Robert Breedlove discusses the properties of sound money, central banking, and why Bitcoin is the best peace-making technology. They explore the nature of money, its role as a medium of exchange, and the importance of understanding it to comprehend Bitcoin. They also delve into the effects of inflation, the technological nature of money, and the fraudulent nature of fractional reserve banking. The chapter concludes with a discussion on the design and purpose of Bitcoin, its properties as money, and its potential future value.
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Quick takeaways
Gold emerged as the most durable, recognizable, portable, and scarce form of money, but its lack of portability led to the development of banknotes.
The shift away from the gold standard in 1971 marked a pivotal moment in monetary history, leading to the era of fiat currency where central banks have the power to create money out of thin air, resulting in inflation and wealth transfer from the poor to the rich.
Central banking is seen as a criminal enterprise, allowing for the transfer of wealth from productive market actors to the shareholders of central banks through the printing of money and inflation, benefiting owners of non-depreciable assets.
Bitcoin has effectively perfected all properties of money, with infinite divisibility, durability, high portability, recognizability, and absolute scarcity, making it a compelling alternative to fiat currencies and a powerful tool for preserving and growing wealth.
Deep dives
The Evolution of Money and Gold as a Monetary Standard
Over time, different forms of money were experimented with in order to preserve purchasing power. Gold and other monetary metals emerged as the most divisible, durable, recognizable, portable, and scarce forms of money available. However, gold had a drawback in terms of portability, leading to the creation of centralized custodians and the issuance of banknotes. This global gold standard allowed for more efficient trade and economic growth. However, the human flaw of trust and temptation to print more money led to fractional reserve banking and the gradual erosion of the gold standard. By 1971, the gold standard was abandoned completely, marking a pivotal moment in monetary history.
The Consequences of Fiat Currency and Fractional Reserve Banking
The shift away from the gold standard in 1971 brought about the era of fiat currency, where central banks have the power to create money out of thin air. Fractional reserve banking, which allows banks to lend out more money than they have in reserves, became the norm. This led to an increase in debt and the transfer of wealth from the poor to the rich. Inflation caused by the continuous printing of money eroded the purchasing power of the currency, resulting in financial hardship for those with fixed incomes. The winners in this system are the shareholders of central banks and commercial banks, while the losers are the general public who rely on the devaluing currency.
The Problems with Central Banking and Currency Counterfeiting
Central banking, with its monopoly on currency counterfeiting, is seen as a criminal enterprise that allows for the transfer of wealth from productive market actors to the shareholders of central banks. The printing of money leads to inflation, which can devalue the currency and erode the wealth and purchasing power of individuals. Counterfeit money is considered illegal, but the distinction between counterfeiting and legal inflation lies in who has the power to create money. The winners in this system are those who own assets that cannot be counterfeited, such as real estate, while the losers are those who rely on a currency that is continuously debased.
The Importance of Gold as a Store of Value
Gold, historically recognized as the best form of money, possesses the properties of divisibility, durability, recognizability, portability, and scarcity. It has served as a store of value over time and provides a hedge against inflation caused by currency counterfeiting. The demand for gold is not only driven by its industrial uses, but primarily by its role as a store of value. However, gold's lack of portability led to the development of banknotes that allowed for more efficient global trade. Nonetheless, the flawed nature of human behavior and the temptation to print more money resulted in the erosion of the gold standard and the rise of fiat currency.
Bitcoin: A Perfected Monetary Technology
Bitcoin is the first monetary technology in human history that has effectively perfected all five properties of money: divisibility, durability, portability, recognizability, and scarcity. It is infinitely divisible and can be transacted at any scale. It is durable in its intangible and distributed nature. It is highly portable, capable of being moved at the speed of light through any information-bearing medium. It is recognizable and auditable, allowing for verification of transactions and total supply. And it exhibits absolute scarcity with a fixed supply of 21 million coins. Bitcoin's scarcity and its ability to preserve purchasing power make it a compelling alternative to fiat currencies.
