savvy companies are the ones that survive in a fiat currency economy. It’s not surprising that so many companies are led by politicians, rather than entrepreneurs, as they age. They will impose regulatory costs on newcomers and get subsidized with newly printed money, which will ossify their position. These unfair advantages will result in a marketplace full of older, less desirable goods. Newer, better goods won’t be available on the market. The incumbents have the right to change the rules when they lose. They all use political means in order to fulfill market needs. The dying and the decrepit never cease to be a source of inspiration for the new. Politics is a stifling force that stifles creativity and entrepreneurialism. It is a cancer that kills the good cells that keep the body afloat. Markets are biased towards the political, so better stuff doesn’t always win. Fiat money is a protection for the politically connected against newer, more dynamic players who are unable to gain market share. Because incumbent players have more power to stop new players, civilization is weakened. The incumbents will often put up massive regulatory moats, sub-price newer competitors using fiat subsidization, and hire away the best employees using fiat money. Or, they may just buy out all new players. Access to new money is the key to all of these strategies. The zombies survive by eating brains. This mandate can be enforced by the government through fiat currency. Because we haven’t made scientific progress on alternative ways to provide better energy, oil, natural gas, and coal continue dominating. Technology like solar and wind are supported by the government because they are politically popular despite their obvious inability to transport, energy density, and variance. We are going backwards when it comes to energy. The Luddites win in a fiat currency system because fiat money, political considerations, and basically force everything to remain the same. It is deeply conservative in that the old and the decrepit are protected at the expense the new and the meritorious. This sounds familiar? This is the exact math used to justify the lockdowns over the past few years. This dynamic is evident in the airline industry. It is now taking longer to travel from New York City to London than it was 50-years ago. This dynamic can also be seen in dishwashers. A dishwasher 50 years ago could clean a whole load in less than an hour. It takes longer than three hours now. Regulations protect incumbents and place politics above merit. Instead, civilization has fallen behind fiat money. Because that’s where the money is, the nuclear engineers of yesteryear work on React.js apps. Investment bankers are the ones who invented high-frequency trading systems. The incentives are broken. Merit is no longer a consideration. Is it any wonder that we’re falling behind as a civilization? We reached our peak in 1969, when we landed a human on the moon. Since then, humanity has retreated rather than moved forward. It preserves what we have. It’s at worst, it’s preventing humanity from progressing. Worse, it has inflamed our entitlement mindset. These rent seekers believe they have the right to these low-sum positions because of their political connections. People who are motivated to stop things getting better are more harmful to progress than those who aren’t interested in progress. Fiat money makes productive people entitled brats. People will steal if they can do it without work. This is what politics can do. Unfortunately, politics is a zero-sum game that can lead to civilization’s decline. Politics is about consuming accumulated wealth. Fiat money redistributes wealth to ensure that incumbents can stay around. Because incumbents are so powerful, there is little room for new ideas, new products or new goods. How many people have email jobs? How many people actually work? Many people are content with an XBox, a mattress, and pizza delivery. Are these people really helping society? It’s not surprising that so many people feel so low. The politicization of the economy and its zombification have had real effects on how society functions. New forms of housing are difficult to construct due to building codes. New designs are made illegal by airline regulations. Nuclear regulations make alternative, more efficient forms energy extremely expensive. Companies that have been in existence for a long time, and are now obsolete, rob the economy of its productivity. They are subsidized by fiat money, even though they provide little value. Oil, trains, airlines, and cars are all now considered zombies and are protected by fiat money. Even some electronics producers and software companies, which are relatively young to the economy, are now zombies. The zombies are winning. And the zombification process is increasing. Facebook likely transitioned faster than IBM from rent seeker to producer. This is the reality of fiat currency. Producers become rent seekers when they politicize. Bitcoin fixes thisThe good news is that Bitcoin fixes all these incentives. The normal market process of supply, demand, and prices can be restored by removing fiat money. Politics plays a smaller role, and the economy is zombified. Civilization can move again. Bitcoin is the antidote and the great hope for reversing the decline.Unfortunately, we have about 100 years of rot to clear out and that’s going to take some time. Cantillon winners, Ivy League business school graduates, wealthy old people, and bureaucrats are the most likely to convert to Bitcoin. They will fight tooth-and-nine to keep their positions. These people aren’t going away quietly. You can already see that they’re trying to further zombify the system with CBDCs. Fortunately, Bitcoin has the advantage over time. The Cantillon losers such as young people, citizens from developing countries, and actual producers will undoubtedly turn to the more fair system in Bitcoin. The revolution is coming. This guest post is by Jimmy Song. These opinions are not necessarily those of Bitcoin Magazine or BTC Inc.

 

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