Ray Dalio's Open Bitcoin Letter

An open letter to hedge fund giant Ray Dalio about his worldview, the forces of financial nature, and howBitcoin is destined to change both. The letter is written by the founder and CEO of the hedge fund and consulting agency Parallax Digital Robert Bridlov.

Introduction

Ray, your ability to penetrate the dark realmseconomy and sharing its secrets in a simple and understandable language - this is one of your greatest gifts to humanity. With your videos, publicly available research and books, you have opened many eyes to a topic that most people find difficult to understand. The world needs more pioneers like you, who would draw up accessible maps of the difficult-to-understand territory of the economy. Macroeconomists, academics, and central bank clerks rely heavily on the deceptive language and universal public ignorance that allows them to turn schemes. Therefore, your work of turning this esoteric region into a more exoteric form is laudable.

Let me start by saying that, like you, Ray,I do not consider myself a “know-it-all” and in life and work I focus more on the ability to cope with what I do not know, rather than relying on what I know. This approach is consistent with ancient wisdom:

"I know that I know nothing". - Socrates

Knowledge is finite and cannot explain everything in the world,and often they completely obscure the truth. So the territory of economics is best explored with a beginner's mind, free from the accumulated junk commonly called "conventional wisdom." It is from this perspective that I present to you this open letter about your view of Bitcoin through the lens of your stated principles for life and work.(In this letter I sometimes turn my comments to Ray, and sometimes to the audience, so please treat this change of perspective with understanding).

Let's start by assessing Ray from the perspective of a meritocracy of ideas,practiced at his firm Bridgewater. The goal is to honestly evaluate others, with maximum sincerity and without prejudice, in order to discover the best ideas - not limited to strategy, politics or hierarchy - which can then be analyzed and, if useful, put into practice. In the Bridgewater culture, communication takes place both from top to bottom and from bottom to top, so that people feel the right to share their point of view. The main thing for Ray is to come to the truth by any necessary means, and I respect such a straightforward approach.

Below we will study all this in more detail - so let's get started.

Ray Bitcoin Assessment Analysis

Topic: Bitcoin Ray Evaluation
From: Robert Breedlove
To: Ray Dalio
Copy: Everyone
Appendix: Bitcoin Ray Assessment (see below)

Ray, you deserve a D for your grade.the meaning and prospects of Bitcoin. Although there are very few of us, everyone who has the necessary depth of understanding in the fields of computer science, the history of money, game theory, economics and mathematics and has spent time studying Bitcoin intensively(and it takes a lot of time), would agree with such a harsh characterizationyour short-sighted assessment of this momentous monetary innovation. Being a big fan of yours, I am truly convinced that if you take another look(long, firm, thoughtful look), you will see the light. In particular, your assessment is untenable for the following three reasons:

You claim to believe in “technologyblockchain ”, despite the fact that“ blockchain technology ”has established itself only as an integral part of Bitcoin. Contrary to “generally accepted notions,” a real breakthrough is not blockchain, but Bitcoin.
You declare that Bitcoin can be replaced by anothercryptocurrency, although this is very unlikely: Bitcoin is an innovation that is possible only once and depends on previous events. His critical breakthrough in the discovery of absolute rarity - a monetary property never before reached by mankind. There can be no other Bitcoin, because absolute irreproducibility is already open. The iPhone and Blackberry analogy you cite is inappropriate because Bitcoin is a protocol, not a consumer product.
You claim that central banks willstable price currencies have been issued, and such attempts are likely to be made, but such currencies would be the antithesis of a free market. Moreover, price stability is an illusion: the exchange rate of all economic goods relative to each other is fluid. Money is simply the most traded commodity, so exchange rates (prices) expressed in money tend to be more stable, but still subject to the interaction of supply and demand. Because Bitcoin is completely scarce and cannot be stopped, it will likely continue to outperform all other monetary technologies on the free market. Since we are talking about the real-time monetization of an economic commodity, Bitcoin's exchange rate against various fiat currencies is likely to remain volatile for some time, but this volatility will decrease as Bitcoin's market capitalization increases, making its use as a medium of exchange more practical before sufficient network value has been reached for prices to be predominantly denominated in Bitcoin(which resembles the evolutionary stages passed by gold in the process of its monetization).

Your rating is especially disappointing in threereasons: 1) you have repeatedly demonstrated the ability to understand, extract the most essential and convey extremely complex economic concepts in a way that is accessible to a wide audience; 2) the depth of your knowledge in the history, economy and dynamics of the free market allows you to better understand the occurrence and relevance of this asset; and 3) your virtually unparalleled influence and reputation as a leader in macroeconomic thought, an organizational engineer, and a cultural innovator is an invaluable platform for reaching out to the masses of the dire consequences that the currently prevailing economic order leads to and how Bitcoin can ease them.

In this open letter I will show thatThe fundamental tenets of your worldview, as outlined in your book Principles and other writings, are entirely consistent with Bitcoin—even if you don't realize it yet. I'll start with two introductory sections: on the nature and history of money and on the general functionality and economic properties of Bitcoin - which may be skipped by the reader who“Has already fallen into Bitcoin’s rabbit hole”so to speak. After that, I will alternately review and analyze many of Ray's most important principles to better understand their relationship to the markets and Bitcoin. Let's get started.

Money Basics

(You can skip this introduction to money and the following introduction to Bitcoin, if you understand the characteristics of money and the general functionality and economic properties of Bitcoin).

Moneyis a tool for moving value in time and space(or space-time, because, as Einstein explained, they represent a single whole).

Moneyis an emergent property of barter (directexchange), solving the problem of mismatch of needs. They naturally develop in the free market as the most marketable economic goods. Without saying anything about its origins, Ray still understands the technical functions of money, as seen in the video of his assessment of Bitcoin (see video above). Here are their main functions*:

A means of saving that allows you to move value over time (the first function and the evolutionary stage of money).
A medium of exchange that allows you to move value in space (second function and evolutionary stage of money).

* We will consciously omit the third function and the evolutionary stage of money - the accounting unit - since it is not relevant to our discussion.

Although the task of money is always the same: to move value in space-time - the technology that performs this task is constantly exposed to market evolutionary pressure. The higher the technology’s resilience to cost dilution over time - whether because of fakes, supply inflation or spoilage - the more effective it is as a store of value. When a store of value accumulates enough value, people begin to use it in trade. The wider the acceptance of a particular type of money, the higher its value as a medium of exchange, as a result of which this aspect of its value is proportional to the number of participants in the monetary network (users). When monetary technology in the form of an economic commodity becomes generally accepted in interpersonal exchange (trade), it is called “money”. Money technologies compete for wider adoption based on the following properties:

Rarity:resistance to manipulation of the money supply and therefore dilution of the value of the monetary unit(creation difficulty).
Divisibility:ease of accounting and transactions on different scales(divisible and combined units).
Portability:ease of moving value in space(high cost to weight ratio).
Durability:ease of moving value over time(spoilage resistance).
Recognition:ease of identification and verification of monetary value by the other party to the transaction(universal identification and verification).

Due to the relative advantages offeredby competing monetary technology, an economic commodity used as money can change over time. At different times, humanity has used, among other things, shells, salt, livestock, precious metals and government bills as money. Competing money technologies are subject to a market process similar to free-market pricing, where the collective actions of buyers and sellers are constantly reduced to a single effective variable called the market price. It is possible to better understand this dynamics thanks to an analogy: monetary evolution is approximately comparable to the evolutionary process of communication technologies.

Whatever means are used to accomplish it, the task of communication technologies remains the same:move information in spacetime. Like a money market, between differentCommunication technologies are constantly engaged in lively competition, where they are subject to a market pricing process. When new technologies are invented, they are tested by the market through competition and survive or die depending on their relative speed, accuracy of messaging, reliability, traceability and mobility. Since the task of these technologies is one, people tend to converge to any one technology, which is facilitated by the network effect.

Network effect, defined as additionalthe benefit to all existing members of the network from adding a new member encourages people to use better communication technology. As more people switch to the latest and greatest technology, it encourages others to do the same, as the growing number of network participants exponentially increases the number of possible connections. A simple example is a telephone. If there are only two phones, only one connection is possible. If there are five phones on the network, the number of connections jumps to 10. And if there are 12 phones on the network, then the number of connections increases exponentially again to 66, and so on.(Metcalfe’s law explains the dynamics of the network effect).

Since the task of communication technologies, regardless of technological progress, remains unchanged(moving information in space-time), the technology that best performsthis task, as a rule, gains primacy in the market. This trend, reinforced by the network effect, has driven the evolution of communication technologies from carrier pigeons to the telegraph and the Internet. This is a manifestation of the winner-takes-all dynamic.(or “winner gets the most”)common to many networks, including communication and money technology networks.

Like communication technologies, monetarytechnologies have a single purpose: the movement of value in space-time. However, the various monetary technologies that perform this task are subject to market pricing and therefore evolve over time based on their monetary characteristics. Among the characteristics of money, the primacy in determining the likelihood of success of a particular monetary technology in the free market belongs to hardness(also known as rarity or resistance). This characteristic is most important becausethat it determines the usefulness of money as a means of saving, and money that is unable to adequately maintain value over time is inevitably unable to effectively transfer value in space. A quantitative assessment of the relative hardness, or rarity, of competing monetary technologies is the ratio of their reserves to inflows - an indicator also common on the markets of precious metals such as gold:

Reserves refer to the existing supply of monetary units(e.g. ounces of gold, US dollars, bitcoins).
Inflow is a new proposal created over a certain period of time, usually one year.
To obtain the ratio of reserves to inflows, it is necessary to divide the supply of monetary units by its increase(you can consider this indicator as the inverse of the rate of inflation).
The higher the ratio of reserves to influx, the higher the hardness(rarity, sustainability)monetary technology.

Hardness of money can be represented asthe difficulty (or cost) of creating an additional unit of monetary technology. For example, the monetary hardness of gold is based on the capital and operating costs of extracting one ounce of it. Because gold miners will always strive to mine it until the additional cost per ounce equals the additional revenue per ounce(in other words, marginal cost will not equal marginal revenue), they have constant motivationmaximize supply inflow to achieve profitability. Compared to communication technologies, money exhibits a stronger centripetal network effect such as“The winner gets everything”, which encourages users to converge to onestore of value. Those who will not accept the hardest money available to them will find their store of value devalued by those who are able to produce it profitably(when marginal cost is less than marginal revenue). So hard money is justa monetary technology freely chosen in an unfettered market as the best store of value available. Historically, gold has reigned supreme as hard money precisely because of its superiorratio of total reserves to annual inflows(Stock-to-flow) in comparison with other monetary metals.

In a free market, people naturally and rationallythey prefer to save the value created by their labor in monetary technology, which is the most difficult to produce, since the creation of new units dilutes the value of existing units with all holders of this money. Since gold shows the best monetary hardness, it has repeatedly surpassed silver and other monetary metals throughout history. The competitive advantage of gold stems from the game-theoretic aspects of the evolution of savings.

Since gold is practically indestructible, almostall ounces mined throughout human history remain part of its existing supply. And because gold is relatively rare in the Earth's crust, the annual influx of gold supply is only a small percentage of existing reserves. Together, these qualities give gold the highest reserves-to-flows ratio of any monetary technology in the world.(to Bitcoin), which means that the inflation rate of his proposal is relatively low and predictable. It is thanks to better hardness that gold has become the dominant monetary technology in the free market.

Game theory says - and the history of markets proves– that anyone who can, for example, make money from mining silver by selling it at a price above the cost of mining has a direct financial motivation(saving value over time)save the proceeds in the hardestform of money available to him. As this harsh economic reality is faced by all market participants, this persistent motivation is driving a flood of capital investment from silver(or any other softer money technology)to gold(or the hardest form of money available). Thus, free-market competitionforces people to converge to a single means of saving and, therefore, favors hard money. This is not surprising, since the free market tends to converge to the best possible technological solutions to problems, discounting the rest. And just as money is an emergent property of a direct exchange (barter) economy, hard money is an emergent property of an indirect (monetary) exchange economy.

The physical nature of gold gives him howadvantages and disadvantages. Being a precious metal that has reached its monetary value in the free market, gold is a sovereign monetary technology, which means that its value, trust factors and transactional affordability as money are not subject to counterparty risks. In other words, gold is property money or a bearer asset. If someone gave you a gold coin and you put it in your pocket, then you became a participant in an irreversible transaction. The value of this coin is determined by the market, and the one with whom it is physically located is considered to be its full owner. No bank or payment intermediary can censor or cancel this free-market transaction. To store or spend your gold, you do not need to trust any third parties. Sovereignty is a unique property of bearer assets such as gold, silver or diamonds.

Conversely, if someone gives you a US dollar, you are accepting counterparty risk from the US government, which could dilute its value through supply inflation(as we see with all fiat currencies throughout history)or even cancel its value(as we saw when India demonetized 500 rupee banknotes). Also, if you received this US dollarthrough a payment intermediary such as PayPal or Venmo, you are also at risk of censoring, canceling, or tracking this payment. Even if you keep fiat currency in physical form, it is vulnerable to supply inflation, since the central bank can simply print more by stealing the value contained in it. By conducting transactions in anything other than bearer assets valued solely on the basis of free-market dynamics, you give your personal financial sovereignty to the currency issuer and / or other financial intermediaries.

Although physical nature gives it the propertysovereignty, it also has characteristic shortcomings. The main disadvantage is suboptimal divisibility. Because gold has such a high value-to-weight ratio, it is impractical to pay for coffee in gold coins, for example. It is this deficiency of gold that has historically given silver a certain utility, as it has a much smaller value-to-weight ratio, making it more practical for everyday purchases(due to higher divisibility and portability), while gold was mainly intended for settlements on large transactions.

The divisibility problem of gold was "solved" whenCentral banks began to issue paper currencies that were fully convertible into gold. Thus, users received a hybrid monetary technology that had the hardness of gold, while simultaneously offering even greater ease of transactions.(high divisibility and portability)than that of silver. Due to the erosion of its marginal utility by fiat currencies(and later - electronic abstractions of paper currencies), silver was completely demonetized, and as a result, the entire world money market evolved to the gold standard based on paper currencies.

Since the transactions were carried out in securedgold paper currencies, the worldwide gold standard led to the centralization of gold in bank vaults. These gold reserves became too tempting for governments and central banks to resist the possibility of expropriation, which was the catalyst for the practice of fractional reserve banking that is ubiquitous in the modern world economy. By creating more currency units than their gold reserves could support, governments began to remove the convertibility of currencies into gold, culminating in US President Nixon's unilateral decision in 1971 to permanently end the gold peg(although it was stated that this is a temporary measure).

Since all other currencies in the world were pegged toUS dollar, this final act of usurpation of financial sovereignty officially abolished the gold standard throughout the world. This death blow to monetary justice marked the beginning of an era“Political debt money secured by future tax revenues”that the law today makes us alluse - fiat currency. With fiat currencies, unlimited inflation has appeared, periodically flashing around the world. The term "inflation" comes from the Latin verb "inflare", meaning "inflate." This is a good description, since fiat currency inflation has only one possible outcome - depreciation.

