Fighting Withdrawal
The U.S. government's debt has skyrocketed from around $1.2 trillion in 1980 to $31.4 trillion in 2023. In 1980 Debt to GDP was ~26% and in 2023 Debt to GDP is ~123%. Exponential growth happens fast. If something doesn't change fiat money will become unsustainable in the coming decades.
I’ve often heard people compare the traditional financial system to a drug addict looking for his next hit. I find this to be a rather harsh analogy because at least the addict has a chance to overcome his addiction. The legacy financial system on the other hand seems beyond repair. There will be a point where no amount of liquidity will be enough to satisfy the system's needs. Everyday it becomes increasingly clear that the foundation of money used for trade should be solid and dependable. Fiat currency is built on trust, coercion, and debt. The concept of debt-based money is a paradox, so it’s remarkable that central planners have managed to maintain this charade for so long. Over 50 years have passed since President Nixon severed money’s connection to reality by abandoning the gold standard. It’s high time for us, the people, to accept nothing less than a stable and reliable method for conducting economic transactions.
Central banks are the untrustworthy translators of the financial world. They make decisions that serve their own interests, rather than the interests of ordinary people. Their decisions have led to an increasingly centralized world, where a select few individuals have the power to make decisions that affect billions of people. This lack of decentralization can lead to inefficient resource allocation and higher costs for consumers.
Imagine trying to navigate a foreign land without knowing the language, relying solely on a translator to communicate for you. Now imagine if that translator was not only unreliable but also deceitful, making up information and making decisions that benefited them instead of you. That would be an extremely frustrating and potentially dangerous situation.
The Federal Reserve’s practice of bailing out so-called “zombie” companies that would otherwise fail exemplifies this problem. By selecting winners, the Fed is inadvertently selecting losers. There are no free lunches. When money is created without an opportunity cost it ultimately hurts ordinary dollar users. The net effect of the Fed’s policy is a lack of reliable goods & services and a dilution of purchasing power.
The current financial system is in dire need of reform. We need to move towards a more decentralized system that relies on the wisdom of free markets, rather than the decisions of a select few individuals. This would not only benefit consumers, but also lead to a more efficient and stable economy. If your ruler for measuring things is constantly changing, all your calculations will be off.
Central banking figures such as Ben Bernanke and Janet Yellen have received Nobel Prizes for their contributions to the flawed financial system that perpetuates wealth transfers through quantitative easing. This is not surprising, as Charlie Munger famously stated, “Show me the incentive and I’ll show you the outcome.” Yellen and Bernanke regularly participate in lucrative speaking engagements and self-promotion, which only serves to highlight the irony of their awards. Ultimately, their actions have legitimized and perpetuated an unsustainable financial system.
In stark contrast to these central planners, Satoshi Nakamoto, opted for a path of humble anonymity. Bitcoin offers a more transparent, verifiable, and decentralized system. Since transactions are recorded on a public, immutable ledger they are accessible and verifiable by anyone. Not having to rely on unnecessary middlemen in order to transact helps eliminate unnecessary intermediaries who don’t provide fair value for the services they render. When less people are able to act parasitically it will reduce opportunities for corruption and fraud.
Satoshi’s anonymity and detachment from Bitcoin reflect a genuine commitment to creating a decentralized and equitable financial system. By stepping back and allowing Bitcoin to grow organically, Satoshi fostered a truly decentralized network, free from the potential influence and manipulation that could arise from a figurehead. Bitcoin’s fixed supply and predictable inflation rate prevent unchecked money printing and preserve the currency’s value, enabling a monetary policy that is both known and immutable.
Bitcoin represents the ideal financial translator, based on a universal language that everyone can understand: mathematics. This foundational element ensures that there is no room for misinterpretation or manipulation. Bitcoin provides a reliable alternative to a traditional financial system built on trust, coercion, and debt. It enables mutually beneficial transactions to occur freely and openly among market participants, without intermediaries or centralized control. In a world where trust in traditional financial systems is eroding, Bitcoin offers a more stable and trustworthy foundation for economic activity. As people increasingly turn to Bitcoin and other decentralized systems, we have the opportunity to create a financial system that is more equitable, transparent, and secure for everyone.
As we look towards the next ten years, it will be fascinating to see how the Federal Reserve and other global central banks endeavor to preserve their autonomy. In some respects, it would be beneficial if they are able to sustain higher interest rates, as it will lead to the eventual dissolution of unsustainable businesses. While it is regrettable to witness job losses, positions involving inadvertent fraud, such as those at companies like FTX, should cease to exist for the sake of a healthier financial landscape.
One of nature’s inherent strengths and resilience stems from its decentralized structure. No single entity holds dominion over its vast, interconnected web of ecosystems. Each component operates autonomously, adapting and evolving in response to its surroundings. Similarly, Bitcoin is decentralized and grows stronger with every attack on the network. All Bitcoin has to do to become money for the world is to keep adding blocks every ten minutes. “Tick Tock, Next Block,” as we Bitcoiners say.
What an actual Bitcoin standard would look like is anyone’s guess. Bitcoin can be likened to a breathtaking work of art, transcending boundaries and captivating people from all walks of life. Just as art enthusiasts approach a masterpiece with various desires – some yearning to possess it, some finding solace in its aesthetic appeal, and others aspiring to exhibit it in prestigious museums for all to marvel at – Bitcoin elicits a diverse range of reactions. Despite differing individual intentions, there is a widespread consensus that both art and Bitcoin offer immense value and benefits to society.
All the Federal Reserve’s attempts to manipulate reality through zero interest rate policies, money printing, quantitative easing, yield curve control, and other obscure methods of selecting winners like the BTFP program will ultimately fail with enough time. As with nature, reality has a way of humbling those who seek to control it. Embracing decentralized systems not only aligns us more closely with the wisdom of nature, but also serves as a safeguard against the inevitable failure of centralized structures.