So, this came up recently (#1515201) and I was reminded that I had never actually put the review I wrote of Seb Bunney's book The Hidden Cost of Money on SN.
I've mentioned it (#839329, #838984), and directly referenced his excessive ego writing intellectual checks his mind can't cash (#1015955)... but never posted a fuller take-down.
So let me rectify this errorSo let me rectify this error
...and, as I say in the Mises.org piece, clean up in my own Bitcoin house.
Most Bitcoiners suffer from a similar problem that Bunney does: they know a handful of few, surface-level talking points, and never investigate deeply the monetary system they propose (bitcoin) or the fiat one they came from (or the deeper, most serious history of how gold worked or how gold could work in the modern world).
Briefly said, they're idiots... ever so confidently scaling a Dunning-Krueger graph. #1015955
What's Wrong with The Hidden Cost of Money?What's Wrong with The Hidden Cost of Money?
Seb, while a nice guy from the few times we've interacted, with his Bitcoiner heart in the right place, is a typical story of roughly kind of, -ish correct storytelling but specifically and definitely wrong in all ways that matter. My initial summary of the book's thesis:
We get a lot of topics that don’t obviously connect to money or the monetary system, like bioenergy use in Europe, climate change, the war on drugs, parenting, COVID-19, the explosion in loneliness and other topics of mental health. In fact, the author’s whole case is that a faulty monetary system has devastating consequences for all those domains and more. Everything is downstream of money.
OK, fine, we can say and believe that all we want (Saif does it too in The Fiat Standard) but proving it is much trickier, and Bunney does nooooone of that.
Here's my biggest annoyance (with fiat/normie types as well as low-level Bitcoiners like Bunney), they don't use words properly -- thus completely warping and diluting their message:
Bunney flings around terms as if they’re synonymous. Finance is money. Money creation is a “capital lever” wielded by the central bank, which grants central banks “access to virtually unlimited capital.” In principle, yes, but wielding it results in hyperinflation — and the astonishing money printing they’ve engaged in are nowhere near “unlimited.” But at the same time, “No matter how much governments intervene or central banks print money, they cannot create value, such as energy, food, and commodities, out of thin air.” Jumping between real and nominal effects like this does nothing but confuse the reader. Capital and money are distinct economic/praxeological concepts, and blurring them benefits nobody: one is real, the other is nominal; one builds things, one facilitates trade and conveys economic information; one is the outcome of investment, the other the highest and most liquid form of saving.
...and instead of using terms that exact, and have specific meanings, he invents new ones that don't make any sense:
To double down on this confusing error, in describing the monetary system Bunney separates money into “real money” (but not the standard use of ‘real’) and financial sector money, completely side-stepping the layered-pyramid money approach that economists have used for a long time. Instead, real money somehow consists of boththe notes in people’s wallets — even though they are anonymous, outside-type bearer instruments and direct liabilities of the Fed — andthe bank money in people’s bank accounts, which are none of those things. The error compounds when the author critiques Quantitative Easing, where the Fed apparently “forces these financial institutions to sell the assets they request.” No, the Fed operates on an open market; they were buying assets from willing sellers.
How about this?
Dollar’s purchasing power “stayed relatively intact” when it was pegged to gold (OK, fair), but to illustrate that Bunney graphs the real and nominal minimum wage (strike one: irrelevant metric) since 1938 (strike two: wrong timeline), a nine-decade period of which the dollar was only ephemerally pegged to gold under the Bretton Woods system for only a dozen years.
oooh, oops:
He incorrectly states that house prices in his hometown of Whistler, British Columbia blew out to 106(!) times average wages. They didn’t: Even using his own scanty sources (prices from a real estate agent and wages from a recruitment website) gives us house price-to-wage ratios during the 2022 ‘rona boom in the high 20s. Still bad, but still wrong.
...and the errors honestly never stop.
So many other figures in the book are unreasonable that it casts doubt on much else that the author claims: One in five Americans lost their jobs in the GFC, when the actual number is 7-9 million. The 10-million figure of people losing their homes also seems a little on the high end (an NYU study reports six million; Pew Research in mid-2009 said two million houses foreclosed on). Central banking didn’t start in 1913. The Fed doesn’t have a GDP growth rate goal. The concept of “wage stickiness” is misused. A lower mortgage rate reduces a family’s expenditures, not increasing its incomes. The author states that a government subsidy “exacerbates inequality as prices rise” but also, the very same subsidies “are forcibly lowering prices” — one wonders how. Higher interest rates would reduce our destruction of the Earth and make us more ESG friendly, when any sensible interpretation makes the ESG mania a ZIRP-phenomenon.
"The best I can say about Bunney’s book is that it’s an unsuccessful attempt at exploring the connections between a monetary system and outcomes in the world.""The best I can say about Bunney’s book is that it’s an unsuccessful attempt at exploring the connections between a monetary system and outcomes in the world."
The Hidden Cost of Money is a pretty trashy Bitcoin book. Don't read it.
Den is done slaying for today. See yous tomorrow.
On the whole I mostly agree. Bitcoiners like Bunney really need to increase their economics understanding. Two things tho:
"
But at the same time, “No matter how much governments intervene or central banks print money, they cannot create value, such as energy, food, and commodities, out of thin air.” Jumping between** real and nominal effects like this does nothing but confuse the reader. Capital and money are distinct economic/praxeological concepts, and blurring them benefits nobody
"
I disagree, didn't read Bunney's book but in general this is a very important distinction to make. There's no gaping chasm between money and capital that makes them incomaparable. New money can easily become existing capital very quickly. The point is money creation doesn't create value, it redistributes it, and that's very important to point out.
"
real money somehow consists of boththe notes in people’s wallets — even though they are anonymous, outside-type bearer instruments and direct liabilities of the Fed — andthe bank money in people’s bank accounts, which are none of those things.
"
When analyzing the macroeconomic effects of money supply, I think it makes complete sense to include both cash and deposits in your monetary aggregate. At the end of the day, who is liable for that money and whether or not it's self bearing are insignificant compared to what markets they are accepted in as transactions settlement medium and their turnover rates. Cash and bank deposits operate in largely the same market, the nonbank market (meaning they can be used to settle payments among nonbanks for pretty much and good (with slight differences)), or if you want to be more accurate, a specific countries nonbank market (foreign currencies are assets not money in the domestic market). If the supply of dollars vs supply of dollar deposits increases by 20 trillion it wouldn't really make too much of a difference on prices / macroeconomy in general (assuming in both cases the supply of reserves increases by a significant portion, enough to support the new deposits in the second case), as opposed to an increase in Fed reserves vs dollar deposits or Franc deposits vs Dollar deposits
Also it is a resort town, next to a world-class ski area. I imagine the home prices in boonies, BC did not go up by anywhere near so much.
However, I am now going to go reread all your Money Classes of the Day so as to reduce the likelihood that I make a fool of myself in future writings.
Hahahaha neat! Have fuuuunz, my aspiration is that readers learn a lot (while insulting them, I suppose...) <3
Sigh.......ah yes Seb Bunney.... the person who I would actively try and hide from anyone I know getting into bitcoin, out of fear of them finding him talking about perpetual motion machines he saw on youtube. He seems like a lovely person and a true believer, but I dont know if he's helping XD.