After unlinking gold, the US dollar lostmore than 97% of its relative value. Printing fiat currency has become a favorite weapon of political leaders, allowing them to promote their programs and enrich themselves. It has also become the main way to finance endless wars. Over the past century, central banks - cunningly gaining power over a large part of world gold through coercion and confiscation - have experienced unprecedented mortality due to wars, rising inequalities of property and an ongoing series of economic ups and downs, driven by the continuous marginalization of paper currencies, leading to the emergence of fiat currencies. Now all semblance of monetary justice and sanity is destroyed, and citizens deprived of choice are forced to use the mildest form of money in history.

Soon after the last (and perhaps the largest)The economic downturn brought about by the fiat currency of the Great Recession of 2008, when the world's central banks actively printed fiat currencies to recapitalize their financial institutions through a shadow tax in the form of inflation, Satoshi Nakamoto released an open source software project. He, she, or they called him Bitcoin.

Bitcoin Basics

(Again, you can skip this introduction to Bitcoin if you understand its general functionality and economic properties).

Bitcoin can be presented as the first incarnationdigital sovereign money. His transactions are free from censorship, irreversible and final. In other words, bitcoins are the world's first digital bearer asset. The possession of bitcoins is carried out through the possession of a private key, which is an alphanumeric data string that can be stored in analog, computer or even human memory. Bitcoin’s absolutely rare money supply is based on the most fundamental commodity resource in the universe - energy.

Bitcoin reserves to inflows ratio, indicatorits monetary hardness, increases (inevitably) every 4 years, and will be twice as high as gold, after a downward adjustment (halving or «halving») inflation rate in 2024. Then Bitcoin will definitely become the hardest form of money in history. Bitcoin's uncompromising, apolitical monetary system is guaranteed by unbreakable cryptography, which ensures inevitability. Its unparalleled hardness is made possible by the ever-increasing complexity of its creation, requiring the expenditure of real energy in a process known as proof of work. This connection to economic reality is called “mining,” a reference to the difficulty of mining gold, and is the source of Bitcoin’s monetary justice.

Bitcoin is also the world's first asset withideal inelasticity of supply, since changes in its price do not affect the inflow of supply at all. This means that changes in the demand for Bitcoin can only be expressed in its market price. If the price of gold rises, the supply of gold will increase as new gold miners enter the market and new gold mining methods become profitable.(since manufacturers will be able to sell their product at a higher price)that will put downward pressure onratio of reserves to inflows. In the case of Bitcoin, no matter how the price rises, it is impossible to create an inflow of supply, in addition to a mathematically guaranteed and universally transparent emission schedule. In addition, a higher market price means better Bitcoin network security provided by mining resources. Like a vault, whose walls become thicker with the value stored in it, Bitcoin is becoming an increasingly secure monetary network with an increase in its market capitalization. The absolute immutability of the algorithmically guaranteed monetary policy of Bitcoin drives a favorable cycle that contributes to the expansion of its network.

Bitcoin's supply has absolute scarcity, which means its monetary policy(or money supply)fixed – only 21 million units will be created.Before Bitcoin, only time itself demonstrated the property of absolute scarcity. This means that its reserves-to-flows ratio will continue to rise and will eventually become infinite when the last Bitcoin is created sometime in the mid-22nd century. Bitcoin's monetary policy becomes the most reliable in the world as it is completely transparent and immutable.

Bitcoin is the opposite of government monetarypolitics - vague, opaque and changing depending on the whims of bureaucrats. In fact, each of us must choose: trust the management of the money supply to the whims of mercenary bureaucrats or the unshakable laws of mathematics. But no matter what we choose, most likely we will all have to accept the harsh reality of Bitcoin’s best hardness, as history teaches us that the economic consequences of hard money cannot be ignored. As we have already seen, in the free money market, the winner receives everything. It is critically important that Bitcoin is open, like colloquial speech, and is above the regulation and legislative restrictions protecting the monetary monopoly of central banks.

Thus, Bitcoin, the hardest form of moneyin history, directly competes with government money, the softest form of money in history. If Bitcoin continues to exist, it will likely continue to outperform gold and fiat currencies in the free market and its market capitalization will increase. Sooner or later, every holder of softer forms of money(be it gold or fiat currency)will face the harsh reality of gradual, andthen the sudden depreciation of his asset relative to Bitcoin's ever-limited supply inflow. Facing this harsh economic reality will be persistent, and each of us will have to deal with the same mathematical and market dynamics that have catalyzed the evolution of money throughout history.

Hard money selected in the free market,dominated during the first 4900 of the 5000 years of human commercial history, and everything indicates their return with the advent of Bitcoin. Before government intervention, the money supply was not a political subject, but was governed by game-theoretic principles - “politics”, going back to the laws of nature. Since governments introduced a monetary monopoly in the form of central banks, trust in their ability to prudently support the money supply has been steadily undermined. In other words, Bitcoin is the most reliable monetary policy in human history, undermining the most unreliable monetary policy in human history. One can count on the fact that the competitive dynamics inherent in the money market will be played out in the same way as it has been throughout history, and the money supply will again be determined by the free market, and not by central planners.

Armed with this basic knowledge of money andBitcoin, we will now delve into the various principles that make up Ray's worldview. In the process of this research, we will gain a more fundamental understanding of history, markets and Bitcoin. Let's start with Ray's most famous cultural innovation, the meritocracy of ideas.

Meritocracy of ideas

images: brammels.com

“In almost all cases, an approach to decision-making based on the meritocracy of ideas is better than traditional authoritarian or democratic decision-making.”

At the top of Ray's worldview is culturalThe paradigm he invented at Bridgewater is the meritocracy of ideas. This distinctive organizational style aims to remove obstacles to the free flow of information between people, such as egoism, hierarchy, and self-interest. A meritocracy of ideas strives for rationality and imperviousness to politics. As Ray writes:“We are looking at convincing ideas, not at the position. Preference is given to better ideas - regardless of who expressed them. ”. In essence, the meritocracy of ideas is freea market of ideas where they are filtered through a kind of semblance of natural selection. Instead of giving decision-making authority to a hierarchy of officials, the meritocracy of ideas seeks to cultivate an environment where ideas freely compete based on their merits:

The meritocracy of ideas is an open environment for the dissemination and combination of the most worthy ideas, free from artificial obstacles such as egoism, politics and hierarchy.

No wonder Ray, being a supporterfree-market capitalism, developed this approach to organizational structure, since it has proven itself as the most effective system for most people. In the 20th century (repeatedly) it was proved that free markets (capitalism) function better than markets with central planning (socialism). At the heart of any economic system lies the problem of properly adapting the distribution of resources to the circumstances that people face at every particular point in space-time. In other words, the main economic problem boils down to how best to distribute current knowledge of relative value and rarity. Knowledge is inherently extremely fluid: it is found in many minds and is constantly changing in accordance with the ongoing interpersonal interactions of individuals and their assessment (and revaluation) of market reality. The task of the economic system is to make possible the rapid, continuous and effective assimilation and dissemination of this knowledge in order to properly guide the actions of entrepreneurs.

Naturally, individual entrepreneurs are betterare generally familiar with the economic conditions characteristic of their time, place and industry. By seeing, hearing, and touching the operating factors and influences specific to their industry almost daily, entrepreneurs gain and maintain a deep understanding of the ever-changing conditions relevant to their chosen specialty. In other words, knowledge has a localized dimension: it constantly emerges at all points in space-time where the actions of entrepreneurs come into contact(including decisions and concessions)and economic reality(including cost and rarity). Thus, knowledge by its very nature is distributed among many minds. And free markets consisting of the actions of entrepreneurs guided by accurate price signals(more will be said later), contribute to a better assimilation and dissemination of this localized knowledge in the economy. Simply put, a free market actually integrates many minds into a single whole.

Capitalism is an economic systemusing a realistic, bottom-up approach to the distributed nature of knowledge. In a free market, each entrepreneur can freely act in his own interests in seeking profit. Faced with the ubiquitous reality of value and rarity, the actions of entrepreneurs, like the actions of a pilot operating an airplane using navigation devices, are guided by the corresponding market prices. Such is free-market capitalism: the seemingly chaotic variety of entrepreneurial decisions, price reconfigurations, and capital flows merging together, harmonizing individual and collective interests.

For example, imagine Larry, a farmer,growing lemons. Larry, as a farmer, is primarily concerned about the cost of fertilizers, land and water, and he carefully monitors the overall structure of his costs relative to the expected market value of his lemons crop, since maintaining a total income above total costs is necessary for the survival of the enterprise. If drought occurs, making water rarer, Larry will learn about this economic reality by raising the price of water, which, in turn, will force him to increase the selling price of lemons or reduce some other costs in order to maintain profitability. It is important that Larry can effectively respond to drought solely on the basis of rising water prices, without direct knowledge of the drought or its causes. When entrepreneurs buy and sell various production factors corresponding to their specialization, the knowledge in their mind takes the form of the prices of these factors and in this form is distributed to other people interacting with them in the market.

As new experience providesfeedback, changing the state of knowledge, entrepreneurs should be able to freely make decisions on their economic affairs, take risks in accordance with their considerations, and act without coercion or violence that can upset their affairs. The government must act as a defensive force, using its monopoly on violence to prevent violence in society, protecting the rule of law and private property. Unhindered free-market competition of entrepreneurs guarantees the survival and prosperity of those who bring something valuable to society. This principle of non-interference and mutual respect forms the essence of genuine free-market capitalism. The following excerpt from the skilful essay “I, the Pencil” poetically explains the magic of free markets:

“I, a pencil, are complexa combination of miracles: wood, zinc, copper, graphite, etc. But to these miracles that manifest themselves in nature, an even more extraordinary miracle is added: the configuration of creative human energies - millions of tiny know-how, naturally and spontaneously combined in response to human needs and desires without any human control! Since only God can create a tree, I insist that only God can create me. A person is capable of managing these millions of know-how no more than he is able to combine molecules to create a tree ... That is what I had in mind when I wrote: "Awareness of the miracle that I personify can help save the freedom that humanity is so sadly losing." For if you realize that these know-how is natural, they automatically organize themselves into creative and productive patterns in response to human needs and demand - that is, without any forced control - then you will receive an absolutely essential ingredient of freedom: faith in free people. Freedom is impossible without this faith ... The lesson I want to teach is this: creative energies should not have obstacles. Society should be organized in accordance with this lesson. Let the legislative apparatus of society eliminate all obstacles as much as possible. Creative know-how should flow freely. It must be believed that free men and women will respond to an invisible hand. And this faith will be confirmed. I, a pencil who seems so simple, by the miracle of my creation, I prove that this faith is as practical as the sun, rain, trees and earth. "

The complete opposite of the economic systemfree market capitalism stands for central planning (socialism). Central planning, as the name suggests, means managing the economy according to a single plan in a top-down, authoritarian and unnatural manner. In a socialist economic system, the central body owns and controls all production factors of society(capital, land and, ultimately, people). Therefore, this centralized authority(usually consisting of old, callous and pale people)self-confidently assumes that he has everythingthe knowledge and feedback necessary to form a fully (and continuously) accurate representation of the ever-changing economic reality in which society operates. Whereas the free market is a form of ideological competition(akin to the meritocracy of ideas), which should guide the actions of entrepreneurs in accordance with economic reality, central planning is more reminiscent of ideological totalitarianism(akin to red tape), associated with the traditional organizational hierarchy, where the merits of ideas do not receive enough attention and subordinates unquestioningly follow the orders of superiors.

Completely at odds with reality, socialisminsolvent, because it is a poor information system: when all production factors are in the same hands, the development of price signals needed to adapt to changing market reality is suppressed. This inevitably leads to scarcity, mass hunger and the decay of society, often associated with socialism.

If the 20th century taught us something, it’s thatfree markets are better than centrally planned in almost all respects. With the ability to function freely and naturally, markets consistently generate innovations that increase productivity, reduce costs and improve the quality of life of all members of society. Just think for a moment about how innovations such as the car, smartphone, and the Internet have increased our personal freedom and enriched our lives. Now think about how non-innovative and non-adaptive government functions such as transport management, the postal service and central banks are. Why, in the light of undeniable evidence in favor of a free-market economic system, we still tolerate the central planning of the largest market - the money market - an important issue that often eludes attention. Again, money is just a technology for moving value in space-time. Although this is an ancient (and, in a sense, largely due to propagandists, mysterious) social technology, it is not very different from everything else that we produce and distribute today through free-market mechanisms around the world.

If we return to the coherence of the free market with the meritocracy of ideas, we come to two useful formulas. First of all, the meritocracy of ideas consists of three key elements. As Ray writes:

“Meritocracy of ideas = absolute honesty + ultimate transparency + decision-making process taking into account competence”

Now let's translate this equation into a comparable free-market format:

Free markets = true price signals + transparent and reliable rule of law, private property rights and hard money + decision-making process based on skin at stake

With these equations in mind, let's nowdelve into each of their components to get a clear understanding of the meritocracy of Ray's ideas and its relationship to free markets. Having fully disclosed these concepts, we will delve into other principles that underlie Ray's approach to life and work, using them as filters to more fully examine the potential impact of Bitcoin on all aspects of life.

Let's begin our journey with the greatest source of freedom in the universe -truths.

Absolute honesty

Photos: Unsplash

"Any favorable result is based on truth - or, more precisely, on an objective representation of reality."

The first component of Ray's idea meritocracy isabsolute honesty. Its essence is that for orientation in reality and interaction with it, its clear perception is critically important. In markets it is often said that “price is truth,” which means that market reality is expressed and measured by the price of an asset at a particular moment. You may remember from economics class that the market price is the intersection of supply(objective quality)and demand(intersubjective, or opinion-based quality). In other words, prices are data packets that convey rarity information.(which is objective)and cost(which is intersubjective). Every entrepreneur’s decision to purchase orsales are determined by current prices and, in turn, inform the market of the state of its economic conditions, which then affect the similar decision-making process of all other entrepreneurs in the market. This is intersubjective value. These decisions are based on the actual availability of time, resources and know-how. This is an objective rarity. This feedback allows free markets to dynamically adapt, forming prices that accurately reflect economic reality.

Back to our lemon farmer Larry. Let's say a hurricane destroyed a significant portion of the lemons in California. A decrease in the level of supply of lemons with a constant level of consumer demand inevitably means an increase in the prices of lemons. Rising prices motivates farmers like Larry to grow more lemons, because now you can get more on the market for them. On the other hand, due to higher prices, consumers buy less acidic yellow citrus. When people respond to ever-changing incentives that reflect the ever-changing economic reality of supply and demand, free markets adapt to maximize productivity and minimize costs. Thus, price signals serve as a dynamic incentive system that balances deviations in supply and demand in the free market. However, to maintain their credibility, price signals should be freely expressed in money not distorted by government intervention.

A price signal turns economic complexity into simplicity; it compresses the diversity of market realities into a single working variable - the market price.

Accurate price signals are only possible whenthere is free competition in the market and it is not subject to government interference, such as price fixing, trade restrictions or legislative protection of the monopoly. Under genuine free-market capitalism, most markets are relatively free of such artificial obstacles, and price signals, respectively, predominantly reliably convey the truth. Lemon prices, for example, reflect the actual reality of supply and demand.(or rarity and value)at any given moment. However, the money market in the modern economy is very different, and these differences are reflected in all other markets.

Money is economic water. Just as water promotes the movement of organic chemicals in the life cycle, money mediates the exchange of goods, services and knowledge in the markets.

