# The Bitcoin Standard ### Definitions **Debt Monetization** [Debt Monetization](https://en.wikipedia.org/wiki/Debt_monetization) or **monetary financing** is the practice of a government borrowing money from the [central bank](https://en.wikipedia.org/wiki/Central_bank "Central bank") to finance public spending instead of selling bonds to the private sector or raising taxes. It is often informally and pejoratively called **printing money** or [money creation](https://en.wikipedia.org/wiki/Money_creation) **Cantillon Effect** The beneficiaries of the expansion of the money supply are those who receive the money first, since they are able to spend it quickly before the prices *rise*. As the money is spent more, the price levels rise, until the late recipients of the money suffer a reduction in their real purchasing power. (pg. 67) ### MMT vs. Austrian Economics My Ideas Idea 1: The fundamental difference between MMT and Austrian Economics is how they view money. The former views money as a promise while the later views money as value. Idea 2: The only reason MMT seems to have "worked" thus far is that even as inflation has increased technology has continually allowed for innovation. This is where the value is coming from. You cannot get something for nothing. The value needs to come from somewhere. Idea 3: A helpful way to think about this in terms of value. Let us state that there is a fundamental concept of value. Let us state that there exists a certain amount of it; it is made up of the bucket of apples the farmer grew, the cars Ford produced, the software apple produced, the service provided by the waiter, and so on. Consider this value fixed, with amount X. If we now let piece of paper represent portions of this value, and we have N pieces of paper, each paper has a value of X/N. Now, if I increase the pieces of paper (say we double them), but keep value fixed, then each piece of paper has a value of X/(2N). By increasing the amount of currency, we reduced its value. However, what if Apple (via invention and innovation) comes up with a new holographic computer that did not exists before. In that case, they have created new value. If this is happening at the same time as the increasing of paper currency, then it will offset the effects, making them less noticeable. The question is, is this bad? It is likely that humans will always continue to innovate, so is it bad to capitalize on this and print more money? TODO. "The deficit can be any size, the debt can be any size, provided they don't cause inflation" The Key Differences • https://www.youtube.com/watch?v=qSYlzxczAY4 • How does each side view money? ◦ Austrian: money emerged as a natural market phenomenon to solve the problem of a barter system having to rely on the double coincidence of wants. Some commodity will emerge (shells, metals, cigarettes, etc) to act as a medium of exchange. ◦ MMT: money is derived from governments. All money is fiat money which arises out of a governments need to levy taxes. This is know as Chartalism. In this view money is not a commodity but a function of law. • This can cause us to be at an impasse right off the bat ◦ We can see this is wrong whenever we see exchange mechanisms emerge in natural markets (e.g. prisons, black markets, bitcoin) • There is also a misunderstanding of what causes inflation ◦ inflation is always caused by an increase in the money supply. It is always a monetary phenomenon. The california gold rush also lead to inflation! • MMT goal: full employment. This is garbage. • Mises: Price of coca cola remained fixed at 5 cents for 70 years. But quite plainly its real price (price as an exchange ratio relative to all other goods) fluctuated during that time. • MMT is a redistribution scheme from the savers (a grandmother who puts her money under her bed) to the first receivers of money (ditch diggers, bridge builders) ### Ideas * Saylor on energy collapse and booth on innovation. Seems like the same type of thing. * --- Date: 20210527 Links to: [Book Reviews MOC](Book%20Reviews%20MOC.md) References: * [Abandonment of Gold Standard during Inter-War Period](https://mediawiki.middlebury.edu/IPE/Abandonment_of_Gold_Standard_during_Inter-War_Period#:~:text=the%20gold%20standard.-,Britain%20Abandons%20Gold,declining%20exports%20and%20increasing%20imports.) * [How interest rates affect currency](https://economics.stackexchange.com/questions/6986/how-interest-rate-affects-currency )