With the aid of Jeffrey Tucker and Konrad Graf I created my first bitcoin wallet when showing them around Brisbane after last years Mises Seminar. I preferred this as a kind of ceremonial tip of the hat to their work and analysis than simply creating one myself. Jeffrey also sent me my first bit of bitcoin.
Originally I was pretty sceptical. Bitcoin did not fit the old Austrian analysis and so I suspected it should be rejected, as opposed to the theory being extended and thus accepted. In the early days the responses to my queries were incredibly sloppy. Many proponents could not agree amongst themselves whether it violated Mises Regression Theorem or not and the relevancy of such a consideration. What I was adamant about was that there did not appear to be any objective use value. It was not until Konrad Graf came along that I was shown the way forward (See in particular Part III 14m03s—19m45s: The “money” question, Mises Regression Theorem, and the Bitcoin regression Timeline) which put briefly, posits that “bitcoin may therefore be the best documented historical illustration of the origins aspect of the regression theorem.”
Whilst I was right that it did not constitute money at that point in time, I was wrong regarding speculation of its growth. One other concern was that I predominately saw it as a reaction to that of the current statist environment. What I wanted to know and what was not presented for the longest period of time was a reasonable response to this: "…And I’d be interested to hear the ‘positives’ / ‘arguments for’ bitcoin - that would still exist, if there was a voluntary society (free market in money & the law) etc…" With the point being I thought I understood the benefits but wondered whether should e-gold.com and other currencies be free to operate on the market in a competitive environment that they would be more likely to succeed and become adopted as money.
It wasn’t until Konrad Graf’s analysis adequately addressed my first concern by placing Mises Regression Theorem above it all that the benefits of bitcoin became much more apparent.
I have a lot to learn moving forward and I acknowledge I am still pretty ignorant. Early on I lacked the time to investigate further given the task of organising the Australian Mises Seminar’s but should be free to do so now. Konrad’s Decrypted series has been helpful. Parts I and II are good for beginners. Part III is good for those interested in Bitcoin within the context of Austrian Economics.
Edit: When I created my fist account via mobile, I some how entered a different password to what I intended. Haven’t been able to login-so made a new wallet above, and forwarded on the bitcoin I had received from JT. Lesson learnt!
Bitcoin Decrypted: Part III - Social Theory Aspects is an introduction to Bitcoin that spans practical, technical, historical, and social-theory perspectives in an integrated narrative. For those with already an interest in Austrian Economics and an understanding of money, this is the one to watch.
Bitcoin Decrypted: Part II - Technical Aspects is an introduction to Bitcoin that spans practical, technical, historical, and social-theory perspectives in an integrated narrative.
Bitcoin Decrypted: Part I - Context and Overview is an introduction to Bitcoin that spans practical, technical, historical, and social-theory perspectives in an integrated narrative.
“A most important truth about money now emerges from our discussion: money is a commodity. Learning this simple lesson is one of the world’s most important tasks. So often have people talked about money as something much more or less than this. Money is not an abstract unit of account, divorceable from a concrete good; it is not a useless token only good for exchanging; it is not a “claim on society”; it is not a guarantee of a fixed price level. It is simply a commodity [emphasis added]. It differs from other commodities in being demanded mainly as a medium of exchange. But aside from this, it is a commodity—and, like all commodities, it has an existing stock, it faces demands by people to buy and hold it, etc. Like all commodities, its “price”—in terms of other goods—is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it.”
"Inflation’s standard definition is too narrow to provide an appreciation of the extent of its harm; it is far more than a deterioration of the currency’s purchasing power. It’s also much more than a "hidden tax." Government’s perennial fiat inflation is a subtle WMD. Consider the following:
In funding wars, it allows government to ignore the fiscal resistance of its citizens.
It benefits the central government at the expense of secondary and tertiary governments.
It turns moral hazard and irresponsibility into an institution, and guarantees recurring economic crises.
By making credit cheap, it encourages businesses to finance their ventures through borrowing rather than equity. Because of market competition, few firms can resist the offer of low credit, making them more dependent on banks. As Pius XI noted in 1931, it puts a dictatorship in the hands of lenders who regulate the lifeblood of the entire economic system.
Fiat inflation drives people to invest in capital markets where few will have the expertise, time, and inclination to monitor their investments properly. In former times people could save simply by holding gold and silver coins.
Under a perennially increasing price level, the average citizen finds his best strategy is personal debt, which weakens self-reliance and independence.
Under chronic fiat inflation, people will tend to choose their employment based on monetary returns. Money then becomes the prime or only consideration for personal happiness.