Money representing one of the parties practicallyof any economic exchange constitute the largest market in the world. In all major world economies, this market is monopolized by central banks, meaning that all forms of money that compete with fiat currency are prohibited (see E-gold). As Ray so aptly points out:“Feudal fragmentation is counterproductive and contrary to the values of the meritocracy of ideas”. But for some reason we see economic fiefs called nation states everywhere, which are incompatible with the free market paradigm(and therefore with the paradigm of the meritocracy of ideas). Even in the USA, where they pride themselves on free-market capitalism, the socialist structure of the money market is maintained. In this market, the following elements influence the price expression of money:

Sentence– the amount of money available for loans(loan capital).
Demand– the required amount of loan capital.
Interest rate– the price paid for the provision of a loan.

Central banks "control" the money market,controlling the supply of loan capital and setting the interest rate (price) at which this capital can be loaned. These privileges of the central bank are guaranteed by the state’s right to a monopoly, which protects their fiat mass-produced currencies from competition and eliminates their “skin on the line”. The skin at stake, an important concept of Nassim Taleb, is a property based on symmetry, a balance of incentives and anti-incentives: in addition to the possible gain, people should also be punished if something for which they are responsible goes wrong or harms others.

Skin at stake– cornerstone properlyfunctioning systems, both organic and inorganic, and the very essence of hard money. In the case of gold, the costs and risks of its extraction constitute disincentives that counterbalance the incentives of its market price. Central banks, through various schemes and manipulations, hijacked the gold market and developed an economic system where money could be created without skin in the game, allowing them to privatize seigniorage profits and socialize any losses caused by inflation. If decisions that have consequences are not made by people who depend on the results of the decisions made, then the system is vulnerable to complete collapse. Frequent collapses of fiat currencies confirm the unfavorable asymmetry of this model for citizens.

Most often, having direct financialmotivated to do so and without the risk of losing anything, central banks increase the supply of loanable capital and lower interest rates below natural levels, provoking an expansion of the money supply. It is important that expansion of the money supply does not create new wealth, since “money printing” does not inject any new productive factors into the economy, such as tools, factories, equipment, or human time. Instead, expansionary monetary policy merely redistributes rights to productive assets from their rightful owners to those who receive the newly printed money first—usually bankers, politicians, and other select few closest to the liquidity pipeline.(due to the cantillon effect). As Charles Holt Carroll said:

"Inflation is the surest way to fertilize the fields of the rich then the poor."

Money supply inflationis a violation of private property rights,because it redistributes wealth from its original owners (the many) into the hands of those close to the managers of the monetary system (the few). But wealth confiscation through the shadow tax of inflation is not the only collateral damage from money supply expansion. Entrepreneurs operating in such a soft money economy are easily misled by price signals inevitably distorted by centrally planned fiat currency markets.

To understand this, let's look at the world through the eyes ofLemon Farmer Larry: Encouraged by "cheap" loans offered by a local banker, Larry decides to take out a loan to expand his lemon farm. He calculated that if you borrowed enough money at 3%, it would increase farm productivity by 2.5 times, while increasing costs(including 3% paid each year to the banker)only 2.3 times. Larry expects these economies of scale(a positive 20% difference between a 2.5-fold increase in income and a 2.3-fold increase in costs)will directly increase his bottom line.So Larry goes to the banker to sign the loan papers and begins expanding his business. At first, everything seems to be going smoothly. Larry begins to gradually purchase the additional land, fertilizer, and equipment needed to grow and sell more lemons. However, things go awry when other lemon farmers, lured by the same prospect of profit, also take out loans to expand their farms. As more farmers take out loans and compete for the same assets to grow lemons, inflation sets in and prices rise, increasing the cost of growing lemons. Shortly after investing his entire loan into expanding his farm, Larry discovers that his costs have actually increased by 2.8 times as there are more dollars competing for the same production assets to grow lemons. Gradually and then suddenly, the money Larry borrowed to increase his profits begins to work against him as his increased capacity has eaten into his original profits and is now making losses.(a negative difference of 30% between a 2.5-fold increase in income and a 2.8-fold increase in costs, minus previous profit). At this point, Larry has no choice but tohow to raise prices, cut costs, refinance, sell a farm or declare bankruptcy. Under similar conditions, other projects in other industries, misled by artificially cheap loans, also begin to incur losses.

Simultaneous widespread ruindebt-laden projects like Larry's Farm is called a recession. The boom and bust cycle that we are all accustomed to in modern economies is an inevitable consequence of such centrally planned manipulations of the money market. In essence, this is no different from the shortage that occurs when the price of bread is fixed at an artificially low level(which led to mass starvation in the USSR). Artificially low interest rates do notprovide no benefit to the real economy, but only spread distorted price signals that encourage entrepreneurs to take on projects that cannot be profitable due to the (hard to predict) impact of inflation on costs. As in all well-functioning markets, the price of money must be discovered and continually adjusted based on the natural interaction of supply and demand. Attempts to centrally plan this market only distort the truth(price signals), provoke excessive lending and recession and cause (or at least exacerbate)cycle of ups and downs.

The more opaque the money supply becomes, the more opaque the price signals that they carry from entrepreneur to entrepreneur also become opaque.

The more opaque the current and futuresupply of money, the more entrepreneurs suffer from such myopia and the more the economic rationality of human action is suppressed. Distorted price signals like the ones Larry encountered are entirely a result of the opacity of central bank “managed” (read: manipulated) money supply. Central banks are only able to pull off such schemes because of their legal monopoly.(artificial obstacles to free-market competition)protecting their worst monetary technologies(fiat currencies)from competition with the best technologies(such as gold)On the market. Legislative protection of monopoly prevents pricing in the money market(natural interest rates). There is also numerous evidence ofactive suppression of the price of gold by central banks to protect fiat currencies (see Gata.org). Moreover, if monetary technologies were freely chosen and priced in the market, as was the case when gold demonstrated its superiority, then everyone could more reliably use money as a store of value, rather than being forced to move it further down the risk curve by investing in stocks. real estate and other scarce assets to protect their wealth from inflation, which further distorts prices. How distorted prices have become can be seen in the growing number ofunicorn companies.

Simply put, price istrue. Distorted money warpsthe veracity of price signals and confuses entrepreneurs. Thus, at the heart of the cyclical ups and downs of the economy is this distortion of fundamental signals, which incorrectly directs the actions of entrepreneurs. Under such conditions of monetary socialism, an attempt to build a business is akin to trying to build a house in a jurisdiction that is constantly changing the values of the metric system. As Taleb writes:

“I call this mechanism the“ Wittgenstein ruler. ” If you are not sure about the reliability of the ruler, then when measuring a table with a ruler, you can measure a ruler in the same way with a table. The less you trust the reliability of the line, the more information you get about the line and the less about the table. ”

Having an absolutely fixed offer, Bitcoinrestores the clarity of these economic signals critical for the proper allocation of capital, risk assessment and business planning. Universal and constant measuring units — seconds, meters, kilograms, etc. — are critical in economics and industry. The global commerce mechanism rests on this foundation of standardized measures: skyscraper builders and manufacturers of electronics and all kinds of other goods rely on the constancy of these measuring units, searching for components and materials around the world. Money is also most useful when their offer is constant. When bitcoin, being an extremely objective money, will have enough value to motivate users to spend it, the price signals expressed in it will carry more truth than any other money in history.

Bitcoin is a noise-free money channelunexpected fluctuations in supply, which inevitably means that it transmits the purest signals. Thus, Bitcoin is an ideal carrier of data packages on cost and rarity, known as price signals.

If we return to the idea meritocracy equation, thenIt can be seen that fiat currency contradicts absolute fairness and its corresponding truthful price signals in a free market. On the other side,Bitcoin is the most honest money, which you can imagine, since everythingits components, including the money supply, are available for everyone to view. In today's world of fake news, clickbait, and data theft, Bitcoin is a rare example of honesty.Central banks are the exact opposite. They hide the truth behind all kinds of intricacies.

If money is economic water, then the fiat currency is cloudy and opaque, while Bitcoin is crystal clear.

Bitcoin transparency has already shed a lot of light onsecretive central banking industry and its shady tactics, contributing to renewed interest in the Austrian school of economics and prompting an entire generation to ask:What is money?We can understand Bitcoin's impact on the world even more clearly by delving into the second pillar of Ray's meritocracy: extreme transparency.

Extreme transparency

Photos: Unsplash

"By extreme transparency, I mean providing every employee with the opportunity to receive almost any information."

Initially, capitalism was based on suchthe cornerstones of reliable rule of law, private property rights and hard money. These cornerstones accordingly provided people with non-violent dispute resolution, confiscation-resistant assets and a solid medium of exchange. With strong and reliable rules, entrepreneurs can freely “play the game”, accumulating capital for themselves and providing any innovations resulting from the process to the whole society. For effective work, entrepreneurs must know the rules of the game and be sure that they will not change. Imagine that a casino at its discretion each time changes the advantages of card combinations in poker. Without firm rules on which to build a strategy, any player will quickly leave the game. Stability in these areas is one of the main reasons why the US is so attractive for investment. For the most part, US courts function well and treaty law decisions are impartial. The exception, of course, is a violation of private property rights resulting from centrally manipulated money supply - in other words, the softness of the US dollar.

According to you, Ray:“The painful lesson I learned from thissituations: you can never be sure of anything. There are always risks that may occur at the most unexpected moment, and therefore it is better to assume in any case that you are missing something. ”. The American dollar is now considered by manyone of the safest bets in the modern world: it is issued by the world's largest economy, "backed" by the world's most militant tax office, and is almost universally accepted as a medium of exchange. Moreover, as a result of the unilateral decision(and the veiled threat of force)The US dollar single-handedly dominates the most important commodity resource of the modern industrial economy:oil. The problem of the apparent reliability of the Americandollar in the opacity of the rules governing its existence. How many dollars are there? How much will be released in the coming years? Who makes the decisions? Who makes money on their release? Despite the fact that today the dollar is a database maintained by the Federal Reserve System (FRS) that could make it available for audit, it refuses to do so.

Instead, the Fed determines monetary policy formeetings held behind a closed door and communicates its intentions using ambiguous and vague expressions. This opacity is counterbalanced by a whole army of macroeconomists, analysts, and market commentators, who sort out the details of central bankers' statements, including not only their words, but also tone, pitch, and even wardrobe.

Imagine a government agencytasked with determining the prices of, for example, cars based on uncommunicated criteria and behind closed doors. Ask any supporter of free-market capitalism if this is a good idea, and they will start spewing bile at you for even mentioning such a socialist way of running car production. Then ask him whether it would be a good idea for the same agency to control the prices of communications technologies such as laptops and smartphones. You will find the same response and (perhaps) a loud American battle cry in support of free market capitalism. Finally, gently point out to him that the Fed determines the price of the dollar(interest rates), the most valuable US export market, anddoes this based on uncommunicated criteria and behind closed doors. Although Keynesians have done an excellent job of convincing many of the mysterious nature of money, money is merely a tool for moving value through space-time and therefore must be valued and chosen in the free market(like everything else in a truly capitalist society).

Sunlight is the best disinfectant.When everyone can see the criteria and decision-making process, they become more trustworthy. In the case of Bitcoin, the algorithm that determines its monetary policy is completely transparent, meaning everyone can agree that the system is fair and impartial. Representing an open source monetary protocol,Bitcoin is, in essence, the principle of ultimate transparency in action.Like the management ones you developed, Ray.tools such as Baseball Cards, Dot Collector, Pain Button, etc., Bitcoin can be thought of as a tool for managing global monetary policy. As a machine of open source software and entrepreneurial interests, it does the work that central banks do today—maintaining monetary policy, achieving consensus on account balances, and facilitating international flows of value—without relying on the whims of the bureaucrats who control a government monopoly for money.Bitcoin is an extremely transparent alternative to the opacity of central banks. This is a lighthouse towering over industry,deliberately shrouded in darkness. A correctly understood, superior transparency of Bitcoin inevitably improves its reliability. And if this is understood, then it will be impossible to deny it.

Bitcoin monetary policy (inflow scheduleoffers) the most reliable in the world, because it is completely transparent and unchangeable. Bitcoin is the opposite of government monetary policy - vague, opaque, and changing depending on the whims of bureaucrats.

In the context of Bitcoin's idea meritocracy equationrestores the resistance of money to confiscation, which gives its users a stronger ownership right compared to fiat currency. Importantly, Bitcoin also restores the missing third cornerstone of capitalism in an otherwise free world: sound money. As an economic commodity subject to free market monetization, with supply rigidities superior to gold, Bitcoin resurrects the triad of free market capitalism. It's worth repeating again:Bitcoin is completely honest and extremely transparent..

You, Ray, say:“When people hide nothing, they get rid of stress and are able to build relationships based on trust”. Transparency and reliability are the essenceBitcoin's monetary policy. It is truly unique in that its offer is absolutely predictable and has absolute rarity. Bitcoin's most reliable monetary policy in history surpasses the current most unreliable monetary policy in history. He quickly confirms his superiority over central banks in all respects - reliability, predictability, audibility, profitability and resistance to censorship and manipulation - which further undermines the competence of central bankers, which decreases with each printed dollar.

Competency-based decision making

“When you are responsible for making a decision, compare the opinion of the group (given competence) with what you think yourself.”

When it comes to money, track recordplays an important role. Human trust gradually converges towards the money with the most stable exchange rate - in other words, towards that which best maintains or increases purchasing power over time. Gold definitely takes the cake in this regard, as it has over 5,000 years of history of reliable rarity and, therefore, retention of value. Over the past century, about an ounce of gold could buy an expensive men's suit, while the price of the same suit in dollars was constantly rising. The best-performing central bank fiat currency in history is the British pound, which in its 317 years of existencelost only 99.5% of the cost. If we talk about saving value, thengold has a reliable track record, while fiat currencies are much less competent in this regard. The hardness of money, one of the three cornerstones of free-market capitalism, was almost completely compromised by state monopolization.

For optimal performanceFree market capitalism's three cornerstones—the rule of law, private property rights, and sound money—must be consistently applied to all market participants. While the rule of law and property rights are (mostly) immutable in Western societies, the opposite is true with a centrally planned money supply. Without reliable information about the main aspects of monetary management(see above for extreme transparency)entrepreneurs are forced to rely on othersmeans of protecting your wealth from theft or depreciation. Fiat currency users have, at best, limited assurance that their wealth will be protected from confiscation, censorship, inflation, or counterfeiting.

Fiat currencies held in banks are at risk of confiscation or payment censorship by authorities. When physically stored(e.g. under the mattress)fiat currencies are still subject to value dilution through inflation(legalized version of counterfeiting). Although fiat currencies have some physical protection against counterfeiting(illegal version of inflation), this is a cat and mouse game where counterfeiters and authorities are constantly trying to outwit each other in the field of currency verification technologies.

Bitcoin, on the other hand, is completely sound money, providing strong guarantees to its users. It is resistant to confiscation, since only the owner of the private key(alphanumeric data string)can provide the digital signature requiredfor spending funds. Bitcoin transactions cannot be censored due to the peer-to-peer and open nature of its software architecture. Complete immunity from unexpected changes in the money supply is guaranteed by uncrackable cryptography and the economic interests of the miners who ensure the security of the network. Finally, because the rules governing Bitcoin can be verified by anyone, anywhere, at any time, it is completely resistant to counterfeiting. Its extremely transparent nature makes Bitcoin the most reliable monetary technology in history. Monetary opacity always leads to moral hazard on the part of politicians.

With decades of experience seeing these risks pay off first-hand, Ray says:“The work of a politician is very difficult even during a period of economic prosperity and becomes almost impossible during a crisis, and outright misinformation in the media makes the situation even worse”. So the question begs: why let politicians dictate monetary policy? Proponents of free-market capitalism do not make such concessions in any other market. We do not trust the board of governors that would tell us how many cars to produce or at what price to sell laptops every year, so why should we trust central banks to determine prices and production goals in the world's largest market? As with all production decisions, a free market — representing the collective interests, intelligence, and wisdom of all economic participants — is always the best generator of (low) competent prices, innovation, and consumer satisfaction.

Therefore, most wars in the world were fought forgaining control of this coveted crown. And in order to control monetary policy, it is necessary to dominate the initial layer of monetary sovereignty on planet Earth - gold. For example, during World War II, North America became a strategic geographic safe haven for European gold reserves to save them from Nazi looting. At the end of World War II, when the United States finally intervened to destroy war-torn opponents and proclaim itself the winner, the Bretton Woods Conference was held, at which the rules of the global economy were rewritten by the new self-proclaimed king - America. This conference actually approved the Fed as the world central bank, and the US dollar as the world reserve currency.

Even those who believe in monetary socialism find it difficult to defend the competence of central bankers. You, Ray, say:“Assess the competence of people, which depends on their ability and willingness to say what they think. Always consider their professional merit. ”. If we talk about abilities, then centralbankers arrogated to themselves virtually unlimited freedom to manipulate the supply and price of fiat currency. However, they applied these privileges based on (largely) uncommunicated criteria and are known for their veiled communication style. In other words, central bankers are not too willing to say what they think(which violates the first requirement of the meritocracy of ideas), and the criteria for their decision-making are shrouded in lies. As Michel Montaigne wrote:

“If a lie, like truth, had only one thingface, then our position would be better. For then we could take for the true opposite of what the liar says: however, the opposite of truth has hundreds of thousands of forms, an indefinite and limitless field. "

As for merit, the central bankers,perhaps the world record for the most terrible history of indicators belongs. Since reputation cannot be printed and must be earned in an honest life, it is not surprising that central banks were not very successful in this regard. Historically, all fiat currencies have shown a tendency to depreciate, which each time only further discredited this money model. The Fed, which was entrusted with price stabilization and employment maximization, failed in both tasks, especially after the unlinking to gold in 1971. Below you can see the graph of growth in the consumer price index in the USA since 1775:

Dependability-dependent money supply reliabilitycentral bankers, is proportional to the ability of massively produced constantly softening fiat currencies to save value. Bitcoin's factual money supply is just as reliable as mathematics and thermodynamics, ensuring the immutability of its registry. Opinions are like soft money: they can easily be diluted and distorted. Facts are like hard money: they are rooted in scientific reality. If in a simple way: do you think it is better for the largest market in the world to be controlled by opinions or facts? Buying bitcoins is buying insurance from abuse by central bankers.

And most importantly, how can one believe in the effectiveness of central bankers if they have absolutely no skin on the line? As Taleb says:

"Systems do not learn because individuals learn, -This is a modern myth. Systems are trained on a collective level through a selection mechanism, discarding those elements that reduce the fitness of the whole, provided they have skins at stake. Food in New York is getting better from bankruptcy to bankruptcy, not because of the training curve for cooks: Compare the quality of food in mortal restaurants and immortal government canteens. In the absence of a filter in the form of a skin at stake, the evolution mechanism does not work: if someone else dies in your place, the system will sooner or later collapse due to accumulated asymmetric risks and inadequacies. ”

Completely divorced from the consequences of theiractions that are entrusted to citizens, central bankers are interested in maintaining the status quo in order to maintain their jobs and “prestige”. Money, the largest and most important market in the world, simply cannot evolve without practitioners subject to real and instant consequences and concessions. Simply put, if you do not have the skin on the line, then you are incompetent. That is why Roman architects had to stand under their monolithic arches when scaffolding was removed. Such a (deadly) anti-stimulus for poor performance worked wonders, and some of the oldest arches built in this way still stand after more than two millennia. If central bankers fell under the influence of the destruction that they inflict on centrally planned economies when their decisions are ineffective, then perhaps the world would still adhere to the gold standard and the need for Bitcoin would not be so strong.

Central bankers posing as healerseconomic crises are actually the creators of these disasters. Quantitative easing, distressed asset relief programs, zero interest rate policies and other interventions have severe iatrogenic consequences for society. And the harm is further compounded by the agency problem.(central bankers do not have skin on the line, and therefore there is a conflict of interest when managing the money supply).

Thus, if we talk about the formulaMeritocracy of ideas, it is obvious that central banks do not satisfy the third component - the decision-making process taking into account competence. Instead, the prevailing economic order today contributes to the fact that the least competent people control the global economy. If we translate this into the context of the free market formula, we expect such a result, because without making decisions taking into account “skin on the line”, politicians suffer from the agent problem and become powerless. In this sense, Bitcoin is the exact opposite: the system is controlled by node operators and miners who have the skin on the line and are therefore more competent in decision-making, like the ancient architects who stood under their newly built arches.

Recall that we started with the equation:

Meritocracy of ideas = absolute honesty + extreme transparency + decision-making process taking into account competence

Translated into a free-market format, it looks as follows:

Free markets = true price signals + transparent and reliable rule of law, private property rights and hard money + decision-making process based on skin at stake

Based on what we have already learned, we can also translate these equations into the context of central banks and Bitcoin:

Central banks = untruthful price signals +transparent and reliable rule of law, marginalized private property rights (due to violations through inflation) and soft money + decision-making process taking into account the agency problem

Bitcoin = (absolutely) true price signals +transparent and reliable rule of law, private property rights and (absolutely) hard money + decision-making process taking into account “skin on the line”

Obviously, only Bitcoin is 100%corresponds to the free market equation, while the fiat currency almost completely does not correspond to it. Since the equation of the free market is equivalent to the equation of the meritocracy of ideas, we can conclude that Bitcoin is fully consistent with the meritocracy of ideas, as Ray formulated it, while the fiat currency is not.

Thus, thanks to mathematics, Bitcoin is both a free market and a meritocracy of ideas.

So, Ray, if you are upfront about your principles, how can you not believe in Bitcoin. You write:“When the interlocutor says:“ I am convinced that ... ”- ask him:“ What data do you rely on? On the basis of what principles of thinking have you come to your conclusion? ”So let me ask you, Ray:After Bitcoin's stellar performance for over a decade (more than 99.98% uptime, no hacks, evolution into the most secure computing network in the world, market capitalization of nearly $200 billion and total transaction value of over $1 trillion), based on what data? and the principles of thinking you came to your conclusion about Bitcoin?

I can assume that, like many smart people,you may have dropped Bitcoin from the very beginning. In accordance with one of your favorite principles, I ask you to be open-minded about Bitcoin, and then you will see that he himself is the embodiment of open-mindedness. So, let's delve into this aspect.

Open-mindedness

“If you are able to admit that you have"Blind spots" and that others can see something better than you, that the threats and opportunities that they point to do exist, your chances of making effective decisions increase markedly. "

Open-mindedness is a key aspect of howmeritocracy of ideas and evolution. This concept is closely related to filtering and multivariance, with a kind of non-cognitive mind inherent in natural systems that deal with many possibilities, which allows them to “learn”, accepting what works and discarding the rest. An interesting paradox is found in the fact that this openness is the source of the opaque logic of nature. As Taleb writes:

“Evolution takes place through non-directional,convex bricolage or adjustment, which is essentially invulnerable. Evolution realizes potential stochastic benefits through constant, repetitive, small, localized errors. What we call science is developed from top to bottom by the command-control method, and this is the exact opposite of evolution: interference with the effect of negative bulge. In other words, people realize small obvious benefits, at the same time risking losing a lot ... People should not be given explosive toys - such as atomic bombs, financial derivatives or means to create life. ”

Prejudice, on the other hand, representsrigid fixation on existing knowledge, which excludes the possibility of learning, innovation and evolution. Without a culture of open-mindedness, organizations are unable to properly learn and adapt and begin to lose to more fit competitors. Isolated from market discipline, thanks to their monopoly protected by law, central bankers become weak-witted, and their money technologies become fragile and poorly adaptable to changes in user demand.

Open-mindedness is a constant statemind, a clear awareness of multivariance and freedom to filter, change your mental or organizational models, reform your previous assessments of conditions on the basis of new information or a new look at old information (Bayesian conclusion).

Here we see the ineffectiveness of the centralplanning from another perspective: moving in accordance with a single, rigid plan, the economy follows a course devoid of opportunities, and becomes blind to multivariate and, therefore, biased. Bias is fatal to institutions, innovation and individuals. As legendary physicist Richard Feynman said:“It is impossible to be sure of your innocence, you can only be sure of your innocence”. That is why open-mindedness is important in all areas of human activity.

Open-mindedness in the tech industrymanifests itself in the form of open technologies that anyone can learn, change or improve. Ray applies this principle to Bridgewater's corporate culture and the "management tools" his team uses to make organizational and investment decisions. Bridgewater's management tools are open by design, allowing them to continually adapt to best serve their employees. Ray says:“Since the logic of creating algorithms is open to everyone, everyone can evaluate its quality and justice and make their own proposals”. Taking to these management toolsthe principle of ultimate transparency, Ray stimulates a culture of open-mindedness. Tools are open to criticism and change, just as in his cultural paradigm, ideas are evaluated openly, solely on the basis of their merits. This approach ensures that everyone will understand why the organization is acting in one way or another and whether the tools contribute to the achievement of its goals.

In essence, practicing open-mindedness helpsthe Bridgewater team to act in accordance with the meritocracy of ideas. Bridgewater is effectively structured as an open organization whose team learns and develops“Fighting markets, thinking independently and"unconventionally regarding their investment decisions, making mistakes, discussing them in order to get to the bottom of the reason, coming up with new, more effective methods of operating activities, systematically making changes, making new mistakes, etc.". Regardless of whether you are aware of this, Ray, you have cultivated a culture based on the ethics of open technology.

Open technologies are available for testing, andtherefore, the need for trust in them is minimized. Openness allows you to absorb feedback from multiple sources to adapt in response to changing market conditions and user demand. Such technologies are completely transparent and auditable, which minimizes the need to trust other people when using them for interaction. Minimizing trust is one of the main advantages of gold, this ancient open monetary technology. Because trading partners did not always trust each other, they could rely on natural laws to limit the supply of gold and use time-tested methods to verify its authenticity(until this function was started, and then repeatedly violated, minted coins)that minimized the need to trust contractors.

Closed technology is completeopposite. Their users must trust the supplier, they are inaccessible to audit, and therefore, poorly adapted to market conditions and user demand. In the case of fiat currency, the supplier is a monopolist, and, as many people know from the fundamentals of the economy, the monopolist seeks to maximize profits at the expense of everyone else. Fiat currency is a closed technology that is legally protected from audit and competing monetary technologies. Such opacity and market isolation not only slows down the pace of innovation in monetary technology, but also undermines the reliability of fiat currencies and feeds monopolists.

You, Ray, say:“The process of adaptation with the fast trial and error method is priceless”, – and this is the very essence of openness. Bitcoin, being open source, is like a language. Its source code and transaction history are completely transparent and can even be printed on paper(interestingly, they are protected under the first amendment to the US Constitution). In addition, Bitcoin is supported by the World Wide Webvolunteer programmers. These programmers have self-interest in the sense that they almost always own the coins themselves and share the philosophy of Bitcoin, so improving its functionality and expanding the network benefits them. The work of these programmers is very similar to Ray's approach to organizational development, where he creates systems that encourage others to"Honestly talk about what they thinkit’s productive to discuss what they disagree with, be prepared to change their minds and have approved ways of making decisions, if the contradictions cannot be resolved so that you can move on without negative emotions ”. Again, Ray, your approach to culture and governance is consistent with the philosophy of open technology.

Ray why do you think Bridgewatershould take advantage of open tools, but should society suffer from closed fiat currency? Shouldn't citizens of all countries have access to the most open and high-quality set of characteristics of the most important technology in their life - money?

Bitcoin's openness is key to its competitivenesssuperiority as money. Over the past decade, a global army of volunteer programmers has significantly improved the utility of the Bitcoin network. But - and this is important - these programmers cannot change the rules of Bitcoin through an ingenious implementation of the social contract. Additionally, since the Bitcoin network is "run" by all the nodes, this is consistent with Ray's advice:“Make sure that people who lead others are open to questions and comments from subordinates.”. Constant analysis and feedback fromusers, each of whom has a skin on the line and participates in the management, ensure that Bitcoin always functions optimally or almost optimally. Conversely, the fiat currency has almost no innovation since its inception.

Due to its open nature, bitcoin sometimescalled the "internet of value." Just as the Internet is a set of open data exchange protocols, Bitcoin is an open value exchange protocol. Openness ensures that the Bitcoin code cannot be manipulated that is beneficial to someone to the detriment of others. Fiat currency is the exact opposite. Its central planners, at their own discretion and with practically zero costs, can deprive the money network of value by increasing its supply (such "technological loopholes" are possible only in fiat currency). As for how to destroy Bitcoin, the analogy of the “Internet of value” also leads to a useful comparative question: how can you permanently completely disconnect the Internet around the world? Governments have extensive experience in eliminating centralized structures, but the decentralized nature of the Internet and Bitcoin is in many ways superior to the violent and coercive power of governments (which is why America cannot regulate Bitcoin).

Bitcoin's openness also makes it antifragile, meaning hostility only hardens it. You, Ray, say:“The key to success is knowing how to strive for more and how to lose with dignity”. Open, decentralized digitaltools such as Bitcoin are unique in their ability to organize human activities without a central coordinator on an unprecedented scale (“strive for more”), and also become better in the face of technical setbacks (“worth losing”). The stress for Bitcoin may be external attacks on its network or attempts to fork its blockchain. After 11 years of almost perfect work in a ruthlessly hostile environment, Bitcoin received a lot of scars (Bitcoin Cash, SegWit, etc.). Every time Bitcoin withstands an attack, it strengthens its reputation as safe, reliable, and unchangeable.

Bitcoin is a technology that has gainedvalue in the free market based on its reliability as money. Unlike fiat currencies, which survive solely through government protection from competing technologies, Bitcoin survives on its own merits. Bitcoin is a free market for turning electricity into digital gold - it beats monopoly money around the world and makes the money market free again(as we saw in the Gilded Age). Just as the Internet has surpassed intranets, Bitcoin is superior to fiat currencies due to its openness and better monetary properties.

You, Ray, say:“In order to adhere to the principle of absolute open-mindedness, you must allow so much that you can make mistakes that it should encourage others to tell you about it.”. Unhindered competition drivesothers to prove your wrong in the market by discovering better or cheaper ways of producing or performing certain actions - and this is the very essence of free-market capitalism. In truly free markets, individuals are the most sovereign and ruthlessly pursuing their needs, so entrepreneurs should always strive to provide high quality at a fair price. Thanks to this relentless process, free markets generate quality, innovation and profitability. In monopolized markets, the opposite is true - they maximize the profit of monopolists at the expense of consumers through lower quality (low level of innovation) and higher prices (market distortions, egregious commissions and confiscation of value due to inflation).

You, Ray, talk about open technologies:“Of course, no system is perfect, but this one eliminates bias and its conclusions are more objective than the decisions of an authoritarian big boss.” Here you describe the superiority of Bitcoin's immutable monetary policy, which is completely free of arbitrariness, and its focus on incentives(people are motivated to use Bitcoin)over the arbitrary monetary policy of central banks and its orientation towards anti-incentives(those who try to compete with fiat currencies or refuse to use them are punished). In addition, the institutional network surroundinga central bank is so complex and incomprehensible that it makes it prone to insider speculation, accumulation of systemic risks and collapse. Such a confused and closed system is bureaucratic, inefficient and fragile.

So, open-mindedness is the key to adaptability and,hence the longevity of natural systems. Bitcoin, like open money, is excellent in this regard. And money arose as a natural market phenomenon long before governments.

Faith in nature

“Whenever I observe something in nature,what seems wrong to me (or humanity), I proceed from the assumption that I am mistaken, and try to understand why nature did just that and what is the rational kernel in it. ”

Ray's observation here is consistent with the wisdom of Taleb, who said:“Everything that Mother Nature does is true until proven otherwise; everything that people and science do is wrong until proven otherwise ”. Obviously this is a convictionfiat currencies - unnatural money born from unnatural laws. Gold and silver, on the other hand, became natural money precisely because of natural laws that were not subject to human intervention and gave them the properties of good money. Like the (predominantly) uncompromising laws governing gold, the rules governing Bitcoin are based on the (absolutely) uncompromising laws of mathematics, the fundamental language of nature.

You, Ray, say:“Nature acts in the interests of the whole ecosystem, not individual species, and most people judge what is good and what is bad, solely from the perspective of how this will affect them”. This is precisely the problem when people are entrusted with managing the money supply: they are directly motivated to produce more and more money, to use it to buy hard assets(such as land, gold, and business)and transfer production costs(dilution of cash value due to supply inflation)to all other market participants who are required by law to use fiat currencies, whose value is constantly being compromised.

Being a social technology, no lessfundamental to human interaction than colloquial language, money, in order to provide the highest utility to most people, must be governed by rules that cannot be manipulated so that one is beneficial to the detriment of the other. Paradoxically, to make money useful to most people, managing their offer should not be in anyone's hands. That is why gold has become money in the free market and even today remains the only tool for final settlements between central banks. Gold, the hardest natural money in the world, remains the main sovereign money technology on Earth. From the accounting point of view, where assets = capital + liabilities, gold is net capital, since physical liabilities do not involve any liabilities with gold. Fiat currency, in contrast, is based on debt, as it requires trust in the issuer, its tax authorities and payment intermediaries.

Simply put, gold is the king of the naturalof money. It acquired the role of money as a result of free-market processes of a natural nature. Fiat currencies, on the other hand, are artificial. They can exist only in economies where people are forced to use them because of laws on means of payment, control over the movement of capital, confiscation actions and other restrictions that suppress competition in the money market. The existence of fiat currencies is due to human egoism, greed, a thirst for control and protectionism.

Whereas central banks are turninghuman greed in a race to depreciate fiat currencies, which will inevitably destabilize the economy, Bitcoin turns greed into the stability and reliability of the network. Bitcoin ingeniously combines the personal interest inherent in human nature with electricity and turns them into an undeniable registry and expansion of the monetary network. The Bitcoin network is the embodiment of the free market, where any entrepreneur with access to reasonably cheap electricity and the necessary equipment can freely enter the market as a miner, which undermines the global monopoly on the money market.

In this sense, Bitcoin is a fractal freemarket. Its network of miners freely competes for the production of money with absolute rarity, existing beyond the reach of supporting monopoly artificial means, thereby transferring its free-market characteristics to the global money market and providing people with an alternative to monetary socialism.

Free markets embody the principle of naturalself-organization, where the pursuit of individual interests turns into an improvement of collective interests (counteraction to iatrogenic, as Taleb would say). This spontaneous order generated by free markets has existed to one degree or another since mankind began to engage in trade. Free markets are one of the most important organizing principles in the world, as they turn greed into higher productivity, lower prices and a stream of innovative ideas. Why then endure a proprietary money market? You, Ray, say: "Most people pretend to act in your best interest, doing it on their own." This is precisely what private owners of central banks have been doing for more than a century - acting in their own interests under the auspices of a state-protected monopoly and to the detriment of everyone else. In this sense, central banks are perhaps the most successful scam of this magnitude in history.

In nature, to eat, you need to spendenergy. Plants turn sunlight into sugar, herbivores spend a significant part of their life on their feet, eating grass, and predators periodically exert all their strength for hunting. According to the first law of thermodynamics, there is no free lunch in the universe. If a different impression is created, then you can be sure that hidden risks are accumulating, since nature inevitably acts in the interests of the whole ecosystem and sooner or later will restore equilibrium - suddenly and sharply, if the imbalance is large enough. Thanks to their printing presses, central banks have been enjoying a “free lunch” for more than a century, where asset control has been constantly redistributed from the masses to the select few. Bitcoin is a (relatively) sudden monetary phenomenon and an economically sharp force that opposes bank cartels and restores the balance of the global economic order.

Bitcoin mining, often demonized astoo wasteful, in fact, can have a very beneficial effect on world ecology. Although this has not yet been convincingly proven, there are studies supporting this statement, and deductive inferences indicate its correctness. Here are excerpts from a publication on this topic:

“Since Bitcoin mining is extremely mobile incompared with the general demand for electricity, it can actually have a beneficial effect on the constrained global renewable energy resources ... Whereas the traditional industrial and household electricity demand is largely geographically linked - whether it is proximity to cities, resources, transport routes, etc. ., - Bitcoin mining can be performed almost anywhere ... This means that some of the most promising renewable energy resources remain unused due to their remote location ... Mining Bitcoin is a ruthless race for the cheapest electricity, and therefore - as Dan Held and Nick Carter have analyzed - he is the buyer of electricity of last resort ... Thus, Bitcoin mining - offering the possibility of direct monetization of electricity regardless of the connection to the power grid - can play an important role in renewable energy development cycle. ”

What does the buyer of last resort electricity mean? Nick Carter gives a useful example:

“The Bitcoin network is a global power system,reducing the burden on cramped assets and introducing new ones. Imagine a three-dimensional topographic map of the world, where areas with cheap energy are located lower, and with a road - higher. I imagine Bitcoin mining as a glass of water poured onto the surface and leveled it. ”

In this sense, Bitcoin mining is alsonatural, as the free-market processes of which it consists. Instead of heating the oceans, Bitcoin mining can actually help us cleanse them. Ray, I am sure that such a prospect should inspire you as a lover of the oceans. Perhaps you just didn’t get sufficiently familiar with the nature of this new money to understand their potential environmental impact? In the end, Bitcoin mining is one of the most efficient energy applications in the world, and in fact, increasing the collective energy efficiency of mankind is the main goal of the global economy.

In the deepest sense, as Brother Hass says, Bitcoin- this is nature, a new form of life - a digital organism. Ralph Merkle, the famous cryptographer and inventor of his "tree" data structure, described Bitcoin in an interesting way:

“Bitcoin is the first example of a new life form. He lives and breathes on the Internet. He lives because of his ability to pay people to maintain his life. He lives because he provides a useful service for which people are willing to pay. He lives because anyone, regardless of location, can run a copy of his code. He lives because all running copies constantly communicate with each other. He lives, because any distorted copy is quickly and without question rejected. He lives because he is extremely transparent: anyone can look at his code and see what exactly he does.

It is impossible to change. It is impossible to argue with him. It is impossible to crack. It is impossible to distort. It is impossible to stop. It is impossible to even interrupt.

If nuclear war destroys half of our planet, it will continue to live unchanged. He will continue to provide his services. He will continue to pay people for the maintenance of his life.

The only way to disable it is to destroyall servers on which it is running. And this is difficult, because there are many such servers, they are located in many different countries and many people want to use it.

The only realistic way to destroy it ismake the services they provide so useless and outdated that no one wants to use it. So outdated that no one wants to pay for it and keep it on their server. Then he will have nothing to pay, and he will die of hunger.

But while there are those who want to use it, it is very difficult to destroy, distort, stop or interrupt. ”

Bitcoin, like a hammer or a wheel, isa technology that lives for the same reason as any other technology: it is useful for those who use it. Bitcoin can be understood as a spontaneously organized protocol, acting as a new form of non-inflationary money and an unhindered payment channel. Structurally, the Bitcoin network reflects a characteristic phenomenon that is ubiquitous in nature - the archetype of a decentralized network.

Naturally occurring archetypeThe decentralized network was preceded by historical innovations that caused paradigm shifts, such as the railway system, telegraph, telephone, electricity, Internet, social networks, and now Bitcoin.

Although nowadays fiat currency is often mistaken for"Natural order of things" (erroneous form of monetary actualism), in fact, everything is exactly the opposite. You, Ray, say:“To succeed, you cannot compromise where compromise is impossible.”. How can one justify such a compromise asthe abolition of convertibility of dollars into natural money, or such a strong dilution of the value of fiat currencies? The only purpose of such fraud is to give bankers, bureaucrats and politicians the opportunity to expropriate someone else’s, not to repay their debts and transfer real costs to ordinary citizens. Fiat currency, far from a natural form of money, came to world domination at the end of a long causal chain, rooted in a flawed system that encourages people to narrow their time horizons and maintain a zero-sum mentality.

Chains of cause and effect

“I am convinced that all events occur due to a causal relationship that repeats and changes over time.”

Different institutional structures andmotivational systems cause different human behavior. Fiat currency is the latest and most extreme act of money supply manipulation, a practice that has been indulged in by everyone throughout history who has had the opportunity to do so. Interestingly, coinage arose due to the lack of monetary metals - the difficulty of verifying their value and authenticity. In the old days, entrepreneurs trusted the “official seal” depicted on the coin(usually with the emperor’s pathetic face)that made the need to check money inof each transaction, in the need to trust a certificate of monetary value certified by the state seal. Almost everywhere where coins began to be minted, the rulers soon indulged in “cutting coins”, periodically collecting coins from the population and re-melting them into new versions with the same face value, but with a lower content of precious metal, leaving themselves the remainder for the purpose of enrichment. People, of course, were indignant at this, since the expression of their preference for hard money was suppressed. But this was to be expected from central planning.

When it comes to economic systems, free markets make consumer preferences irrefutable, while central planning makes them inconsequential.

Like modern inflation, coin clippingrepresented a method of hidden taxation of the population through currency depreciation. The notorious Roman Emperor Nero was the first to indulge in this deceptive practice. By doing this, he created a dangerous precedent, which was imitated by many subsequent emperors.(and later central bankers)in different eras and in different empires.Every time money's ability to store value was compromised by coin clipping or supply inflation, sooner or later the society it held together would begin to collapse. Centralization of control over the money supply has always led and will lead to an increase in wealth inequality, since those few(rulers, politicians, central bankers), which can take away the value of many (citizens), always succumb to this temptation. Sooner or later, such parasitism leads to social unrest and, ultimately, to a coup.

What is interesting when the problem of checking monetarymetals transferred the function of monetary trust to state coins, this gave the demagogues the means to violate the trust that their “official seals” inspired, with the aim of enrichment. If there had historically been a technology sufficiently resistant to counterfeiting and confiscation (like Bitcoin), then governments would probably never have become such a significant institution in human society. It may be hard to believe, but it is. The lack of reliable money led to the heyday of states. The emergence of perfectly reliable money can make the state model obsolete as a side effect.

Money is the mechanism by which peopleevaluate their time and share it. This is a trust structure through which people weigh opportunity costs and decide where to invest their final energies and capital. When rulers manipulate this mechanism of interaction, societies that use softening money begin to decompose, as confidence in the currency is undermined, which impedes trade and reverses the division of labor. As a result, prices rise and an economic crisis ensues. Wrongly directed into a centrally planned economic system instead of a free market, greed becomes self-destructive.

Greed destroys fiat currencies, but at the same time ensures the security of the Bitcoin network.

Instead of learning the lessons of history, central banks have taken monetary parasitism to unprecedented extremes. According to you, Ray:"From 1950 to 1980, fluctuations in nationalof debt, inflation and economic growth went up in waves, when each subsequent wave turned out to be larger than the previous one, especially after the dollar lost gold security in 1971 ”. Uniform movement of these economic forceswas not accidental. Having unlinked gold in 1971, Nixon directed the world at an irreversible rate, characterized by ever-greater recessions and rounds of quantitative easing in an attempt to compensate for them. This mortal blow to the gold standard pushed the world into uncharted monetary territory and caused many economic and social problems. Here we mention only a few of them.

When the function of money as a means of savingdisrupted, people began to use their housing for this purpose, which contributed to the emergence of a real estate bubble that burst in 2008 with disastrous consequences.

Because money is divorced from reality, control of productive assets has gradually shifted into fewer and fewer hands with each economic recession and each round of money printing.(due to the cantillon effect). This has led to an unprecedented mismatch in productivity growth and wages.

The discrepancy between productivity and earnings meant that the richest were getting more and more value at the expense of the poorest.

Similar distortions and redistribution of wealthare the inevitable consequences of monetary central planning. By manipulating the price of money (interest rates), central banks encourage excessive borrowing, inefficient capital allocation, and market distortions. Keeping interest rates below natural levels(at the intersection of demand and supply curves of loan capital), central banks violate naturalcause-and-effect chains that support the dynamic equilibrium of markets. As a result, the behavior of market prices begins to depend more on monetary policy than on supply and demand curves. Ray personally witnessed this:“In 1978-1980 (both in 1970-1971 and1974-1975) different markets began to move synchronously, because they were much more influenced by monetary policy fluctuations than their individual supply-demand ratio ”. Such a causal relationship exists today and is becoming increasingly apparent when viewed from the right angle.

Such market distortions would not be possible ina world with a free money market. Free markets with ruthless efficiency eliminate surplus and promote optimal resource allocation. As a result, they contribute to the development of hard money, because people naturally choose the most liquid asset that best saves value as money. Hard money eliminates market distortions, as their supply and demand remain rooted in economic reality, beyond the reach of mercenary central planners. Simply put, by switching to free-market money, such as Bitcoin, we can eliminate the main driver of property inequality - inflation of the money supply.

To better understand the underlying cause of wealth inequality, we take the approach advocated by you, Ray, when you say:“The underlying reason lies in the characteristics, not in the actions, so ask the question“ why? ”Until you get to the point.”. Let's proceed to our analysis:

The root cause detection procedure:

The main reason for social unrest and the disintegration of society is property inequality. It is of concern that this inequality is growing in the developed economies of the world.

Why is wealth inequality growing?

Wealth inequality has its roots inmonarchical history of mankind. While economic inequality is partly natural because people are born with unequal skills and dispositions, the (increasing) levels observed in modern times are an anomaly. Today, most productive assets are in the hands of a small number of people. Under a system of monetary central planning, this small number of people have privileged access to newly printed fiat currency, which represents a redistribution of productive assets to those who receive this new money first, at the expense of those who receive it later.(cantillon effect).

Why does a small number of people have privileged access to newly printed money?

Those with the most controlproductive assets, took advantage of their position to monopolize the money market. Their position is reinforced through lobbying mechanisms, a system of institutional corruption that strongly influences public policy to favor the private interests of financiers. After consolidation of the monopoly position, monetary policy is used as a means of implicit taxation of the entire population for the sake of even greater enrichment(again, due to the cantillon effect).

Why is there a legalized monopoly on money?

Again, the few who own the majorityproduction assets in the company are capable of (strongly) influencing the legislation within which they operate. Naturally, they prefer laws that are favorable to their interests. Chief among their interests is the ability to confiscate wealth through inflation. This privileged position is protected through the state monopoly on violence. Inflation allows early recipients of new liquidity to indefinitely take wealth from all market participants who are forced to use fiat currency - those who refuse to use it are threatened with imprisonment or other harsh punishment.

Why is violence used to protect the legalized monopoly on money?

The main reason for this violentcoercion is the fear inherent in selfish human behavior. People naturally seek to protect themselves from the uncertainty inherent in the future. In this regard, money, a tool of pure choice in the market, is the ultimate insurance against the future. Using the government monopoly on violence, private interests gradually managed to monopolize the money market, blocking its natural rate. Simply put, central banks have gained absolute power, which, as we know, corrupts absolutely. Fiat currency is the ultimate expression of the dynamics of a proprietary market.

From our analysis it follows that the main reasongrowing inequality of property - a non-free money market. Fiat currency is a tool to restrict freedom and confiscate wealth. Bitcoin, like its predecessor, gold, is exclusively free-market money, a tool to maximize freedom and preserve wealth.

Monetary inflation, a unique property centrallyplanned money is an exclusively means of confiscating wealth. It does not give people a single equilibrium advantage. The virtually unlimited power that control over printing presses of fiat currency gives is the real reason for its existence and monopolization. It is both the goal and the means of monetary socialism. Fiat currency is a government instrument of taxation, control and manipulation of the people. Thomas Jefferson warned:

"If the Americans allow private bankscontrol the release of their currency, first through inflation, then deflation, the banks and corporations that grow around them will deprive people of any property until their children wake up homeless on the continent conquered by their fathers ... I believe that banking institutions are more dangerous for our freedoms than regular armies ... Authority to issue money should be taken from the banks and returned to the people to whom they rightfully belong. ”

Trying to carry out central planningmoney, humanity marginalizes its own potential. Although Bitcoin has demonstrated its disregard for legislative restrictions protecting fiat currencies, it is impossible to know which monetary technology the market would naturally choose without government intervention. Monopolization increases costs and suppresses innovation, which is the exact opposite of the effect of free markets. The inevitable catastrophic consequence of monopolization is degeneration, while free markets lead to its opposite - evolution.

Evolution

“Evolution is the most powerful force in the universe; this is the only process that continues uninterruptedly and stimulates the development of all things. ”

Change is the only thing that never changes. When something ceases to change, it ceases to exist. Therefore, everything exists in a state of evolution or degeneration.

Everything changes, whether for the better or for the worse. You, Ray, write:“Thinking about evolution, I realized that this process is not only about life forms. Technology, language, like everything else, is also subject to evolution. ”. Money, like speaking, isinformation protocol. But, unlike speech, money in the process of its evolution was embodied in many different forms. Seashells, salt, livestock, beads, stones, precious metals and government papers served as money in different historical periods. Even today, local forms of money spontaneously arise, such as prepaid minutes for mobile phones in Africa or cigarettes in prisons. Different monetary technologies constantly compete with each other, just as animals compete in the ecosystem. Only instead of food and sexual partners do monetary goods compete for people's faith and trust.

Historically monetary technology thatthe most difficult to produce, with other comparable characteristics (durability, divisibility, portability, recognition), exceeded the forms that are easier to produce, and began to dominate the free market. Such an asset - a technology discovered in the process of natural market selection - is called hard money.

As we already know, the emergence of fiat currency has becomethe result of government appropriation of gold, which achieved global dominance in the free market due to its extreme rarity compared to other monetary metals, which in turn demonstrated superior monetary characteristics compared to other monetary technologies(such as shells, salt, livestock, etc.). Converting paper money intogold, governments were able to eliminate one drawback - non-optimal divisibility. In the end, however, governments abolished the convertibility of paper money into gold, ushering in an era of fiat currency. The lack of rarity would put an end to fiat currency long ago if it were not for the efforts of governments in the gold market against competition(again, see Gata.org). In this sense, gold is the last money freely chosen on the market, and fiat currency is just a ghost of this monetary metal with a history of many thousands of years. As Taleb describes:

“... The state blocks evolution, saving banks frombankruptcy. Nevertheless, in the long term, social and economic evolution is taking place, albeit in very unpleasant forms - such as leaps, disasters and economic surprises. ”

In a free market, competition generatesinformation that animates innovation—the kind of human-made evolution. Completely insulated from market discipline through an institutionalized monopoly, central bank-issued fiat currencies are greatly softened in both value and functionality. This is not surprising: any complex system - be it technology, economy or organism - isolated from the influence of competitive forces will naturally degenerate over time. Ray, did you notice:“One of nature’s greatest mysterieslies in how a system consisting of individual organisms acting in their own interests without understanding what is happening and leadership is able to remain functional and developing as a whole. I am not an expert in this matter, but it seems to me that this is due to the fact that evolution created: a) incentives and interactions that lead individual organisms, pursuing their interests, to achieve what is good for everyone; b) the process of natural selection; c) the ability to rapid experiments and adaptation ". This amazing dynamic underliesfree-market competition, open adaptation, and Bitcoin, which, as we have seen, is both a free market and open digital hard money.

Bitcoin is an evolutionary leap forward formoney: it combines the divisibility, durability, portability and recognition of clean information with the absolute rarity of time, forming the most flawless money technology that the world has ever seen.

You, Ray, talk about evolution:“I realized that the process of knowledge transfer can be compared with the process of DNA transfer - this is much more important than an individual, because knowledge remains after death”. Ray, is it time for humanity to switch to money,existing outside the schemes, frauds and manipulations of those who are able to control their control mechanisms? By building a developed monetary social contract on an unchangeable set of rules, the motivation to fight for gold or the status of an international reserve currency can be eliminated and, therefore, humanity’s ability to cooperate can be improved, which, in turn, will emphasize the division of labor, increase productivity and increase the total creation of wealth throughout the world. The time has come when money can be controlled by rules, not by rulers, and Bitcoin gives us the opportunity to make this transition once and for all. Imagine how much human ingenuity can be released in the world if you eliminate the need for those who determine monetary policy, in the army of analysts who monitor them under a microscope, and in price signals that are highly distorted due to soft money.

Each of us is a biological information nodea machine that expresses our genetics, experience and ideas; it is in our best collective interests to minimize obstacles to expression, such as politics, hierarchy and illegitimate institutions. Noam Chomsky said:

"Institutional structures are legitimate insofar as they improve the ability to question and create freely, from an internal need."

Organizational methods that favor merit-based competition and rely on the natural selection of ideas contribute to prosperity. This is the paradigm of the free market(and meritocracy of ideas):unhindered exchange is always better than one wherethere is centralized mediation, regulation or manipulation. Unlike cognitive learning, evolution does not distinguish between the observer and the observed, which allows it to learn by internalizing the successes and failures of its components(cells, individuals, exchanges, or businesses)through the filter of natural selection and incorporating them into their own form(body, society, market or economy).

Global Free Markets Coordinatedthrough truthful price signals, can be imagined as a collective mind composed of countless interpersonal exchanges; an organic system, built upward, where resources, risks and time are assessed and distributed according to the economic reality with which society is dealing. This collective mind is a macrocosm consisting of microcosms of our individual minds, which naturally evolved from the bottom up. Existing as illegitimate, closed economic feudal holdings, monetary monopolies of central banks impede natural selection and reduce the evolutionary potential of our global collective mind.

If the internet is the instantiation of a global mind, then #Bitcoin is its (impervious) long-term memory.

Decentralized memory banks are disrupting central banks.

— ?Robert Breedlove (@Breedlove22) July 28, 2019

Ray, did you notice:“The development of the“ universal brain ”went from bottom to top, that is, the lower structures are evolutionarily the oldest, and the upper ones are the youngest. Why is the totality of human economicactions should develop differently? Free markets make bottom-up price and technology discovery possible due to the complete absence of centralized control. Sound money has always developed in a free market and is the norm in human history. Only in the last hundred years have they been so clearly appropriated by a small number of people at the expense of everyone else. To use Darwin's analogy: gold is the result of natural selection, and fiat money is the result of artificial selection. Just as humanity developed purebred dogs from wolves or genetically modified seeds from naturally occurring plants, it created fiat currency from gold. Bitcoin, as unfettered free market money undergoing natural selection in the market, can in this sense be seen as the resurrection of sound money in the modern world, a natural return to the free market foundations of money through advanced(and continuing to evolve)monetary technology.

Being real money monetized in real time, Bitcoin is superior to other forms of money.

in market natural selection, whereasfiat currencies exist solely due to monopolistic artificial selection. Because Bitcoin stands above the artificial means that protect the monopoly position of fiat currencies, it forces these monetary technologies to compete on their own (worse) merits and promises to displace them.

Central banking is the last bastion of socialismin the free world. #Bitcoin undermines the fortified position of this anachronistic institution by transcending its means of protectionism (capital controls, territorial monopolies, anticompetitive laws, and confiscatory actions).

— ?Robert Breedlove (@Breedlove22) October 1, 2019

It’s hard to find the worst technology in terms of howfunctionality and utility for society than fiat currencies. You, Ray, say: “For something to be considered good, it must comply with laws and reality and contribute to evolution in general; this is what is ultimately rewarded. ” In this sense, fiat currencies are bad - very bad. They not only give politicians leverage to control the people, but also undermine social cohesion, since their main function - saving value over time - is constantly compromised in favor of various political circles in the world. Taleb says:

“...If you cling to the old technology, althoughit is unnatural and obviously harmful, and the transition to new technology… does not threaten you with any new side effects, your behavior cannot be called anything other than grossly irrational. In such conditions, to resist getting rid of old technology is to act unreasonably and criminally (I never cease to repeat that getting rid of the unnatural is not fraught with long-term side effects; such an action is always free from iatrogenicity).”

When viewed more globally, Bitcoin seems like a natural evolutionary step towards a more free society:

Gutenberg's printing press gave us decentralized analogue knowledge (which separated the church from the state).

Democracy has given us decentralized governance.

The Internet has given us decentralized digital knowledge.

Bitcoin gave us decentralized digital money(which may one day separate money from the state).

Truly amazing as an anonymous programmerpublished an open source protocol, which is now in serious competition with the global reserve currency, while Facebook, one of the largest corporations in the world, was unable to make progress with its currency project due to legislative obstacles. Digital technologies are changing reality, and decentralization allows you to create leaderless organizational structures that rely not only on managers, but on the rules. Bitcoin is the last and greatest expression of a comprehensive trend leading from centralization to a more natural order of things.

Like you, Ray, I consider myself a leader for whom“The discrepancy between what is and what could be is perceived both as a tragedy and as a source of endless motivation”. I see the world in the chains of financial slavery, wherecentral bankers and their close associates parasitize on the wealth created by the working people. Central planning of money is pure socialism, and apart from a short period at the end of the 19th century, when almost the whole world adhered to the gold standard, we did not see a truly free money market. The economy is like life itself. In life, we do not expect that we will understand events immediately, as they occur, at least with full clarity and seeing all cause-effect relationships. But we better understand them in retrospect. Bitcoin is alive, and although it is impossible and confident to say what awaits it, it monetizes and evolves in real time, and all its supporters have a skin on the line.

Evolution is possible only if risk is present.destruction. Only systems with skin on the line are capable of evolution; without this degeneration is inevitable. Systems learn and evolve in the process of dying off their components. The biological manifestation of this "path of denial" is called apoptosis. An institution whose non-dying components do not allow it to learn any lessons, loses touch with reality and grows until nature eliminates its energy imbalance by the powerful movement of the universal pendulum - whether in the form of a revival or revolution.

So the best evolution is throughhoning organizational principles on the basis of tangible feedback from falsified entrepreneurial experiments conducted at the forefront of our understanding, where each failure informs the economic ensemble that it does not work, so that the next effort is based on more experience gained. This is best facilitated by the free market, with its variety of tangible input data from alternatives to entrepreneurial research into economic reality, rather than the unshakable one-pointedness of a centralized plan. Choosing the technology that will be used as money is best done in an unhindered market, just as other technologies are invented and changed by the forces of competition, in accordance with the timeless principle behind both evolution and innovation.

Timeless perspective

“Over time, I began to realize that eachthe test is just a repetition of the past and that I can act more calmly and systemically, like a biologist who encounters a threatening animal in the jungle: first, the scientist will determine his appearance, and then, based on his own knowledge of his alleged behavior, he will act accordingly".

History does not repeat itself; she rhymes.Each moment and each person is unique, but they are consistent with certain previous patterns or archetypes. Personality types can be characterized and filtered using various methods, such as the Myers-Briggs typology and management tools like the “baseball cards” used at Bridgewater. Contemporary events are often foreshadowed by historical incidents. Thoughtful study of these archetypal forms of character and events allows us to better cope with the uncertainties inherent in life and work. As the axiom says:“Anyone who does not study history is doomed to repeat it”.

Bitcoin is often called digital gold, andfor good reason. The best analogy for its development is the monetization of gold. Money is a market mechanism for valuing and coordinating human time. They reflect the present value of the (liquid) time savings generated by divided labor and indicate prices. Due to the relative inelasticity of supply compared to other monetary metals, gold outperformed them and dominated the free market before central banks took control of it. Its triumph as money is based on the timeless economic principles of the Austrian school. Despite the justifications for schemes such as fiat currency in 1971(the abolition of the convertibility of the dollar into gold was called a "temporary" measure)And modern monetary theory today, prominent historical figures have agreed that only monetary metals are real money:

J.P. Morgan, in his speech to the U.S. Congress, said, "Money is gold and nothing else."

Thomas Jefferson said, "Paper is poverty; It's not money, it's just the ghost of it."

Even you, Ray, once said:“If you do not own gold, then you do not know either history or economics”. There has never been any free marketfiat currency. Only because of government intervention did the money come under monopoly control. But the state participated in the development of money no more than in the development of language. Thus, in order to understand Bitcoin's development from a quantitative point of view, you must first understand how gold gained dominance in the money market. In her unsurpassed work, A Brief History of Money, Seyfedin Ammus sheds light on how Bitcoin follows the monetization path, reminiscent of the path of gold. In short, over the course of history, different societies have converged to monetary technology, which reveals the highest ratio of reserves to inflows. If we consider the quantitative model of the ratio of reserves to inflows compiled by PlanB, you can see a very strong correlation of the bitcoin price with this key indicator.

Ignoring the lessons of history — this is an excellent strategy for natural selection from the gene pool. : Medium

Simply put, the property of money that allows it to retain its value is its scarcity. I'm sure you, Ray, as a former commodity trader, will understand the significance of this pattern.The rarest money wins in free-market competition, as it best protects wealth over time.Bitcoin is inevitably on its way to becomingthe asset with the highest reserves-to-flows ratio in human history, surpassing gold by a factor of two in 2024. Bitcoin's ever-shrinking ratio of supply flows to existing reserves encourages its adoption first as a store of value before it begins to more adequately serve the other functions of money. This is consistent with the way gold is monetized. As the classical economist William Stanley Jevons noted:

“In the historical sense, gold served, firstly, as a commodity valued as an ornament, secondly, as a means of preserving wealth, thirdly, as a means of exchange, and finally, as a measure of value.”

So, speaking of monetization,Bitcoin is “new gold,” following a similar evolutionary path: a jewel, a store of value, a medium of exchange, and finally, an accounting unit. In a deeper sense, Bitcoin can be considered part of the revival of ancient wisdom in the modern world. Yoga, meditation, Ayurvedic medicine, awareness, paleo-diet, ayauasca, acupuncture - people of the digital age are rediscovering the deep roots of humanity. Since the collective knowledge of humanity is now available to anyone with access to the Internet, this is probably the key driver of this worldwide phenomenon. Bitcoin, as a pure expression of Austrian economic thought, is another example of the revival of ancient wisdom in modern times. Having released Bitcoin’s crushing power into the world of monopoly money, Satoshi tested Keynesian economics and its “highly mathematized” theories (evasive propaganda of central banks) and managed to prove their failure.

A robber who justified his theft by saying thathe really helped his victims, by his spending giving a boost to retail trade, would find few converts; but when this theory is clothed in Keynesian equations, it unfortunately carries more conviction.

— Murray Rothbard (@MurraySuggests) October 8, 2019

Bitcoin is the best-performing asset in human history, even taking into account its sharp downturns. Over the past decade, its risk-adjusted return(Sharpe ratio)was higher than all assets, and it outperforms them even more if only negative volatility is taken into account(Bitcoin price volatility was mostly positive). It was hard to invest badly in Bitcoin.

Bitcoin profitability chart. The days in which investing in Bitcoin resulted in losses are marked in red on the chart. The total number of days that are good for investing in Bitcoin is3214. That is,almost 9 years. : lookintobitcoin.com

You, Ray, say:“For me, the highest success of a leader is for others to perform quality work without him”. This is exactly what Bitcoin does for the current and everyonefuture generations. He removes monetary policy from political influence and protects it with the help of timeless, unchangeable and mathematically guaranteed rules that are not subject to human fraud. These rules are fixed and completely transparent, resistant to confiscation, censorship, inflation and forgery, so that everyone can see them and rely on them in the long run. In this sense, Bitcoin is a timeless monetary system where people can flee from the closed economies of the world, dominated by central banks; an antidote for a poisoned human society. As Henry Miller described:

“Society has made relationships so complicatedbetween people, the personality is so entangled with laws and creeds, totems and taboos that a person has become something unnatural, separated from nature, a phenomenon created by nature, but no longer controlled by it. ”

Providing a more robust foundation forEconomic planning and coordination, Bitcoin promises to reduce the toxic bureaucracy festering around the central bank model. Armed with a solid means of saving, people will no longer be forced to invest further along the risk curve in order to protect their wealth. As a result, real estate will become more affordable, and unicorn companies will be less common. Since as a result of this, state revenues will naturally decrease, government-sponsored “zombies” and “too big to collapse” monolithic institutions will gradually lose their significance. Finally, able to protect their wealth from confiscation through inflation, people will have more opportunities to capitalize on their business and realize their desires. And a world where people do what they like is better for everyone. Most people work most of their lives for money, and Bitcoin will change the very nature of both work and money. In this sense, Bitcoin is destined to change humanity more than it can ever change it.

Meaningful work

Images: Unsplash

“We work together with other people to achieve three goals:

1) more effective fulfillment of our mission than we would have succeeded alone;

2) significant relationships through which a community is formed;

3) money that allows us to buy what we want for ourselves and others. ”

"... A person is constantly exposed to the action of two opposing forces that gave rise to it: individual selection, which leads to sin, and group selection, which stimulates virtue."

Since time immemorial, man has feltthe need to perform both selfish and selfless actions. The principles that govern human action consist of family values, social experiences, motivational structures, and natural predispositions. Many of us inherit the political and religious views of our parents or family, which influence our value systems. However, our experiences in the world also shape(and constantly reforming)Our values.And, of course, underneath these external influences lies a foundation of our natural inclinations and preferences. In short, every person is born unique, but is also a product of their environment. Money, as the most universal social phenomenon in the world, is one of the most significant external factors influencing our thinking, planning, preferences, attitudes and actions. Think about this:how many times in the past 24 hours have you thought or talked about money?For most of us, many, many times. The nature of the money we use greatly influences whether we act viciously or virtuously.

In this regard, Bitcoin has interesting effects on personal character. As statedJimmy song (here, here and here), Bitcoin(and hard money in general)encourages people to develop virtues such asprudence, moderation and justice. Because fiat currency suffers from constant dilution in value, its users are motivated to spend and borrow; in other words, be less prudent with your money. Bitcoin is the exact opposite. Its fixed supply and falling inflation rates ensure that its value rises with global economic productivity and motivates people to save and invest. As more people accept Bitcoin, their preferences are shifting more towards future-proofing. In this way, Bitcoin encourages people to view the future as something worth investing in, rather than taking out loans that they will have to pay back in the future.

Because his proposal is not subject tomanipulation, Bitcoin is gradually eroding the financial ability of governments to provide guarantees in the form of benefits and subsidies. It's easy to see how this impacts moderation. If you know that your job is guaranteed to remain yours regardless of your performance, how hard will you work? Likewise, a long history of taxpayer-funded bailouts to failed banks with no skin in the game has encouraged them to take on more and more risks, since any profits go to their shareholders while taxpayers pay for catastrophic losses(against their will). This contradicts the tradition of ancient Catalonia, where bankrupt bankers were beheaded in front of their banks(here you have the skin at stake). By providing the means to privatize profitsand socialization of losses, governments force the market to misprice risks and erode the value of moderation: the ability to optimize the risk-to-reward ratio. Without the risk of collapse, recipients of government guarantees have no skin in the game and therefore take on risks immoderately. Repeated bankruptcies and the wrath of taxpayers whose savings are being eroded by the bailout“Too big to collapse”institutions, make fragile the delicate bonds that hold society together.

Fairness is embodied in an impartial attitude.It embraces truthfulness, honesty and respect. When actions are taken that disproportionately benefit one group at the expense of another, they can be said to be unjust.Money supply inflation- this is an unfair action because it is notoffers equal benefits and enriches political circles close to the money tap at the expense of those far from it. Using inflation as a way to finance welfare and wars, governments continually introduce new programs while maintaining old ones despite their ineffectiveness or uselessness. As Milton Friedman once said:“Nothing is as permanent as interim government programs.”.

Again, government interventioneliminates the skin at stake and divides the intentions of these programs and their results. The result is a growing class of government dependents, workers, and contractors that are inefficient and exist only because of the government’s ability to create new money. Such an intervention distorts the information provided by market prices and, therefore, greatly complicates the possibility of fair interaction. In a free market with hard money, only zealous people are rewarded who do something valuable and do just things. Paradoxically, when governments seek to ensure equal outcomes, they encourage unfair treatment. At the heart of this rotting is monetary inflation - legalized injustice.

In a soft money economy, intermediary business models and professional roles are starting to emerge everywhere, taking value away from the money flowing from the center (the central bank) into the economy(through banks of several lower levels and then to businesses and consumers). These intermediary functions give the economy littlevaluable, but at the same time receive a disproportionate share of economic productivity. Unsurprisingly, such rent-oriented dynamics are ubiquitous in industries suffering from active government intervention, such as healthcare, education, and banking. The explosive growth of rent-oriented behavior began after the abolition of the last remnants of hard money.

Number growth ratioadministrative staffAndsurgeonsover the past 50 years. : US Bureau of Labor Statistics

Central banks compromise meaningfulwork. There has been a demographic shift from professions that create value to those that only take it away, as evidenced by the training of more bankers than engineers, and more degrees in finance than in medicine. In a free market, rewards reflect utility to society. But under monetary socialism, financial motivation prevails to work closer to the tap, from which fiat currency flows, in unproductive posts. Hayek summed it up perfectly:

“It's not just that if we wantpeople gave all their best, we must make it worth it. More importantly, if we want to leave them a choice, if they should be able to decide what they should do, they should be given an affordable measure of the social significance of various occupations. Even with the best of intentions, it is impossible to make a reasonable choice between different alternatives if the advantages they offer are not related to their usefulness to society. ”

One more thing: most rent-seeking professions are boring! Do you know many accountants, bankers or administrators who “love” their work? Many of these professions are the result of the lack of social scalability inherent in monetary socialism. The more we can transfer a large part of the world to hard money, the higher our collective productivity will be, the lower our cost of living will be, and the less each of us will have to work.

Money is not a goal, but only a means. You, Ray, say:“Do not forget that the only purpose of money is to give you what you want, so think carefully about what your values are and put them above money”. I think it’s safe to say thatmost people want to live a joyful and productive life full of meaningful relationships. Therefore, it is very important what type of money is used in society. The usefulness, offer and value of fiat currency cannot be trusted. Since money is a network of trust through which all our commercial relationships are carried out, the lack of trust in money affects trust between their users. Again, in order to get what we need, we need reliable protocols for commercial interaction, such as private property rights, the rule of law and money protected from manipulation. As central banks confiscate and redistribute the wealth created by the labors of others, they undermine these cornerstones of capitalism and weaken the foundations of civilization.

Money and speech are means of expression.Any suppression or censorship of these building blocks of society, responsible for virtually all human coordination and communication, is contrary to the most basic rights and freedoms(first amendment to the US Constitution)characteristic of Western civilization.There can be no justification for a system that suppresses verbal or financial expression. Organizing into a genuine free market capitalist system that encourages basic morality(don't steal, don't kill), our civilization can rise to new levels and significantly improve the quality of human relationships.

Meaningful relationship

Images: Usplash

“Remuneration from joint work overin order to make a “pie” bigger, it is usually more significant not only from the point of view of which piece of the pie each participant will receive, but also from a psychological point of view, since this makes everyone involved happier and healthier. ”

The history of mankind is overshadowed by episodes of violence -skirmishes between individuals, tribes, and later - states. Like other animals, a person seeks to maximize the likelihood that his genes will be passed on to future generations, and is ready to fight for it, sparing no strength. The benefits offered by a peaceful, cooperative society are a counterweight to this self-serving behavior: division of labor, better living standards and more free time. In the XVI-XIX centuries. less than 1% of the global population perished from conflicts. In the XX century, this figure more than quadrupled to 4%.

This is not an accident. Fiat currency inflation gives governments a much cheaper and less explicit way to finance military operations compared to direct taxation or the sale of military bonds. Former US GOP Ron Paul said:

“The century of total war did not coincide with the centurycentral banks ... If every American taxpayer had to pay $ 5-10 thousand more annual taxes in order to finance the war, I’m sure that it would end very soon. The problem is that the government finances the war by taking loans and printing money, instead of directly presenting the bill in the form of higher taxes. When costs are obscured, the question of whether to fight is distorted. ”

As the culprits of inflation, thisinstitutionalized system of theft of time and financial enslavement, central banks are a mechanism by which governments confiscate the resources needed to finance wars. Mises remarked in 1919:

“It is no exaggeration to say that inflation isa key tool of militarism. Without it, the welfare effects of war become apparent much faster and more explicitly; fatigue from war comes much earlier. "

Before the fiat currency experiment, warring states often repeated that“The gold standard should be abolished”. Clearly, it was in the best interests of these states to break the monetary tie to time, since debt-based money offered much greater potential for borrowing against the future(through inflation)to finance ongoing military operations.Of the three ways in which governments can raise revenue—taxation, borrowing, and inflation—the latter is clearly preferable to them because its negative consequences extend over long periods of currency depreciation and the implicit tax of inflation in the form of rising prices is less clear to citizens.(and rising asset prices help to cover up perceived damage, although this is, for the most part, an illusion).

Expansive monetary policy played a keyrole in financing US operations during the Vietnam War. Although the economy seemed strong in the 1960s, American citizens faced economic repercussions in the 1970s when stagflation hit the country (low economic growth, high unemployment and high inflation). In addition to the deaths and destruction of the war, economic disruption occurred in the United States and other countries. From 1965 to 1984 The Dow Jones index fell from its peak of 80% adjusted for inflation as a result of rampant military spending supported by soft money. Unfortunately, the financing of wars through inflation has not stopped in the new millennium.

After great success in the War on Poverty and the War on Drugs, the United States launched"War on terrorism". Over the next 17 years, when the total costs of the "war"(or rather, an imperialist military campaign)Since direct government spending exceeded $2.1 trillion, we have seen the Fed's money printing and Treasury bond purchases nearly equal these military costs.

RatioUS cumulative weapons costsAndUS Treasury billsstored in the Fed from 2001 to 2018 (in billions of US dollars). : Medium

Obviously, it would not be an exaggeration to saythat the money machine of the central bank of the USA and the American war machine are closely related. Replenishing the central banks of government military vehicles is a real scourge of humanity. Neither central banks nor military regimes are accountable to anyone other than their own interests. In the reckless pursuit of their own politicized goals, these institutions confiscate a significant portion of public wealth to finance destructive military campaigns. This problem of confiscating wealth and destroying capital is the most anti-economic force in the modern world. In the face of this diabolical threat, the world has only one hope: the separation of money from the state.

As with any mission critical productresources and industries, a free market is the best mechanism for distributing capital, fostering innovation, and properly assessing risks. The only reason the government monopolizes the money market is its unquenchable thirst for power. It imposes itself on citizens through the edifying messages of the central bank and relies on civil obedience. The fiat currency promotes an exploitative relationship between governments and their citizens, where the former reap the benefits of the latter in exchange for "protection."

Wars do not protect society, but tax it. Wars do not contribute to the public good, but destabilize it. Wars do not stimulate the economy, but ruin it.

Throughout history, money has beenboth the means and the goal of all wars. People have always fought for control of resources or territory, causing great harm to each other in the process. War is the antithesis of meaningful relationships. If we want to build a world with more meaningful relationships, we must weaken humanity's ability to fight with itself. A manipulation-, inflation-, and confiscation-resistant free-market alternative like Bitcoin would be a good start: it holds the promise of depriving the government of the virtually limitless resources that feed it into the fiat currency printing press. When people have the ability to opt out of an inflationary economic order, governments take away the ability to tax them(both explicitly and implicitly through inflation), which weakens the income of states and their ability to wage war.

War and its associated death and annihilationcapital is a consequence of monopolies in the money market. As with other negative consequences of monopolization - such as food shortages, unemployment, distortion in price signals and aggravation of economic cycles - the war can be suppressed with the help of open and free markets, creating incentives for cooperation and building long-term relationships. As a free market that cannot be stopped, Bitcoin deprives the artificial means supporting monetary monopolies of relevance and returns the money market to its natural free state. He does this thanks to his inherent honesty and transparency, which, interestingly, are the key ingredients of Ray's free market for ideas - a meritocracy of ideas. You, Ray, say: "I wanted to get meaningful work and relationships and thought I could achieve this with absolute honesty and utmost transparency." Money that embodies these two free-market qualities can accordingly influence the behavior of its users. This will lead to cultural consequences, diametrically opposed to those that today are generated by fiat currencies.

Simply put, hard money like Bitcoinreduce the tendency of society to prefer to spend in the present. They encourage people to invest in themselves, look for meaningful work that matches their skills, build meaningful relationships and work together with a long-term perspective. It is critical that in a world that uses Bitcoin, financing endless wars through inflation will become a relic of humanity’s barbarian past — making Bitcoin the ultimate boon for meaningful relationships. But in order to come to this, it is necessary to meet reality face to face and accept it as it is here and now.