Bitcoin as a Peacemaking Technology
Bitcoin has the potential to transform the incentive landscape away from coercion and violence towards peace. By being the most expensive asset to steal in human history, Bitcoin provides individuals with inviolable private property rights. It incentivizes cooperation and combats the debasement of weak fiat currencies. Bitcoin's decentralization and its design as a store of value make it a powerful tool for preserving and growing wealth. With increasing government oppression and intervention, the demand for Bitcoin as a form of property that can be transferred without interference will likely continue to rise.
Bitcoin's Future Value and Transformation
There is no definitive prediction for Bitcoin's future value, but it is believed that the price of Bitcoin will rise as fiat currencies experience hyperinflation and Bitcoin's adoption increases. The depreciation of fiat currencies and the monetization of Bitcoin are likely to move in tandem. Bitcoin's fully diluted number of 21 million coins sets a strong precedent for its value and scarcity. However, it is important to note that as fiat currencies lose purchasing power, the value of Bitcoin in dollars will increase significantly. Bitcoin's potential as a multi-million dollar asset and a transformative force in the future of money cannot be overstated.
Where to Learn More
To delve deeper into the topics discussed, listen to the What Is Money podcast with over 350 episodes covering various aspects of money, Bitcoin, and related concepts. Visit whatismoneypodcast.com for links to podcast platforms like YouTube, Spotify, and Apple Podcasts. Follow Robert Breedlove on Twitter @Breedlove22 for ongoing insights and discussions on money and Bitcoin.
In this episode with Tim Braheem, we discuss the properties of sound money, central banking, the incentives for armed conflict, and why Bitcoin is the best peace-making technology.
Tim Braheem is the Founder and CEO of Performance Experts and the host of The 360 Experience podcast.
// OUTLINE // 00:00:00 - Coming up 00:00:38 - Intro 00:02:11 - Helping Lightning Startups with In Wolf's Clothing 00:02:57 - Introducing Robert Breedlove 00:03:22 - Robert's Europe Tour 00:04:36 - The Questions of Significance 00:06:03 - Insufficiency and Indispensability of Language 00:08:47 - Understanding the Nature of Money 00:10:39 - Money: A Universal Medium of Exchange 00:12:57 - Money: The Most Marketable Commodity 00:17:25 - Money Emerges from Trading 00:19:12 - Properties of Good Money 00:22:11 - Money Needs to Be Expensive to Produce 00:25:53 - Counterfeiting of Money 00:27:57 - Retaining Purchasing Power 00:32:37 - Counterfeiting Monopoly of the US Dollar 00:36:27 - Winners & Losers in Central Banking Paradigm 00:41:04 - Simplifying Currency Inflation 00:43:29 - Advantage of Investing in Real-Estate 00:47:40 - Why Gold Became Money 00:54:16 - Warehousing of Gold 00:57:23 - Secure Your Bitcoin Stash with the iCoin Hardware Wallet 00:58:20 - Introduction of Gold-Backed Currency Standard 01:01:12 - Problems with a Fractional Reserve Banking 01:05:57 - Central Banks and War Incentives 01:11:36 - A Centrally Controlled Gold Standard 01:13:53 - Introduction of the Fiat Standard in 1971 01:19:25 - Intital Stage of the Bitcoin Rabbithole 01:23:43 - The $100 Trillion Question 01:26:14 - What is Bitcoin 01:28:56 - The Intangibility of Bitcoin 01:34:40 - A Bitcoin Wallet with Privacy Built-In: Wasabi Wallet 01:35:31 - Comprehending the Non-Physical Nature of Bitcoin 01:37:22 - Bitcoin Resembles the Properties of Good Money 01:41:34 - Bitcoin: An Asset with Absolute Scarcity 01:44:01 - The Emerging Consensus of Bitcoin 01:47:32 - Bitcoin: A Money with Zero Percent Inflation 01:49:49 - Bitcoin is More Than an Invention 01:50:45 - Production Cost of Money 01:52:35 - The Supply and Demand Ratio 01:54:14 - Perfect Information in a Financial System 01:58:07 - The Biggest Fear About Bitcoin 01:59:14 - Bitcoin’s Price Prediction 02:07:20 - Why Bitcoin