Perennial inflation deteriorates product quality. Industries that cannot compensate for inflation with technological innovation turn to other means, such as producing an inferior product under the same name. Lying, which is bound up with fractional-reserve banking, tends to spread like a cancer over the rest of society.
By fueling the exponential growth of the welfare state, fiat inflation fosters the decline of the family. Families become degraded into “small production units that share utility bills, cars, refrigerators, and especially the tax bill.” The welfare state drives the family and private charities out of the “welfare market.”
As Hülsmann concludes, “fiat inflation is a juggernaut of social, economic, cultural, and spiritual destruction.”
— George F. Smith, The Case For Natural Money
"In order to overcome these objections to the claim that fractional reserve banking accords with the principle of freedom of contract, White and Selgin then, as their last line of defense, withdraw to the position that banks may attach an “option clause” to their notes, informing depositors that the bank may at any time suspend or defer redemption, and letting borrowers know that their loans may be instantly recalled. While such a practice would indeed dispose of the charge of fraud, it is subject to another fundamental criticism, for such notes would no longer be money but a peculiar form of lottery tickets.
It is the function of money to serve as the most easily resalable and most widely acceptable good, so as to prepare its owner for instant purchases of directly or indirectly serviceable consumer or producer goods at not yet known future dates; hence, whatever may serve as money so as to be instantly resalable at any future point in time, it must be something that bestows an absolute and unconditional property right on its owner.
In sharp contrast, the owner of a note to which an option clause is attached does not possess an unconditional property title. Rather, similar to the holder of a “fractional reserve parking ticket” (where more tickets are sold than there are parking places on hand, and lots are allocated according to a “first-come-first-served” rule), he is merely entitled to participate in the drawing of certain prizes, consisting of ownership or time-rental services to specified goods according to specified rules. But as drawing rights—and not unconditional ownership titles—they only possess temporally conditional value until the time of the drawing, and they become worthless as soon as the prizes have been allocated to the ticket holders; thus, they would be uniquely unsuited to serve as a medium of exchange.”
— Hans-Hermann Hoppe, Against Fiduciary Media
Explanation of the roles of praxeological law and historical judgment or “understanding” may be provided by the following example: If the supply of a medium of exchange increases; and if the demand for that medium remains the same; then, the purchasing power of that medium will decline. This is a praxeological law.
How may an historian apply this law? He must first determine whether or not a decline in purchasing power (increase in prices) has taken place. This involves difficulties of an historical-statistical nature; it is not a problem for praxeology or that elaborated division of it known as “economic theory” or “catallatics.” Once he has determined that a fall in purchasing power of the medium has taken place, he searches for an explanation by applying the praxeological-catallatic law. He investigates the historical situation to discover whether there has been an increase in the supply of the medium. If he finds a considerable increase in the supply, he is then in a position to assert three truths:
- It is an historical fact that the purchasing power of medium X has declined to such and such an extent.
- It is an historical fact that the supply of the medium X has increased to such and such an extent.
- The praxeological law just mentioned. It is therefore concluded: that a significant cause of the decline, [(1)], was the increase in supply, [(2)].
If he finds no increase in supply, then he deduces that a fall in demand for the medium was the cause of the fall in purchasing power. Such is an example of what is involved in the work of historical explanation.
The work of the “economic theorist”, or praxeologist, is to elaborate the laws (such as ) from the various axioms and according to the rules of logic. Clearly neither Mises nor myself has ever cited “facts as if they provided support for his conclusions and for the axioms, postulates, and logical procedures.” I cited facts such as “dollar gaps” not as proof or test, but as illustrations of the working of praxeological laws in (modern) historical situations. It is a praxeological law that if the government (or any other agency exercising the power of violence) intervenes in the market to establish a valuation of any commodity below what would be the market valuation, a shortage of the commodity develops. Gresham’s Law is a subdivision of this law applied to media of exchange, which, in turn, leads to the explanation of the “dollar gap”. The historian sees a shortage of dollars in relation to pounds develop in England, and using praxeological laws, explains it as the consequence of governmental over-valuation of the pound in relation to the dollar. In no way does he test or “prove” the theory.
— Murray N. Rothbard, Praxeology: Reply to Mr Schuller
Ron Paul on Rothbard and the Great Depression
Ron Paul answering a question regarding the Great Depression. Running as the Libertarian Party candidate for President of the United States. Filmed at Drake University on January 22, 1988. Other things mentioned: Gold standard, Herbert Hoover, Mises, Business cycle, Inflation, Federal Reserve and Roosevelt.
“There are a thousand hacking at the branches of evil to one who is striking at the root.”
— Henry David Thoreau