Saifedean Ammous, bitcoin (BTC): “short fiat as possible”

Saifedean Ammous, the author of “Bitcoin Standard” and the “Fiat Standard” recently gave a fascinating lecture on the river. In the program: inflation, gold standard, war, future of the dollar and of course Bitcoin.

What is money?

Money is a medium of exchange. What defines money is that it is a good that is not bought for itself. It is obtained so that it can be exchanged later. This allows us to build a division of labor, which would not be possible at any level of sophistication without money.

The first thing I will say about money is qthat it allows the division of labor and it allows the market system to develop. And the second thing is that money is a mechanism for that future store value.

Storage of value and civilization

Therefore, money is our most advanced technology and our best tool for transfer the value to the future. We see history as a process: our money is getting harder, and therefore our money is getting better at maintaining its value for the future. By harder I mean harder to produce. It allows us to chart and plan for the future. In other words, it reduces our desire for time. And the harder the money, the more it allows us to think about the future.

A hard money

Money is always the hardest thing to do. For example, in prison, people use cigarettes as money because no one can do it in jail. In societies, we have the example of Yap Island, for example: it is an island without limestone. There is a nearby island that has a lot of limestone but it is very expensive in primitive technology to deliver limestone from Palau to Yap. So in Yap, limestones are silver.

People who store their wealth in things that are hard to do end up maintaining their wealth and perhaps increasing it even more over time.. And of course, that peak was at the end of the 19th century, when the entire planet was adopted the gold standard.

What is the gold standard?

The gold standard is usually when the money is gold, or at least gold -backed state currencies. But the reason why gold became money, and not copper, nickel or banana, is that gold is the hardest metal in the world. It is very difficult to multiply the supply. We do more every year, but we add to the stock. The stock is only rising roughly 1.5% to 2%.

Gold was money at the end of the 19th century but gold caused the problem of divisibility. Many things are less than gold coins, so how can this thing be bought? The answer is create gold -backed financial instruments. National currencies under the gold standard are specific units of gold. There is pieces of paper that can be redeemed in goldto get you to the central bank, you give them the piece of paper, the $ 100 bill or the $ 10 bill, and they give you a specific amount of gold in return.

The gold standard is imposed directly on governments

It was not governments that established gold as money, it was instead gold gave governments the credibility of their money. Gold was money before the invention of the states. You had to have a currency that could be obtained in gold to trade with the rest of the world with some legitimacy.

Although central banks prevented their citizens from using gold, they continued to use it. Gold therefore continued to be money until 1971. The world was a dollar standard and the the dollar is supported by gold. After 1971, though the central banks continued to store gold. Why would you, as a central bank, want to accumulate pieces of paper, or borrow money from another central bank that can produce them indefinitely?

Easy Currency vs Hard Currency

Lebanon, Venezuela or Zimbabwe have currencies whose supply rises very rapidly and therefore their value falls. In comparison, the dollar, the Swiss franc, the euro, the pound sterling, the Japanese yen, are generally rising at a lower rate. This is why you see people all over the world looking for more dollars.

How about a little inflation?

The criticism is that if there is no inflation, people will not spend and the economy will stop spinning. This is absurd, because people don’t spend because they want the economy to continue. They spend because they have needs to be consumed. We need to eat, take shelter, get dressed to keep us warm. As technology advances, the possibilities of doing things increase in our time, so we want to buy more things. There is an unlimited desire to consume.

Inflation is a addiction : when the government has taken the path of spending to solve its problems, it does not stop.

Inflation, the growth hormone of war?

During World War I, the British treasury issued bonds to finance the war. It was only announced in 2017: only a third of the bonds were actually subscribed. Then the Bank of England went and took two of the top Bank of England officials to buy the remaining two-thirds of the bonds not yet paid in their own name have a line of credit from the Bank of England. So it’s not their own money. They took the money from the Bank of England, bought two-thirds of the bonds that funded the war, and so on. England was able to continue the war. They practiced what we call “quantitative easing”.

Under the gold standard the government cannot print gold, and he therefore has a limited budget. He could not tax their people at will, and it was very difficult to take people’s money. Conversely, when you give them paper money, which happened in 1914, you can take their wealth just by printing the money! And that’s what changed everything about the war. This is why the 20th century was the century of total war. Because under the gold standard, governments fought until the gold was depleted. Under the fiat standard, using paper money, with credit money, governments fought until they no longer had liquid wealth in the hands of all their citizens.

What could go wrong when you just printed a large amount of credit and used it to buy bonds? The value of money will fall. During the war, prices continued to rise. War is a very good fence for inflation.

Everything merchants

The fiat system forced every person to be an investor. You have to be a junkie watching the Fed and monitoring all the central banks in the world, you have to learn macroeconomics, you have to learn what all the central banks do, you have to understand how the Commodity market, you need to understand how the stock, bond and real estate markets work. You have to do all this just to save and keep the money you have already earned! This is the most criminal.

The rich are in debt

The conclusion of the fiat system is: you should short fiat as much as you can. The winning move in the monetary system, and this is what the rich do borrow. The rich, in the fiat money system, don’t hold money. If you’re worth a billion dollars now, you don’t have a billion dollars in a checking account – you might have 100,000, 1 million, 5 million or something like that. A small portion of your money is held in cash. Most hold all sorts of other hard property, and you will borrow.

Bitcoin (BTC): future financial system

I often think what is likely to happen is kind of of financial apartheid where there would be two monetary systems. The first is government -controlled and includes surveillance and rising inflation. And if you want, you can opt out of this system and opt for bitcoin.

So we have this bitcoin alternative, which is not inflationary and there is no central authority that can censor it. More and more will learn, more and more will discover it. Whether out of curiosity or self-interest or through the destruction of the national currency, all roads lead to bitcoin.

More and more bitcoins will be bought, the price of bitcoins will increase, and as it rises, bitcoins will become a more important part of the global economy. The truth is that people will join Bitcoin because of greed.

Come for greed and stay for revolution. This will continue to increase because people don’t want to be poor and don’t want to see their wealth being destroyed.

A smooth transition?

Most Bitcoiners tend to lean into an apocalyptic transition: the fiat currency will collapse, we will have hyperinflation, everything will be horrible, and then we will move to bitcoin.

We probably won’t have such a doomsday scenario. When you realize that fiat currency mining creates debt, and bitcoin is allowed, people need to borrow. If you want to have savings, you have a problem: where will you put your savings?

Wherever you place your savings, you create bubbles in these areas. So we see a bubble in the stock market, a bubble in the bond market, a bubble in the housing. This is because people are looking to save, to find a place where they can save.

Homebuilders can build more homes, governments can issue more bonds, fraudulent companies can go public and create more stocks – well, bitcoin is finally providing us an outlet. We don’t have to keep creating more debt. We can invest in this asset that is hard, that is liquid around the world and no one can rise. So no bubbles. There is no mechanism for a person to increase supply and lower prices as for copper, real estate and bonds.

Bitcoin is the solution. So I think there’s a good reason why the financial authorities have adopted bitcoin. They will see that this is their solution to get out of the huge debt bubble that involves everyone.

Saifedean Ammous is convinced that bitcoin is the only alternative to the current fiat system that destroys civilization, promotes the outbreak of wars and oppresses savers.

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Yanis A

Bitcoin changes everything! From a financial background, I am passionate about everything about this technology. Every day, I try to enrich my knowledge of this revolution that will allow humanity to move forward in its conquest of freedom.

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