Can Bitcoin Save Us From Caesar?
No, Bitcoin v United States is not a court case heading for the Supreme Court, but you never know, it just might one day. What this refers to is the idea that a monetary unit that sits outside the government’s control just might save us from the grip of the U.S. empire.
I have long held to the basic idea that the battle for peace and the battle for sound money are one and the same. Empires do not run on ideology, or hope, much less ideals. Empires run on money. They run on expropriated wealth to be more precise. If the empire loses its ability to transfer the wealth of the productive sector to the welfare/warfare state in an unseen manner then it loses its ability to perpetuate itself. Indeed, it loses its reason for being in the first place. If we can successfully dismantle the monetary regime and institute sound money we will have done more for peace than a thousand protest marches could ever do.
I have previously made the case for sound money and for dismantling the Federal Reserve. Here I wish to examine a simpler question; could Bitcoin serve as a defense against a predatory imperial economy. If the reader is seeking a definitive answer then they will be disappointed. Bitcoin may serve such a role, but there are many uncertainties in the whole project.
How Inflation Rips You Off
Yes, I have argued that taxes are theft. All reasonable people can agree on that. I have also agreed with Mao that power comes from the barrel of a gun, indeed it does. Yet, in the day after dull ass day of our world this is not the main way we experience governmental theft. The main form this theft takes is through the use of the printing press (money creation).
Domestically, the process is one that Ludwig von Mises revealed over a century ago and which has yet to be refuted; that new money created is a new claim on real goods and services, that have not been produced. That is, the purchasing power that the new money confers on people was not created by the production of a good or service that can then be exchanged with others in the marketplace. The first receivers of this newly created money have a decided advantage. They get to spend the money at the old, lower prices. The first receivers of this new money are the government, the primary dealers, the hedge fund complex, the mutual fund complex, in short the politically connected F.I.R.E. (finance, insurance, real estate) sector of the economy. Those who receive it last must use the money at the new prices. That this is a tax cannot be gainsaid. Indeed, it is a massive bottom to top redistribution of wealth. This tax rakes place almost completely outside the electoral or legislative system. The Federal Reserve was created in 1913, and this process has more or less been on auto pilot (with a few legislative tweaks and much bureaucratic mission creep) since.
Internationally, this process manifests itself in the status of the U.S. dollar as the reserve currency. The dollar has by the IMF’s own accounting, roughly 57% of the world’s allocated foreign exchange reserves. The world’s savings currently (but not necessarily forever) are held in U.S. denominated assets, primarily U.S. Treasury bonds, thus helping to cover Uncle Sam’s bar tab, at the expense of exporting inflation to the rest of the world.
The aftermath of the Russian invasion of Ukraine is a case in point. In 2022 the U.S. had the G7 immobilize roughly $300 billion of the Russian central bank’s reserves, about half its total holdings, according to the Congressional Research Service. Set aside your justified revulsion at what the Russians did, I have condemned it repeatedly. Instead consider the lesson that every finance minister on earth relearned, that their savings are held at the pleasure of the U.S.. The dollar becomes not just a medium of exchange but rather a club used to control U.S. client states.
What is Bitcoin and What Does It Do?
Bitcoin is simply put digital money, or a digital commodity that its supporters want to become money. I say want to because it is not now a monetary unit. For one thing it is not nearly universally used as a medium of exchange, even though its use in that way is growing. For another thing, Bitcoin is not a final unit of settlement. In order to make Bitcoin useful one must cash out of it into dollars, yen, renminbi, etc. In fact, no one really thinks in Bitcoin. You do not hear people say I have X amount of Bitcoin. They will always say something like “I have $100K in Bitcoin”. That is because it is not yet money.
However, Bitcoin does have some very important characteristics that should it become money it would reside outside the state centric monetary regime. It has three main characteristics, but they are three very important ones.
