You’re Wrong About Economics and Why You Should Learn To Love Bitcoin – Crypto News

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You see them on television, in magazines, quoted in the world’s largest newspaper, front and center at bookstores. They’re the economists. The experts.

You trust them. Yet, they are very often wrong, which means everything you know might be, too.

In very recent history, Treasury secretary Janet Yellen and Federal Reserve chair Jerome Powell called inflation ‘transitory.’

Of living American Nobel economists, 16 of 36 stated that “whatever upwards pressure on prices all this new money (i.e., government stimulus) might bring, there was no threat of inflation.”

All were wrong.

Keynesian economics – long meant to be taught in the classroom – has proven over the course of the 20th and 21st centuries to be no more than superstition.

Keynesian championed the idea that you can ‘spend your way out of a recession.’

As we’re seeing today, and as economists such as Ludwig von Mises and Milton Friedman pointed out, government spending and racking up debt eventually leads to inflation, which hurts the poor.

Once the inflation turns to hyperinflation, governments love to institute capital controls – a favorite in the government’s toolkit when currencies begin to collapse.

That means, generally, citizens cannot trade across borders nor use foreign currencies within the country.

Capital controls exist all over the world. Thus, you can’t trade the currency across borders. This is not a sound approach to money.

No wonder the world’s first perfect money – Bitcoin – didn’t come out of academia but rather under mysterious and captivating circumstances, thanks to the genius of Satoshi Nakamoto.

The world needs sound money

More than 100 years ago, during a 1912 testimony in front of Congress, the so-called robber baron JP Morgan said, “Gold is money – everything else is credit.”

Money being a bearer instrument and credit an IOU from a counterparty, which may or may not be honored.

The US Dollar had been pegged to gold until 1973 when Nixon closed the gold window.

According to Mr. Morgan’s view, the world has been operating on credit for 50 years. The dollars in your bank account aren’t backed by gold, after all.

They’re backed by the ‘full faith and credit’ of the US government.

As the Treasury makes clear, Federal Reserve notes are not redeemable in gold, silver or any other commodity and receive no backing by anything.

Redeemable notes into gold ended in 1933 and silver in 1968. The notes have no value for themselves but for what they will buy.

In another sense, because they are legal tender, Federal Reserve notes are ‘backed’ by all the goods and services in the economy.

In order to create money, the Federal Reserve prints money – in other words, it creates credit or debt.

At the top of the dollar bill, it reads, ‘Federal Reserve note.’ The definition of the word ‘note’ is “a written promise to pay a debt.”

From the ashes of the failed fiat and credit experiments, a new paradigm will emerge where, as Michael Saylor notes, Bitcoin is thought of as money and everything else as credit, including CBDCs (Central Bank Digital Currencies).

This is especially true in a climate where individuals and corporations no longer trust in banks and fiat currencies.

The world has long needed sound money, and that sound money needs to work across time and space.

Bitcoin has proven capable of doing so, especially at the layer-two level, perhaps best exemplified by the Lightning Network.

At present, 450 Bitcoins are produced every day. The miners generally have to sell them to cover electricity and to service debt.

If the organic demand is in excess of $12.5 million a day, supply then becomes constrained.

Bitcoin is energy

Economists view money as mediums of exchange, unit of account and stores of value.

What if they got that wrong, too? Perhaps more so than any of the three, money is a form of energy.

When an individual puts energy into earning money and then stores it in an asset that bleeds value over the decades, that individual is leaking energy spent in the past.

Inflation renders his or her economic life on this earth shorter.

More Bitcoins cannot be suddenly printed, thereby rendering everyone’s savings worthless.

For that reason, Bitcoin is hope for a future teeming with freedom, sovereignty, truth and integrity.

Bitcoin takes money out of the realm of deception and into the realm of possibility.

Kadan Stadelmann is chief technology officer at Komodo Platform, as well as a blockchain developer and operations security expert. His experience ranges from working in operations security in the government sector and launching technology startups to application development and cryptography.

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