The Fiat Feedback Loop

Good Morning Everyone,

There is a powerful metaphor that demonstrates the conundrum we find ourselves in when trying to analyze, assess and gain a clear recognition of a system, from inside of that system.

It is that, of a fish in water.

“Fish don’t know they’re in water. If you tried to explain it, they’d say, “Water? What’s water?” They’re so surrounded by it that it’s impossible to see. They can’t see it until they jump outside of it.”

This metaphor is equally applicable to how we perceive money, and the relationship of money to government or the state.

Australia was on a gold standard in alignment with the British until the end of world war one, at which point the British empire was essentially broke, and chose to transition away from a sound monetary standard to a fiat standard, in order to devalue the currency (siphon value from all who hold the currency), by increasing the money supply and enable them to pay their debts to the US.

The US famously moved from a gold standard to a fiat standard in 1971. Since this time, which is now over 50 years, essentially the entire world has been on a fiat standard.

Obviously we’re not born understanding anything to do with money - infact most never understand it.

Much like the fish in water, given we have not had a standard based on sound money since ‘71 in the US, and even earlier elsewhere, it’s unlikely you would have any concept of the change to the monetary system, and how it impacted you, as it’s essentially all you have known. It’s been the water around you for your entire life, which makes it near impossible to view the world outside of that system and imagine the world could have been any other way.

But the world has been different prior, and when viewed through a wider historical lens, this period of time is more so the exception to the rule, rather than the rule itself.

This is interesting to me, and in many ways explains the difficulty so many have in understanding bitcoin and how it changes absolutely everything. It is a completely foreign system, compared with the current system of ‘water’ which is all they have ever known.

The relationship between money and state is at the core of our existing system.

I read an incredible article over the weekend by Allen Farrington, which i’ve since re-read about five times, to try and really digest the significance of what it brings to light.

I highly recommend you have a read for yourself. It’s short, but profound.

Here is a except from the article:

“While not a singularly causal factor, it is certainly not a coincidence that the three great empires just cited [Roman, Spanish, Brithish] all collapsed more or less in line with the rate of debasement of their currencies in pursuit of economically destructive militaristic ends.

But the fiat era created a dramatic historical anomaly. For the first time in recorded history, the cost of creating new money literally was zero. This has had profound effects on political economy. While money can always buy power, power could now buy money, and without economic calculation. There is no cost too great to seizing power, and next to no incentive not to give it a shot, because any costs can later be paid back, and then some. This, we believe, is the root cause of the cult of toxic bigness now endemic across the developed world,

Rather than a naturally homeostatic process of increased size tending to lead to inefficiency, in the fiat era, the bigger you are — either as a business or a government — the more powerful you become, hence, entirely perversely, the more efficient you become. Of course, the less efficient everybody else becomes because they are transparently being stolen from. The more communal capital is consumed, the more energy the capital consumer can direct towards seizing power and paying back himself, but likely nobody else.

Bitcoin fixes this. And in a remarkably simple way; it undoes everything just described. It returns a cost to money — a higher one even than gold — and makes toxic bigness unsustainable. Hence, Bitcoin isn’t so much explicitly a pro-localist tool. If anything, the reality is even more profound: localism itself is natural, healthy, sustainable, and right. Bitcoin destroys the historically anomalous countervailing force and, in doing so, will let localism happen without having a particular bias of its own beyond the far more abstract concerns for sustainability, efficiency, accountability, humility, and truth — all natural bedfellows to localism.”

So powerful.

While money can always buy power, under a fiat standard, power could now buy money.

And if history is anything to go by. Power will. Until absolute trust in the system is dissolved, power will continue to buy money at the expense of the population.

This is the fiat feedback loop, and we can see this all around us in the world today if you are paying attention. There is a reason the world has become overly politicized, and it is primarily as a result of this feedback loop between money and power.

The need to decouple money from the state has never been more obvious, and the sooner people realise it, the sooner we can transition to a new system that is designed to operate in alignment with the laws of nature, a system that incentivizes localism and the expression of the highest of human values like truth.

This can be difficult to see from within the current system, but as soon as you plug-in to the bitcoin network and begin to express value in a new way, you have an opportunity, perhaps the first opportunity in your life to view the fiat system from the vantage point much like the fish jumping out of the water.

Once you realise the water is all around you, and you can see it, you can never see the world the same way again.

The world needs a decentralized, censorship resistant protocol to enable humans to express value in a truly open and transparent way, and that’s exactly what we’ve got.

The future already exists. It’s just waiting for you to realise it.

I hope you all have a great start to your week, and i’ll talk to everyone tomorrow.

AK

Must-watch clip re Canadian Truckers

Monday Meme: