We desire things that are pleasant. We want to have satisfying relationships, a pleasant place to live, and wonderful food. In addition, we want a lovely house. We want to see far-flung locations, be exposed to incredible music, and have a good time. We hope to create something that will stand the test of time, accomplish something remarkable, and make the world a better place for future generations.
All of these things are essential components of what it is to be human, to take part in society, and to advance mankind. Regrettably, all of these things and more more are harmed by the use of fiat money. Because of the nature of the money we have access to, we are unable to purchase the lovely items that we desire.
Governments are interested in acquiring the ability to legislate their way to wealth, fulfillment, and advancement. They are similar to the alchemists of the past, who attempted to create gold from lead using various formulas in the hope of achieving their goal. In point of fact, they are far worse. They have the mental capacity of a child of five years old who believes that if she only wishes hard enough, she would be able to fly.
The ruling class, being the power-hungry and self-deluded politicians that they are, believe that if they pronounce something to be true, then it will miraculously come to pass. In point of fact, this is where the word "fiat" originates from. In both Latin and English, the term has evolved into an adjective that describes creation via decree. The literal meaning of the phrase is "Let there be." The translation of Genesis 1:3 into Latin is the clearest example of this. There is a word there that might be translated as "let there be light," and it is "fiat lux."
Obviously, creation by decree does not function in the same way now as it does in Genesis. You can't merely want a building and then say, "Let there be a building," since it won't work. Someone is going to have to do the digging, pouring of the foundation, adding of the framework, etc. Without the investment of cash and the effort of workers, decrees accomplish very little. Decrees need to have people and resources recruited in order to be effective because there are no market dynamics, such as supply and demand. In other words, a decree by itself does not truly accomplish anything, despite the fact that governments would dearly desire for the world to be a different place. A edict, by itself, has approximately the same purpose as an elderly person shouting at the sun. In order for the edict to be carried out, there must be some element of force involved. The use of force and violence is more euphemistically known as "fiat decrees."
When it comes to structures, it is quite clear that creation by edict does not accomplish anything. However, in the case of money, declaring its existence to be legitimate and even even humane seems plausible. Keynesian economists hold the view that fiat money is in and of itself capable of accomplishing something. Of course, they are wrong, and the fact that it is theft does not alter regardless of how many times they term it a "due we owe to ourselves." That accounting method is nearly as trustworthy as Enron's.
The insidious nature of fiat currency lies in the fact that it disguises the violent actions of governments as natural market forces. Printing money according to the fiat system is equivalent to stealing from those who already own the currency and paying individuals to perform the government's bidding. This robbery is concealed, and it is paired with a healthy helping of Keynesian propaganda, which makes fiat money seem harmless, and maybe even charitable.
Fiat money, in a way, is a more peaceful kind of fiat rule than other forms of fiat authority. On the other hand, expressing that is analogous to arguing that gangsters who give you the opportunity to pay them off are less aggressive than street thugs.
Dictators are known to resort to overt acts of violence in order to coerce their citizenry into complying with their whims. In these cultures, forced conscription, war, and extreme poverty are all part of daily life; as a result, their lifestyle is a wretched one with very little freedom to speak of. Fiat rule is awful for humanity, as can be plainly shown by observing how backwards the Soviet Union was or how backwards North Korea is at the present time. When a civilization is constructed on the backs of slaves, it is exceedingly difficult to make progress.
In contrast, the use of fiat currency at least appears to be optional. In spite of this, it continues to pose a significant threat to civilized society. Fiat currency is more comparable to organized crime, which gives the impression that everything is done voluntarily.
Incentives are Destroyed by Fiat Money
Many economic incentives are undermined when fiat money is used. The reason for this is that there is a particular customer in the market who is not nearly as sensitive to pricing as the other buyers. This buyer is, of course, the person responsible for the creation of fiat money. They have the ability to do so and do so for a variety of purposes, some of which are charitable (such as providing assistance for the needy), while others are not (military buildup). They squander money like drunken sailors who have just discovered a treasure chest.
When there are several buyers involved, as is the case with the government, someone must constantly play the role of the mediator. It is not the "government" in the traditional sense that really purchases a warplane or a commercial structure. There is always someone acting as an agent of the government who performs this purchase, and they are always the ones doing it. The agent is given the right to spend money on behalf of the government, and the government entrusts the agent with the responsibility of acquiring a variety of products and services on behalf of the government.
Sadly, there is a high potential for misconduct with this structure. Because the agents are, in effect, spending the money of other people in order to make money for other people, they do not have a strong incentive to conduct business in an effective manner. Their incentives are as crooked as the tower of Pisa, which is leaning to one side.
When we use our own money to purchase and sell in the market for our own profit, we engage in complex economic analysis to determine whether or not we will benefit sufficiently from the product or service to be prepared to part with our money. As a result, we are going to pay close attention to prices and work hard to maximize the value we receive for the money we spend.
Getting the most out of one's dollar is not the top objective of a government bureaucracy who is in charge of procurement, though. They are given incentives to spend their money in a way that is beneficial to themselves rather than to the government. This does not necessarily have to be done in overt methods like bribery. They can spend significantly less time inspecting the goods and services or they can buy from individuals that they get along with. The end result is almost always a poor transaction in which the agent receives some insignificant advantage at the expense of a considerably greater cost to the government. In a market based on sound money, the government would dismiss persons like these; but, in a market based on fiat money, the government is less concerned about this issue because money is plentiful and consumers are not price sensitive. You are able to do this task when there is a cookie jar from which you can always take.
Therefore, when all the numbers are added up, the agent comes out ahead, at the expense of everyone else. These individuals are what we refer to as "rent hunters." They do not provide anything of value, yet they are nonetheless compensated. And it's not only those who work for the government. You are also considered to be a rent seeker if you work in investment banking and take wagers that include a lot of leverage. When their investments are successful, they often get to retain the earnings for themselves, but when their investments are unsuccessful, they get bailed out. They, too, contribute nothing positive to society and instead live off of its resources. And to make matters even worse, these are meant to be some of the most brilliant and goal-oriented members of society. They are engaged in large-scale theft rather in constructing items that might be of service to civilized society. They are not the only ones guilty of rent-seeking larceny, of course; there are others. In a society based on fiat money, it is unfortunate that the majority of employment involve a significant amount of rent-seeking activity.
Checking the percentage of a job that is spent on political activities rather than activities that add value is one rule of thumb that will be discussed later on in this article as a way to determine whether or not anything is engaging in rent seeking. When there is a greater involvement of politics, there is typically an increase in rent seeking.
Rent-seeking jobs scam the system, and keep in mind that when individuals are given the opportunity to cheat, the majority of them will. You need go no farther than internet gaming to understand this point. Cheating is appealing because it is much simpler than completing laborious work, and if it is institutionalized, as it is now, there is little moral deterrent to it. This makes cheating an attractive option. We have all become that soccer player who acts as if they are in agony in order to sway the decision of the referee.
It is easy to see why people seek rent since producing a product or providing a service that consumers desire is not only difficult but also very unpredictable. What you generate now will be rendered irrelevant by a single technological advancement in the future. Even if they pay less, occupations that aim to collect rent are desired despite the fact that they are uncertain because of the stability they provide. Is it any surprise that occupations that aim to collect rents are in such high demand?
Consider the number of persons who aspire to work in investment banking, venture capital, or political office. They need a lot less work and have a lot more predictability, which makes them a lot more profitable than selling a product or delivering a service.
Incentives for using fiat money are even more bankrupt than Sam Bankman-Fried.
The Meritocracy is Destroyed by Fiat Money
Because there are so many roles that attempt to collect rent, a significant portion of the economy does not function according to the typical supply and demand market forces. Even the remote prospect of rent seeking requires businesses to price their products and services such that they account for a slanted playing field. The meritocratic system is undermined by fiat money.
In a functioning market, the most desirable goods are purchased. Not the products with the strongest political connections. Not the goods that account for the greatest number of jobs. The most successful goods are those that are able to fulfill the requirements and preferences of the greatest number of customers. The introduction of fiat currency brings politics into the mix.
When a government has the ability to create money, those who have access to that money quickest are the ones who stand to profit the most from the situation. This phenomenon, which is known as the Cantillon Effect, is the reason why wealthy individuals get even wealthier without contributing very lot, if anything at all. How does it then come to pass that the government decides who gets access to the money? Politics is the deciding factor in who receives what amount of money, as is the case with everything else that has to do with the government. And when the people who print the money are political, then everything else is political as well. Politics is a disease that infects the entire market and causes widespread disruption.
Those who "have it" in an economy based on fiat money are typically the ones who are effective political actors. They have the ability to steer freshly created money toward themselves, giving them a significant edge over people who do not possess this ability. Those that are politically smart will do better financially than companies that are not politically savvy yet provide superior products. Therefore, businesses that are able to thrive in an economy based on fiat money are extremely politically aware. It is not surprising that politicians rather than business entrepreneurs seem to be leading a growing number of enterprises, particularly as these companies get older.
Therefore, incumbents who are politically astute have a significant advantage in an economy based on fiat money. They will ossify their position by placing the burden of regulatory fees on entrants while simultaneously receiving subsidies in the form of newly produced money. Because of these unfair advantages, the market will be flooded with older products that are of lower quality, while newer products that are of higher quality will never make it to market. In situations when they are losing, incumbents are granted permission to play Calvinball and adjust the game's parameters.
Indicators that institutions continue to exist long after they are no longer valuable to society include things like labor unions, zombie firms, and aging politicians. They all resort to political measures to compensate for their inability to satisfy customer needs in the market. The obsolete and the perishing are never allowed to pass away to make place for the novel. Politics has a chilling effect on both entrepreneurialism and creative endeavors. It is a malignancy that kills the healthy cells that keep the body functioning properly and alive.
In other words, politics has completely replaced merit in every aspect of society.
The use of fiat currency retards progress.
As a result of the prevalence of politics over talent, it is currently more difficult than it has ever been for civilization to advance. It's not always the case that the best product comes out on top, and markets are heavily influenced by politics. Fiat money is a system that prevents newer, more dynamic businesses from acquiring market share at the expense of more established players that have political connections.
As a result, fiat money is detrimental to growth. As a result of the existing actors' significantly greater capacity to thwart newcomers, civilization gradually solidifies over time. In many cases, the incumbents will establish enormous regulatory moats, under-price emerging competitors through fiat subsidization, recruit away the best staff using fiat money, or as a last ditch effort, just buy out the new companies entirely. Access to newly created money is the key to the success of each of these techniques. Brains are the zombies' primary source of nutrition.
We need to have everything powered by nuclear energy right now, but regulations are severely hindering the development of this technology. This requirement can be enforced through the use of fiat money by the government. Because we have not made significant technological advancements in alternative methods to offer superior energy, oil, natural gas, and coal continue to have a dominant market share. Even if they are demonstrably subpar in terms of variability, energy density, and mobility, governments continue to invest in unsustainable energy sources like wind and solar because they are politically attractive. In terms of energy, we are making backward progress.
In a monetary system based on fiat money, the Luddites come out on top since political concerns and the nature of the money itself effectively force things to remain the same. It is extremely conservative in the sense that it preserves the outdated and deteriorating at the price of the contemporary and valuable. If you're thinking that sounds familiar, you're right. The exact same mathematical reasoning has been put out in order to defend the implementation of lockdowns over the course of the last few years.
The airline sector is a good example of this dynamic in action. The amount of time it takes to travel from New York to London is currently significantly longer than it was fifty years ago. Dishwashers provide another example of this dynamic in action. In dishwashers manufactured fifty years ago, a complete load could be cleaned in less than one hour. It takes now more than three hours to complete. Regulations provide protection for those already in power and prioritize political considerations above merit. As a direct consequence of this, civilisation does not advance.
