Our Most Brilliant Idea (Part 3)
Exploring humanity's greatest idea historically, and its novel form in modernity.
The Greatest Idea of History
“An Idea Is Salvation By Imagination.” — Frank Lloyd Wright
Quintessential to the idea of any money is that both present and future market participants will freely accept it in trade. The likelihood of a money to be accepted by the broadest possible set of trading partners is largely based on how reliably it maintains its scarcity across time. To maximize this store of value function, a money must be resistant to misappropriation—whether by inflation, counterfeit, or confiscation (all of which are theft). The money most resistant to involuntary exchange (aka theft) tends to become the most widely adopted voluntary medium of exchange. Put another way: in free market competition the most theft-proof money wins.
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Those who erroneously choose a less theft-proof money are disfavored by market processes when their wealth is compromised by thieves through inflation, counterfeiting, or confiscation. Another way to say it: market participants adopt the money which minimizes the need to trust one another. Central banks continue to hoard gold because it is trust-minimized money. Bitcoin exhibits even greater trust-minimization qualities, and is therefore disruptive to gold.
Money is the best idea we’ve ever had, for without it, all the other marvelous ideas generated by markets would not exist. As the most tradable thing, money is the highest instantiation of our meta-idea, offering us unbridled optionality in market exchange. As a technology, free-market-selected money maximizes both human freedom and cooperation.
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Historically, gold reduced the incentives to violence, because it was a more securable form of wealth than food, land, and most other assets. In this way, gold greatly constricted the scope of assets worth fighting over, thereby inducing unparalleled social cooperation, trade, and wealth generation. This has profound moral implications too: when money is hard to steal, society becomes hard working; when it is easy to steal, society drifts toward kleptocracy. Let me state the argument in a single sentence: gold was the greatest tool we ever had to incentivize ourselves to civilize ourselves.
If the aim of humanity is to build civilizations, then our most brilliant idea was the use of gold as money.
The global gold standard improved trade (our meta-idea) in a trust-minimized way and standardized the world to a single monetary protocol—thereby maximizing time-savings in trade and its associated wealth creation (two sides of the same coin). Again, wealth creation is absolutely dependent on ideation: using gold as money led the world into an unequaled effulgence of novel ideas and innovations, ushering in an era known colloquially as both The Gilded Age and La Belle Époque:
A brilliant idea indeed, but far from perfect: because gold is physical, it is still vulnerable to theft; and because gold is heavy, economies of scale related to its use as money led to the centralization of its custody in bank vaults (since it is cheaper to transact in paper abstractions of gold than physical gold). An anticapitalist institution—the central bank—festered around these centralized gold hoards. These deceptive and evil institutions operate with flagrant disregard for the tenets of capitalism: central banks are above the law, practice perpetual private property confiscation via inflation, and peddle the most dishonest money in history.
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All central bank business models are critically dependent on the divisibility, portability, and recognizability shortcomings of gold:
If gold were perfectly divisible, there would be no reason to abstract it into paper currency
If gold were perfectly portable, it would be encoded as information and there would be no need to place trust in banking custodians as final settlement could be conducted at the speed of light
If gold were perfectly recognizable, there would be no economic gain from the “public stamp” of national currencies as anyone could verify the veracity of money themselves instantaneously
Indeed, these technological failings of gold formed the attack surface repeatedly exploited by central banks. Fortunately for citizens of the 21st century, free trade—which has been exponentially enhanced by the internet and digital technologies—has generated an even more brilliant idea that promises a permanent ending to the thieving schemes of central banks.
Thank you for reading Our Most Brilliant Idea (Part 3).
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