Consequences of Money — An Introductory Primer
“The type of money utilized in a given market, that is to say, the special characteristics of a particular type of money utilized within a given market, will dictate and necessitate, firstly, the governance model of that market, and secondly, will dictate and necessitate, the means and methods taken by producers participating within that market, to maximize profits for themselves.”
INTRODUCTION
Fiat is one type of money. It is indeed, one of countless types of money, which have been utilized by countless markets, in countless states, tribes, and communities throughout the last 10,000 years of human history.
What makes fiat of great interest to me (and after you have finished reading this article, dear reader, will be of great interest to you as well) is that fiat is the current type of money utilized by the market. What is more, now that humanity is globally interconnected, the market is the entire human population.
So what is the special characteristic of the fiat money that we use?
And, as noted before, what governance model does that special characteristic dictate, and finally, what means and methods are taken by producers to maximize their profits because of fiat money’s special characteristic?
Before addressing these questions, I want to bring into our discussion one other type of money. The other money we will consider is a relative new comer, just a wee baby, slightly over a decade old. This money is referred to as bitcoin. By the way, don’t confuse the bitcoin money with the Bitcoin payment system. The bitcoin with a lowercase “b” is money. The Bitcoin with an uppercase “B” is the electronic payment system of which bitcoin is transacted.
You can think of the Bitcoin electronic payment system as similar to the SWIFT electronic payment system that fiat money uses for transactions. They are both essentially messaging systems. However, these payment systems don’t really matter much for our discussion as we are only concerned with comparing and contrasting fiat money with bitcoin money. To be sure, the electronic payment systems of each type of money are interesting in their own right but they are not relevant for this discussion.
Now then, back to the issue in question.
UNLIMITED FIAT v. LIMITED BITCOIN
So what special characteristic is imbued within fiat? The suspense is too much, I know! Without further ado then, fiat’s special characteristic is that it has an unlimited supply.
We will compare fiat’s unlimited supply characteristic to the special characteristic of bitcoin. And what is bitcoin’s special characteristic? Well you may have already guessed, and you would be correct if you identified that the special characteristic of bitcoin is that it has a limited supply.
This subtle difference between fiat’s unlimited supply and bitcoin’s limited supply is seemingly innocuous, yet the consequences have an impact of such seismic magnitude, of such profound enormity, that it is difficult to overstate. Although, fear not dear reader, for I will certainly try to overstate the significant consequence of this difference in supply characteristic. It is no less than a matter of life and death.
UNLIMITED SUPPLY = VIOLENT TOTALITARIAN GOVERNANCE
The unlimited supply of fiat is a special characteristic which demands and dictates a particular governance model. Remember, the special characteristics of a particular type of money utilized within a given market, will dictate and necessitate, firstly, the governance model of that market.
And what governance model is dictated by an unlimited supply of fiat money? Nothing less than complete control is required. A top down, iron fist of totalitarian governance is required in the fiat market. For in order to allow an unlimited supply of money to exist there must be absolute control. For no rational human would choose to accept a money of unlimited supply, for unlimited money, by definition, cannot hold value.
(As a brief reminder of the functions of the tool that is money, it lubricates trade through increasing the “coincidences of wants,” it stores value over time, and it is a measuring stick or a “unit of account” if you will, which is necessary to make economic calculations for daily life, long term planning, and all the choices made inside and outside of those time frames by each and everyone of us, independently and dependently of each others choices, a grand concert of human action.)
And thus, here we are. Living in a world of fiat money, a money without value due to its unlimited supply characteristic, a world which the market must brutally and violently enforce through an all-powerful state, ready, willing, and able to crush the slightest scent of disobedience. Whether your state is China, Russia, Brazil, Belgium, the United Kingdom, the United States, or any other state, total control is required, necessitated, and dictated because of the unlimited money utilized in these markets.
Oh, your state won’t kill you if you don’t use their fiat money, you say?