First, Bitcoin cannot be increased the way government run currencies are. By design there can only be 21 million Bitcoins ever. This total should be reached in the early 22nd century. The public chain of who owns Bitcoin is enforced by all of those involved in owning, mining and transferring. For a good overview of how Bitcoin works, ands a whole lot of other good monetary information see Lyn Alden’s Broken Money. There is no committee, no dual mandate, no emergency “facilities”.
It is beyond the capacity for even the US government to buy up all the Bitcoin. See here for a Reddit discussion of this. The US government does have a “Bitcoin Strategic Reserve” but that does not make it any more practical for them to take over the entire market. So, they would not be able to stop Bitcoin if it became money, short of shutting down the entire internet (want to see a population instantly radicalized, then shut down the entire internet.) Also, the US government would not be able to finance a war using Bitcoin, because they cannot debase it. They would need to resort to the open taxation that is the bane of all empires.
Second, There is no centralized “chokepoint” that the state could squeeze to shut down and/or take over the system. Bitcoin is a totally peer-to-peer system. It is simply computers, widely dispersed, talking to each other. There is no centralized clearing house or order flow process like we have with the current monetary regime. An owner who controls their own supply of Bitcoin holds a bearer asset that no jurisdiction can freeze, or steal.
Finally, Bitcoin is permissionless. Not having a centralized process that can be choked off there is no way to stop people from transacting. All transactions move across borders without a licensed, that is state controlled intermediary between the parties forced to obey the government’s orders.
This is a game changer. There would have been no way for the Canadian government to shut off the finances from the trucker protest that broke out in response to Covid shutdowns. As it was, it was easy for the Canadian government to turn off the spigot and financially strand the truckers and force them to back off. Multiply this by all the countries sanctioned by the US government and pushed out of the modern banking system. This would render such “sanctions” inert.
There Is Another Side of The Story
For the record, I am a Bitcoin agnostic. It is not yet money, defined as a generally used medium of exchange, as I stated above. Only the market will determine whether it becomes money.
Bitcoin is also volatile, and volatility like this is a risk. If it ever became truly money then this kind of volatility would mostly go away. An asset that aspires to be money that loses half its value in a quarter is a poor candidate to be called money. This is especially true for those of modest means who cannot ride out such a downturn.
The big risk is that holding Bitcoin in hopes that it may become money, and/or soar in value means that you could suffer a catastrophic loss. This is not something you buy with the milk money.
There is also the same danger that exists in any monetary regime. The Lord did not say you cannot serve God and fiat money. He said you cannot serve God and mammon. Mammon is certainly content with being denominated in Bitcoin. We as the faithful forget this at our peril.
Conclusions
Bitcoin, whether it becomes money or not, is not salvation. If it becomes money it could be a very useful tool. It might then be considered “digital gold”. It would have many of the same characteristics as actual gold. It would be a monetary unit that the state could not counterfeit or readily debase. Therefore, it would be extremely difficult, if not impossible for the government to hide the true costs of their wars.
There are differences between gold and Bitcoin, however. Gold has a history as money that goes back thousands of years. It can be held, touched, and carried around. It has weight. Do not downplay that tactile reality in regard to a commodity becoming money. Bitcoin, on the other hand, is more portable than gold and is more resistant to control by the state. In a truly free market, both might serve as money as a means of getting free of the imperial money system. Or, perhaps Bitcoin becomes simply a permissionless payment system in which people can anonymously step into and out of the formal system unseen by the surveillance state.
In the final analysis this ability to “opt out” is all this is about. I am not offering an investment thesis. I am suggesting that this may become a means of withholding consent from the warfare state. Every form of non-state controlled money is wealth that cannot be used to kill. This then could be seen as a vote against the next war. If Bitcoin really did become money it might be a means of dismantling the empire altogether. The empire needs monetary control and the power of money creation to survive. Let’s pray that Bitcoin can become the thing that denies this control to the War Masters.
Praise Be to God
Nothing here is investment advice. I am describing a monetary argument, not recommending a position. Assets that can fall seventy percent are not a place for money you need next year