Instead, fiat money has led to a decline in the level of civilisation. The nuclear engineers of yesteryear are now working on scammy Web3 goods and React.js applications since that is where the money is. Investment bankers who develop high-frequency trading systems are today's equivalent of the innovators of yesterday. Since the incentives are flawed and merit is no longer taken into account, is it any wonder that our society is falling more and further behind?
When we successfully put a human being on the moon in 1969, we reached the pinnacle of our civilisation. Everything that has happened since then has not advanced civilization but rather brought it inward on itself. The best that can be said is that it has conserved what we currently have. At worst, it is undermining the progress that has been made by humanity.
To make matters even worse, all of this rent seeking has stoked the fires of an entitlement mentality. These rent seekers believe that since they have excellent political connections, they are entitled to these jobs that have a negative total. People whose motivations are to prevent things from getting better are the single greatest obstacle to forward movement. Nothing is more counterproductive. People who are industrious are transformed into entitled brats when fiat currency is used.
The Fiat Monetary System Is Extremely Conservative
Fiat currency is built on a foundation of perverse incentives. The majority of individuals, if given the opportunity, will choose to steal over working, especially if it involves politics. The unpleasant reality is that politics is a game with a net loss, and this results in a decline in civilized society. Politics, much like war, is about the consumption of previously earned capital.
The incumbents are able to maintain their positions thanks to the wealth redistribution that fiat money facilitates. Because the incumbents have so much political influence, there is very little space for new ideas, new goods, or new products to enter the market.
In point of fact, we have reached a tipping point in which there are more individuals looking for somewhere to rent than there are people who are productively generating things. How many individuals have occupations that include email? How many people actually have jobs? A much too high percentage of individuals are content with nothing more than an Xbox, a mattress, and pizza delivery. Do these individuals contribute in any manner to the betterment of society? It's no wonder that such a large number of individuals are suffering from depression.
The economy has become increasingly politicized and zombie-like as a result, which has real-world repercussions for how society operates. Building regulations make it incredibly challenging to construct novel types of residential buildings. Because of airline restrictions, new designs are not permitted in any way. Because of restrictions governing nuclear power, other, more effective kinds of energy are too expensive.
The economy loses production because of outdated sectors and businesses that have long since passed their sell-by date. They don't add much value to society, but they continue to get subsidies in the form of fiat currency. Industries such as oil, railways, airplanes, and automobiles have all become zombies and are only kept alive because to the existence of fiat currency. Even some enterprises that are very new to the market, such software corporations and electronic goods manufacturers, are considered zombies at this stage. The undead are gaining the upper hand.
And the process of zombiefication is speeding up. It's likely that Facebook made the move from producer to rent seeker a lot more swiftly than IBM did, for example.
This is the unfortunate truth that comes with using fiat money. As the producers become more politically active, at some point they transition into rent seekers. The normal humans are quickly outnumbered by the zombies, and from there, the situation continues to deteriorate.
Bitcoin Is the Answer to This
The encouraging thing is that Bitcoin eliminates these perverse incentives. The elimination of fiat money makes it possible for the standard market mechanism of supply and demand to determine prices. When this happens, politics play a far less role, and the zombiefication of the economy begins to reverse. There is hope for the future of civilization. Bitcoin is both the medicine for the ailment and the best chance for a turnaround in the downward trend.
Unfortuitously, we have nearly a century's worth of rot to clean up, and doing so will need some patience on our part. People who have the most vested interest in the status quo, known as Cantillon winners, are the least likely to switch to Bitcoin and will fight tooth and nail to maintain their positions. Examples of Cantillon winners include business school graduates from Ivy League schools, wealthy elderly people, and bureaucrats of all stripes. You can already see that these folks are making their own attempt to further zombify themselves using CBDCs, so it's clear that they have no intention of vanishing without a fight.
Bitcoin is fortunate in that it has time working in its favor as an asset. The individuals who stand to lose the most under Cantillon, such as young people, inhabitants of undeveloped nations, and genuine producers of products and services, will invariably gravitate toward the far more equitable system that Bitcoin offers. The zombies will eventually eat themselves to death.