One of my early bitcoin articles, when I was still gradually coming out of the bitcoin closet among other, established monetary economists.
These days, I usually think of ways to get bitcoin into a mainstream story, sometimes subtly and sometimes not-so-subtly (#830458). Back in 2021 I was much quieter with all of this. Shy, you might say.
The 20th century is the odd-one-out in that labor arrangements overwhelmingly were standardized, pay adjusted to working hours rather than (or as a proxy for) output, and a macroeconomic environment focused on keeping even short-term prices stable and predictable (excepting the World Wars, various hyperinflations, and the Great Inflation of the 1970s).
"the future of work could thus become a lot more like the past."
What I argue in this piece is that output and price volatility used to be a natural feature of the world, and that nominal income targeting or nominal rigidities are artificial impositions on an otherwise well-functioning world. Volatility is natural and normal, and purging it from our economies has had unintended consequences; somebody always carries the risk (#867043).
He correctly identifies that bitcoin’s fixed supply (its inelastic supply schedule) is a weakness, making long-run price expectations unanchored and short-term fluctuations unresponsive to money demand [...] when the underlying monetary unit is price volatile, long-term contracting is costly and imposes new and additional risks on people. Insofar as we don’t want to ride the volatility of pricing in everyday items we are worse off in a bitcoinizing world as the prices we face will be less stable, the values of incomes (and wealth we already possess) having less long-term predictability
To use a personal example: my rent is already tied to the official inflation rate of my country, adjusted monthly. The calculation is done by a real-world third party (a bit like betting markets), and the inclusion into my monthly rate happens automatically, with few of the long-term contracting issues raised by Luther. This happens to be a fiat currency, but could equally well be a bitcoin adjustment.
My hail mary conclusion? Maybe bitcoin, for all its blackboard-type stylized flaws, is the best we can do?
...might be the best we can practically get. There are academic arguments where an Ivory-tower scholar can show, blackboard-style, that a more ideal outcome is feasible. Regarding bitcoin’s supply mechanism, again I don’t disagree, but I ask: Is that really feasible? It doesn’t take much skepticism about the role of central banks in the modern world to accept that it might not be
"The bitcoin revolution doesn’t take an Act of Parliament, or convincing those least likely to appreciate the harm of current monetary policy; it merely takes individuals to opt out, to vote with their feet."
that's why I'm most optimistic about a better monetary future. It crucially does not depend on a change of mind among the economists running the Fed or the Treasury; it does not require a parliamentary vote. It just requires Bitcoiners to build and to opt out.
...and then people like Nassim Taleb or Eugene Fama (#875931) or Paul Krugman can say whatever they like.
Whatcha gonna believe, what they say or your own lying eyes?!
Happy stacking, friends.