Accepting reality

: Unsplash

"A distinguishing feature of man is his inherent ability to look at reality more broadly and understand it."

Since 2008 the world's central banks poured into the economic system an unprecedented influx of liquidity from fiat currencies. As expected, this exacerbated property inequality and sowed new seeds of systemic risk. Although we are still seeing a historically long bullish run-up in the economy, hidden risks are beginning to surface. Whatever form the next crisis takes, central banks have only three options to try to mitigate its effects: 1) reduce benefits; 2) raise taxes; and 3) print money. All three options will hit hardest those who live on a fixed income: retirees and poor workers. Of these options, historically central bankers most often preferred printing money, since they can be dealt with without much political hassle.

Negative aggravates systemic risks.the yield of government bonds, on which the fixed income of most retirees, who are usually less likely to take risks, depends. Since many similar instruments are now suffering from negative returns, investors with a low risk appetite, including pensioners and pension funds, are forced to take risks in the stock markets, low-quality bonds, or even more risky assets. This is contrary to the standard American dream, where in your youth you earn and invest in higher risk assets, such as stocks, so that with the approach of your pension, you gradually switch to lower risk investments that bring a relatively predictable and stable income, such as bonds. This approach gives greater potential for gain in youth and reduces the likelihood of losses in old age, protecting against losses due to the collapse of the stock market.

: thenational.ae

Bitcoin can help those who live onfixed income, protect against the accumulation of hidden risks created by central banks that deprive citizens of alternatives. Investing just 5% in it provides those vulnerable to economic downturns with a kind of insurance against the idiocy inherent in a politician-driven, debt-based monetary system. Here we see an expression of the barbell strategy that Taleb wrote about: an approach to investing and other aspects of life that uses a large investment in a low-risk, low-reward element and a small investment in a high-risk, high-reward element. In fact, over the past 6 years, a portfolio with 95% in cash and 5% in Bitcoin has outperformed the S&P 500 in terms of risk/reward ratio every year.

Why should I ever hold stocks? 5% #bitcoin + 95% cash outperforms stocks on risk AND return, every year past 6 years… pic.twitter.com/WbB3n1VZLy

— PlanB (@100trillionUSD) June 7, 2019

After decades of flooding the market with cheapwith money, central banks have distorted free-market incentive systems and made economies dependent on artificial liquidity to keep them afloat. The slightest hint of quantitative tightening sent markets crashing in 2018, forcing the Fed to quickly revert to a more accommodative monetary policy. The soft money constantly injected into the economy flows into hard assets, allowing investors to protect their wealth from the inevitable inflation created by quantitative easing, which further distorts prices expressed in soft money and creates the conditions for new bubbles in markets such as real estate and stocks. At the heart of this ongoing monetary easing lies(perhaps well-intentioned, but definitely incorrect)attempts by central banks“Create price stability” and “smooth the economic cycle”– which, regardless of intentions, is tantamount toif the arsonist tried to extinguish the fire he started. To recap our argument: printing money does not create any stability, but it distorts price signals and exacerbates economic cycles.

It was the printing of money that led to the negativebond yields that we observe in Europe. As the European Central Bank continues to print money, it must buy bonds to inject cash into the economy, which pushes bond prices up and suppresses their profitability. Thus, we find ourselves in a (already familiar to us) trap of fiat currency, where attempts to maintain the health of the economy by injecting artificial liquidity do the most harm to the most vulnerable of us, those who live on a fixed income. Bitcoin solves this problem: taking control of monetary policy from people who are able to “manage” such a complex system as the economy no more than “manage” the weather, it removes the vector by which politicians create economic distortions with which they then try fight using the same tools that these problems created. Since the offer of Bitcoin is absolutely rare, no matter what part of the total offer you own, you can be 100% sure that you will always have at least this part. This is an important discovery of absolute rarity presented by Bitcoin: a unique event that cannot be repeated.

Soft money also distorts markets whencorporations take cheap loans and buy back their own shares. Such actions express the belief that the company’s shares during the loan term will bring more than will go to its service, taking into account inflation. Here again, the agent problem manifests itself, since the reduction in the number of shares in circulation helps corporate managers achieve the targeted “earnings per share” on which their premiums depend. This “financialization” of the real economy is the product of erroneous incentives inherent in the fiat currency. It is not surprising that, as a result of the last 10 years of reckless printing of money, the redemption of corporate shares by corporations has become the main source of demand for them.

The result is a perverted dependency configuration:low risk proprietors loseinterest in “safe” investment objects, such as bonds, due to negative returns, pushing them further along the risk curve for stocks or something worse. However, due to the above rechargedwith soft money stock repurchases, the main source of demand for these shares is corporations that repurchase their own shares for artificially cheap money, which is why share prices are perversely dependent on the continued provision by central banks of loans with low interest rates. So now all pension portfolios and funds have become dependent on the incessant and helpful policies of central banks, which can maintain their confiscation through inflation only to the extent that society remains quite productive and obeying their authority.

If you look at the face of reality, we will seethat the fiat currency experiment is now in its final stages. If low interest rates are not maintained or if central banks cease to inject liquidity in increasing doses, the economy will collapse catastrophically. And even without this, it is only a matter of time before society reaches a boiling point, as is always the case when money - the personification of trust - is sufficiently devalued. Thus, now is the time to embrace reality, learn from history and plan for a better future. It should already be clear that an effective monetary system cannot be built on fiat currency. Be that as it may, let's “take a broader look at the reality” of different monetary systems to compare their fundamental nature and see what works best for us in terms of organizational principles. In a sense, each type of money represents liquid stocks of the corresponding monetary system. Let's compare:

Fiat currency: liquid shares of a central bank - privately owned and privately managed by a monetary monopoly

Only class B shares are available; all Class A shares are held by central bank shareholders.

No voting rights.

Supervisory board rights are limited to public statements by central bankers.

Greed turns into money dilution, confiscation through inflation and trade wars.

Liquid stocks are subject to unlimited dilution.

Liquid shares are subject to deauthorization.

Liquid shares are subject to censorship.

Liquid shares are subject to forfeiture.

Liquid shares do not give rights to the underlying asset of the monetary network (gold).

Gold: semi-liquid stocks of global, original, physical, free-market money

Class A shares = physical gold; Class B shares = gold certificates.

No vote.

It is managed by nature, there is no governing council (only for class A).

Greed turns into monetary value and genuine value.

Liquid stocks are subject to unlimited dilution, but historically it is low and predictable.

Liquid shares are resistant to deauthorization (only for class A).

Liquid shares are resistant to censorship (only for class A).

Liquid shares are subject to forfeiture.

Liquid shares themselves are the underlying asset (gold, only for class A).

Bitcoin: liquid stocks of the world's only global digital monetary final settlement network

Class A shares = private key; Class B shares = exchange-traded debt obligations.

Proportional voting right; the ability to fork a network with a new set of rules.

100% transparent rules; no governing council.

Greed turns into monetary value, genuine value and network security.

Liquid stocks are resistant to dilution.

Liquid shares are resistant to censorship (only for class A).

Liquid shares are resistant to confiscation (only for class A).

Liquid shares themselves are the underlying asset (Bitcoin, only for class A).

Ultimately, from someone’s personal opinionnothing depends on it. The decision is free market. Fortunately, Bitcoin exists as a free-market alternative whereby society can solve the problems created by central banks and governments. Only time will tell how everything will turn out. Remember: the growth in the ratio of reserves to the influx of Bitcoin is irreversible. At this stage, it would be reckless to completely ignore this asset, and over time, regrets from not participating in it will become only stronger.

In the year 2020, the annual new supply flow of #Bitcoin will be ~ 328,725.00 units.

In the year 2100, the annual new supply flow of #Bitcoin will contract to ~ 0.31 units.

During this time, Bitcoin's stock-to-flow ratio will increase over 1,118,659X

Buy #Bitcoin, because math. pic.twitter.com/Gcyhi2ReyX

— ?Robert Breedlove (@Breedlove22) July 27, 2019

So let me briefly summarize my arguments:

Distorted price signals are “nervous”damage” from which the economic order based on central banks inevitably suffers. As with all industrial monopolies, a select few profit at the expense of the rest. Bitcoin solves this problem by disintermediating the money market and restoring its natural dynamics of supply and demand. Ray says:“To implement a meritocratic approachthree conditions are necessary. Everyone should: 1) honestly express their opinion; 2) productively express disagreement in order to stimulate a quality discussion, during which participants can change their point of view and come to the best collective decision; 3) adopt an approved course of action in case of remaining disagreements ”. These three conditions for the meritocracy of ideas, reflectedin free markets can be summarized as fairness, quality competition and conflict resolution. Bitcoin satisfies all three conditions: it is completely transparent (honesty), its security is ensured by a free mining market(quality competition), and it is governed by community-defined rules implemented by algorithms(conflict resolution protocol). Bitcoin embodies elements of the meritocracy of ideas and is one of the few sources of truth in modern times. As Einstein said:“The most important problems of our time cannot be solved using the same level of thinking that created them”Just like double entry accountingserved as a catalyst for capitalism by allowing us to synchronize economic activities across space-time, we now need the triple entry system found in Bitcoin to abolish the monopoly of central banks and further strengthen the synchronicity of human economic activity.

Bitcoin is an open value exchange protocol.Openness ensures that Bitcoin's code cannot be manipulated to the detriment of others. The rules that govern Bitcoin are based on the (absolutely) uncompromising laws of mathematics, the fundamental language of nature. Bitcoin is a zero marginal cost market where all available energy can be traded. This means that every joule of energy that cannot be put to a more profitable use flows into“Digital gold alchemy” (a kind of untapped energy program). This will reorient the race downward,associated with fiat currency, where all monopolists are motivated to depreciate their currency by secretly taxing citizens to the race of the cheapest energy sources, stimulating innovation in energy efficiency around the world. Such an ongoing program of encouraging cheap energy becomes all the more economically convincing, the more cash value accumulates in Bitcoin and the more idle joules are used.

With central planning, anyone who doesn’tobeys a single plan, becomes an enemy of the state. Thus, power is concentrated in the hands of an ever smaller number of people, which makes intoxication with power more powerful and attracts the most unscrupulous people to the struggle for it. Bitcoin is an alternative, “plan B”, for those who are enslaved by the dominant monetary monopolies. It provides the dissenters with a way out of the panopticon, built by politicians and bankers, simply giving the opportunity to take advantage of freedom of speech. This is a peaceful rebellion against an institutionalized system of theft of time, known as central banking. Just as Galileo's new views on celestial bodies over time crushed the political influence of the church, Bitcoin undermines political control over money thanks to the unique discovery of absolute rarity - the most important property of time that lives outside the reach of man-made legislative structures.


The meritocracy of ideas is the depoliticization of decision making; Bitcoin is the de-politicization of money.

Bitcoin is a meritocracy of ideas and irresistiblefree money market. It naturally surpasses all isolated monopoly money, not obeying the laws protecting them and forcing them to participate in competition, where only their advantages matter. Bitcoin is hard money chosen on the free market, freeing the world from economic feudal monopolies. Bitcoin is a meritocracy of ideas consisting of absolute honesty (fair consensus, unchanged registry, truthful price signals), extreme transparency (open source, inflation resistance, transparent and reliable money supply) and decision-making based on competence (one hash equals one voice control with the skin on the line). Thus, this is free-market money, standing above all economies that use fiat currencies (centrally planned money). Bitcoin is an unregulated and containable, perfectly transparent implementation of energy-based, absolutely rare hard money that absorbs increasingly softer forms and once and for all takes away their entire value. Bitcoin is hard money returning a monetary history to its free-market sources.

In the context of human history, Bitcoinrepresents a return to the system of hard money chosen in the free market. Ray, Bitcoin - this is the paradigm shift that you foresaw when the pendulum of nature changes its direction of movement.

“All generations of humanity are constantlywar, war with fear. Those who have the courage to overcome him become free, and those who submit to him suffer until they have the courage to defeat him or until death takes them.” - Alexander the Great

Courage can only exist in the face of fear. If you listen closely, you can hear the devil whispering:“You will not survive the storm”. But if you listen to your heart, to your inner warrior, you will hear its answer:“I am a thunderstorm”.

A storm is coming

In the 19th century, Georgy Plekhanov in an essay“On the role of personality in history”put forward a strong argument about the inevitability of the path,emerging as an expression of unpredictably free human actions. As a process, human history expresses the laws (principles) by which its subjects are oriented. As an actualization, human history is created by those who formulate and solve the problems of progress in accordance with the conditions of their era, regardless of its laws. In this sense, a great man is such because "he has those characteristics which make him most qualified to serve the great public needs of his time" and he performs his sacred duty, if necessary, without regard to the laws.

The restoration of personal sovereignty - the mainthe goal of separating money from the state. Free markets are the meritocracy of ideas; defining characteristics of both of them - minimized obstacles to the interaction, combination and reproduction of knowledge. And knowledge growth is a key driver of innovation, evolution and economic growth. Bitcoin is both free-market money and a free market itself, where entrepreneurs can freely enter and exit the mining network. Consistent with Ray's definition of the meritocracy of ideas, Bitcoin represents absolute honesty and utmost transparency in action, with management at stake. Since the money market is the central pillar of any economy, it is crucial that it remains free and protected from monopolists, otherwise we will observe a constant cartelization of industries that are closest to its economic influence. Bitcoin is free-market money born of social necessity; absolutely inelastic trust structure necessary to save humanity from its suicidal greed.

Paradoxically, only when they canact of their own free will, people become aware of such economic necessity due to the fact that they have skin in the game. Those who are constrained by regulation or protected from the consequences of their actions by government monopolies, guarantees, or other barriers, suffer disengagement and atrophy over time. In this sense, freedom is equal to the recognition of necessity, the acceptance of opportunity costs, the recognition of obstacles that must be overcome, and the understanding of natural laws. Cost is the bridge between awareness of life's necessities and freedom of choice. It is expressed in the price at which (objective) supply and (intersubjective) demand intersect. Without an objective measure of value (hard money), market signals are distorted and the distribution of capital is manipulated, causing societies to move toward centralized concentrations of power.(government growth), nationalization of assets(restriction of free enterprise)and marginalization of citizens(inflation, taxation and military service). Entrepreneurship is an integral partfree market and the antithesis of state control. If everyone can earn by any (non-violent) means, this ensures that the markets will generate the lowest prices, the highest level of satisfaction of needs and a constant stream of innovation.

Freedom allows people to do thingswhich they themselves consider necessary when confronted with rare things inherent in being. Freedom, in the deepest sense, is a necessity transformed into action. Such a deep definition is fractal, in the sense that it does not refute the surface form, but includes it. When a person overcomes his internal and external limitations, he is born again, his "free activity becomes a conscious and free expression of necessity." Overcoming the compulsion to use government money, Bitcoin contributes to a return to a natural, sovereign human condition, being with more freedom and self-expression and less constraint. Incinerating the opacity of central banks with the light of pure transparency, drowning the inherent fiat currency of a lie in a constant stream of undeniable truth (a new block about every 10 minutes), Bitcoin, like free people whose sovereignty it revives, becomes a great social force that:

"Over the evil deceit

God’s thunder storm ... "

Bitcoin is the first social institution in history,with the potential to overthrow the greatest man-made scourge humanity has ever dealt with — a lowly pair of monopolists who confiscate wealth and spur inequality: governments and central banks.


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