Imagine trying to pay your annual income tax with beaver pelts, glass beads, sheep, gold, or some other type of money. The state will place you in prison for not using their fiat. Of course you could fight the totalitarian state, fight for your freedom from the cage. They will undoubtedly initiate swift measures to bring you to their cage, and should you continue to resist, deployment of heavily armored and weaponized soldiers will ensue, and they will find you and violently extract you to prison.
Should you resist, and match their firepower, you will be murdered, and the state’s ultimate supremacy will remain intact and unscathed. This is the all-powerful governance model required of fiat money.
This totalitarian model is not well understood. In fact, I dare say that you, dear reader may have flinched at this candid survey of your fair state and its violent affairs with disobedient citizens. Give it a moment of reflection.
The point here is the cold reality that unlimited supplies of fiat money necessitates a singular all-powerful authority to enforce the otherwise unacceptable worthless money, and to seek and destroy any that oppose. This is fiat.
No matter your state, this is your position. You can paint it rosy or ignore the reality, but you are here, locked in a nightmare, of violent aggression, ready to destroy you, should you step out of line.
Oh but don’t worry these fun times get even better. Let’s next discuss the producer’s means and methods in this fiat market, and the resultant products that these means and methods necessitate in order to maximize profits.
UNLIMITED SUPPLY = SCARCE QUALITY PRODUCTS
The other capriciousness with which fiat dictates, is the means and methods that producers must implement in order to maximize their profits. A simple summation of the means and methods of suppliers is one which you may well already be aware of, and no doubt have experienced in your daily life, the implementation of “built in obsolescence.”
In other words, when Apple makes their next iPhone, they design the phone to stop working within two years. The battery will give out or the data plan mysteriously slows, or the plug in for the battery charger has changed. Something will require you to buy the next marginally improved iteration, at a sales price equal to or greater than your current phone.
There is no doubt, technology is now available for Apple to develop an iPhone that would operate flawlessly for the next ten years or more. And at the very least, provide some platform to interchange and upgrade parts as needed, at discounted prices from purchasing the entire phone. The company would of course never offer such an abundance of quality. Why cut into profits, right?!
What is important to note here is that producers must take an obsolescence enforcing approach in order to maximize profits and build market share.
For if a competing producer were to make a phone with a lifetime warranty, that competitor would soon be bought out by Apple, the larger “obsolescence enforcing producer.” Apple, being a large company with a bigger balance sheet would be able to secure a low interest rate loan, available only because of an unlimited fiat money supply, and the lifetime warranty competitor would quickly be bought out and destroyed once under the ownership and control of Apple.
Of course if the buyout approach was not available because for example, the competitor producer was not interested in “selling out,” the larger “obsolescence enforcing producer” would find other solutions to destroy the lifetime warranty.
For example, the obsolescence enforcing producer could choke out the supply chain of the smaller competitor, or work with state regulators to create regulatory and licensing hurdles, under the auspices of “customer protections,” such that the smaller competitor would be forced out of business due to overburdening paperwork and red-tape requirements.
Both of these solutions would be available to the larger producer through access to large loans at low interest rates, only because the supply of fiat money is unlimited. This source of funds can be applied to manipulate regulators and pass these “consumer protections” or be used to price out the smaller competitor by running at losses to take market share.
The name of the game with unlimited fiat money is finding ways to manipulate the market in order to make quality products scarce. For minimizing quality, maximizes profits in this fiat market.
Keep in mind also that producers will and must take every means necessary to continually increase scarcity in order to maximize profits and grow in size. For should they not, they will be swallowed up by an even larger “obsolescence enforcing producer” with even more access to larger loans and financing at ever lower interest rates. All of which is only possible with an unlimited money supply, which is only allowed by fiat and its special unlimited supply characteristic.
To summarize then, just as market governance demands one all-powerful authority, the long term trend of producers is a consolidation into one market producer for a given market product, ensuring maximum control and minimizing abundance of quality thus ensuring maximum profits. These are the results of unlimited fiat. A world of life expectancy declines, child mortality increases, consumer and employee dissatisfaction, living in bondage to unlimited cheap money. Fantastic.
