TOKYO, JAPAN – JANUARY 25: Brass bitcoin medals produced by Sakamoto Metal are seen at a workshop … [+]
Bitcoin in its present, high-profile form cannot be money. About the previous assertion, it should in no way be taken as a knock on crypto, or private money more broadly. Evidence supporting the previous statement can be found in my 2022 book The Money Confusion: How Illiteracy About Currencies and Inflation Sets the Stage for the Crypto Revolution.
My own view is that precisely because governments have always devalued their currencies, crypto can – and must – replace government money. Seriously, what could be more high-profile than devaluation? Precisely because government money (think dollars, pounds, euros, yen, etc.) is what we earn in return for our work, few acts of government are more high profile than the devaluations governments have always foisted on us.
Via devaluation, governments quite literally rob us of the fruits of our labor by shrinking the exchangeable value of the money that we individuals receive in return for our work. Which is just a reminder that contra the expressed droolings of economists, inflation is not a “stealth tax.” Inflation is loud. We notice the bitter fruits of theft rather quickly.
The problem now is that private money forms of the crypto variety have yet to distinguish themselves from government money. Think once again the most famous cryptocurrency of all, bitcoin.
If you’re reading this opinion piece, you either own bitcoin already, you’ve owned bitcoin, or you spent the past week in particular wishing you owned it. Which is no insight. With the coin having surged past $90,000 per, more than a few of you lament a failure to purchase the coin one year ($36,000), two years ($16,000), five years ($8,000), eight years ($735), and fifteen years ago when thousands of bitcoin were exchanged for two PapaJohn’s pizzas.
For fun, let’s ignore the many ups and downs of bitcoin on the way to where it is today. That’s what owners of the coins and proponents of those coins want us to do. With bitcoin on a tear, it’s only natural for those who stuck it out or those who simply believe to knowingly nod along to the popular notion that bitcoin is on an upward trajectory that is only in its infancy. That’s what the most prominent bitcoin proponent and owner, Michael Saylor, is asserting.
Ok, but if you agree with the present narrative that bitcoin’s surge is of the early days variety then you’re by definition accepting what’s similarly true, that bitcoin will never be money. Think about it.
The sole use of money is as a medium of exchange. No one buys, sells, lends or borrows with money. More realistically production always buys production, and production is always loaned in return for future production. Money is just the reasonably trusted store of value that moves production between buyer, seller, lender, and borrower. If the latter is true, and it is, how can bitcoin ever be money? More specifically, what bitcoin cheerleader would ever buy, sell, lend or borrow in an alleged exchange medium that is only going up?
It’s just a gentle reminder that if bitcoin is what its proponents want it to be (up, up, and up) then it can only be an exchange medium insofar as those purchasing with it suffer inflation in reverse as the value of goods purchased in return for the coin relentlessly shrink in value relative to the coin itself. In other words, bitcoin’s alleged feature is its bug. And then this alleged feature imagines that there’s such thing as a speculation that only goes up.
Oh well, even proponents of the constant that is gold (it only moves up when fiat currencies in which it’s priced are going down – a real inflation hedge) don’t think the above about the yellow metal. They know well that persistently devaluing governments sometimes go the other way. What will keep bitcoin afloat once its alleged purpose is discredited by the very “feature” that proponents claim will have it on an upward path forever?