“Human collaboration creates divisions of work, which increases specialization, which increases quantity and quality of product, which increases discoveries and inventions, which expands human civilization, which increases human collaboration…a grand continuing cycle of growth, onwards and upwards.”
LIMITED SUPPLY = VOLUNTARY SELF GOVERNANCE
The limited supply of bitcoin creates an unusual and not well understood governance model. For we have never in our known history of humanity, had such a governance model in place. This is one of self governance. For the cost to embark on anything more would come at great expense.
An example of this blossoming model is in the governance of bitcoin itself. I myself decide the governance of bitcoin. I voluntarily choose the rules that govern the bitcoin that I prefer. And the bitcoin that I prefer is one of limited supply, and therefore, there is only one option available for me, bitcoin. This simple idea is not well understood.
For should there be some other option available, there would then, by the ability of having multiple options, therefore exist an unlimited supply. This is a difficult and nuanced notion. Let us give it some more thought.
In other words, bitcoin is governed not by some group of all powerful violent totalitarians, but by voluntary individuals like me and you, dear reader. We individually, and voluntarily, choose to self govern. For only through our self governance can a money maintain its limited supply. The desire to create more wealth through the creation of more money is such a powerful force that no custodial governance model could maintain a limited supply over time. Only one of self enforcement can perpetuate a limited supply for the incentive is only aligned with the self governed to not inflate his own supply.
Another example that may help to color this fascinating and exotic idea of self-governance is to compare and contrast the governance models of the computer code that is bitcoin, against the governance model of the computer code that is fiat…but that is for another discussion…
LIMITED SUPPLY = ABUNDANT QUALITY PRODUCTS
With regards to producers, heretofore the world has no history of a limited supply money and therefore no historical illustrative examples to provide for elucidating the means and methods with which producers will take to maximize their profits. However, with the quickly growing bitcoin market of self governance we can begin to identify anecdotal evidence emerging which points us to the notion that this limited supply special characteristic is forcing producers to pump an abundance of quality into their products.
Consider one of the most popular bitcoin key wallets, Coldcard. The producer of this product has shared through open source channels the entire design specifications of their product as a way to ensure maximum abundance of quality. Imagine Apple sharing in an open source way their design specifications to the iPhone. And yet the Coldcard key wallet is wildly popular because of its openness and drive towards maximum abundance of quality.
The reason that maximum quality is achieved in a market of limited supply money is precisely because a money of limited supply has the maximum possible value relative to all other types of money and therefore, consumers using this money will only exchange their limited supply valuable money for a product of maximum quality.
This is rather intuitive in retrospect. As an example you can consider going shopping with your fiat money compared with going shopping with your retirement savings. You are not going to buy another pair of low quality shoes or the newest iPhone with your 401k because it is too valuable to you. Instead you will exchange your relatively cheap fiat for some marginally more valuable pair of shoes or marginally improved over priced phone.
So what then we see beginning to emerge in the market of limited supply bitcoin money, are producers that can only achieve profits through the pursuit of providing maximum quality, demanded by consumers of low time preference, established and dictated by a limited supply money.
CLOSING THOUGHTS
I began this article many months ago, drafting countless versions that discussed good and evil, morals and ethics. The original intent of this discussion was to draft a framework for good and bad decisions. However as I wrote, I found no sure arguments, no sound logical positions to stand upon.
After many months of writing I reached a break through when I stopped looking at money as something good or evil. Money is simply a tool. And there are many types of money, each its own type of tool with special characteristics which will dictate the life that you and I live.
We have known of a life of fiat. We know of no other life. We have stories and fables of times when gold money had dictated life in the past, and other stories of stones, and seashells dictating life for other peoples of the past.
What we are now beginning to see take shape before us is the life that bitcoin will dictate. One of self governance, and abundance. One of thoughtfulness, conviction, and awareness. One of personal fulfillment, of the sharing of ideas, and the making of dreams into realities. I look forward to this life with my friends and family, and I think you, dear reader, can look forward to it with you and yours as well.
