KOL402 | Austrian Economics Discord Conference: Inflation: Its Causes, Effects, Parallels and Death in a Bitcoin World

Kinsella on Liberty Podcast, Episode 402. This is my presentation (audio only) at the Austrian Economics Discord Conference: “Inflation, Money, and the State,” Austrian Economics Discord Server (Jan. 7–8, 2023); my talk was "Inflation: Its Causes, Effects, Parallels and Death in a Bitcoin World." Previous appearance: KOL371 | Austrian Economics Discord Conference: Law, Decentralized and Centralized. My talk is below. Update: See also thoughts on the nature of money, the barter problems solves, etc., in: KOL337 | Join the Wasabikas Ep. 15.0: You Don’t Own Bitcoin—Property Rights, Praxeology and the Foundations of Private Law, with Max Hillebrand Am I a Bitcoin Maximalist? On the issue if why money needs only solve these problems, and why the idea of smart contracts as one of the useful features of functions of an advanced money is confused, see: my facebook post  https://www.facebook.com/nskinsella/posts/10158404058053181; comments on this in LIBERTARIAN ANSWER MAN: Smart Contracts  and KOL401 | Sazmining Twitter Space: Bitcoin & Property Rights. https://youtu.be/Uvi05GJE5LM   Final trailer: https://youtu.be/890corLQKFM Original trailer: https://youtu.be/AgsocsxhIws For last year's, see: “Law: Decentralized and Centralized,” Austrian Economics Discord Conference: “The Enduring Importance of the Austrian School,” Austrian Economics Discord Server (Jan. 8–9, 2022) [KOL371]. Related material: Paul Cantor, Hyperinflation and Hyperreality Theodore Dalrymple, "Inflation’s Moral Hazard" Guido Hülsmann, The Ethics of Money Production Adam Fergusson, When Money Dies Hoppe, Democracy: The God That Failed, ch. 1 and TSC, p. 27, on the negative effects of inflation on character Jeffrey Tucker, How the End of Negative Interest Rates Affects Your Life ((Generations over hundreds and thousands of years have been acculturated to believe that good things come to those who wait. Sacrifice some now and you earn greater rewards later. Study hard for the exam and you get an A. Study hard for all exams and you graduate with honors. Graduate with honors and you have a better chance of getting a good-paying job.So on it goes with the whole of life. The more you defer your consumption and indulgence in the here and now, and think about the future, the better off you will be. That presumption is naturally built into the financial system. The yield curve in normal times provides a higher payout in the future than it does in the present. It teaches us to defer consumption, forgoing whatever joy there is in the present, in favor of great reward down the line.Again, in normal times, that means that savers win in the long run. Keep socking money away in the bank rather than taking that extra vacation, give it a few years, and you have a solid nest egg.All of economics is supposed to work this way. The guy alone on the island who wants to catch more fish needs to spend a day or two making a net but in order to afford that time away from scooping up fish as he sees them, he needs to save up food to live on while he constructs his capital goods. )) Kinsella, “Legislation and Law in a Free Society,” Mises Daily (Feb. 25, 2010),  (( Longer version: “Legislation and the Discovery of Law in a Free Society,” Journal of Libertarian Studies 11 (Summer 1995), p. 132 )) on negative effects of uncertainty (( Negative Effects of UncertaintyLegislation tends to interfere with agreements that courts would otherwise have enforced and thereby makes parties to contracts less certain that the contract will ultimately be enforced. Thus, individuals tend to rely less on contracts, leading them to develop costly alternatives such as structuring companies, transactions, or production processes differently than they otherwise would have."There is much more certainty in a decentralized legal system than in a centralized, legislation-based system."Another pernicious effect of the increased uncertainty in legislation-based systems is the increase of overall time preference. Individuals invariably demonstrate a preference for earlier goods over later goods, all things being equal. When time preferences are lower, individuals are more willing to forgo immediate benefits such as consumption, and invest their time and capital in more indirect (i.e., more roundabout, lengthier) production processes, which yield more or better goods for consumption or for further production. Any artificial raising of the general time-preference rate thus tends to impoverish society by pushing us away from production and long-term investments. Yet increased uncertainty, which is brought about by a legislation-based system, causes an increase in time-preference rates because if the future is less certain, it is relatively less valuable compared to the present.In addition to materially impoverishing society, higher time-preference rates also lead to increased crime. As a person becomes more present oriented, immediate (criminal) gratifications become relatively more attractive, and future, uncertain punishment becomes less of a deterrent. )) Nock: https://en.wikiquote.org/wiki/Albert_Jay_Nock ((https://www.facebook.com/nskinsella/posts/pfbid02P3vXZf5nBupzUkeaoWSHpkqsZSyq1mxsiuSyBarAfWeFqfJQeF6HXuAmbtur4gRAlMaresca: I’m struck by how Nock touches upon psychology every now and then. How the State negatively impacts character. For example, the judge who feels no responsibility for an unfair ruling simply because he is “only following the law”. Or how the State affects general public behavior. I wonder why so few libertarian thinkers have even mentioned psychology in regards to statism. The field seems to be an untapped resource for understanding statism; perhaps thorough research could be of value to libertarian outreach. -- Mark Maresca In your link, under the Quotes section, the bullet point starting with “Once, I remember, I ran across the case of a boy who had been sentenced to prison”. That was the main one that struck me. I’ll look for others. Like Reply 18h   Mark Maresca Stephan Kinsella I liked this quote because it recognizes that the blind acceptance of the State can impact individual morality: “The upshot of our willingness to accept a reality, provided we do not hear it named, or provided we ourselves are not obliged to name it, leads us to accept many realities that we ought not to accept. It leads to many and serious moral misjudgments of both facts and persons; in other words, it leads straight into a profound intellectual dishonesty.” Like Reply 18h   Mark Maresca Stephan Kinsella and this one which shows that the State leverages the immature minds of youth : “The mentality of an army on the march is merely so much delayed adolescence; it remains persistently, incorrigibly and notoriously infantile.” François-René Rideau I often say that much worse than the impoverishment and physical oppression, the unforgivable sin of socialism and statism in general is the corruption of the souls of its victims. Turned from humans into less than humans. Zombies. )) Plauché, Geoffrey Allan, "Aristotelian liberalism: an inquiry into the foundations of a free and flourishing society" (2009). LSU Doctoral Dissertations. 3248 (( "There are many ways in which governments can disrupt the societal consumption-investment ratio in favor of consumption. The most egregious way, the one responsible for the systemic boom and bust business cycle, is a policy of easy credit. Such a policy is best facilitated by a fractional reserve central banking system with fiat money (i.e., paper money unbacked by a commodity with real value, like gold or silver). Easy credit is pumped into the economy by an expansion of the supply of money and credit, primarily by means of printing fiat money and artificially lowering interest rates. Monetary inflation leads to price inflation as the new money trickles through the economy, acting as a regressive tax on the poor and encouraging more spending now as people perceive prices rising and their money becoming less and less valuable. Artificially low interest rates, below the natural market rate, give market actors false signals. They see the value of savings and investment decline, particularly in light of inflation. Producers are misled by the cheap credit to undertake more expensive projects they otherwise would not have undertaken and which do not match real consumer demand, resulting in malinvestment. Consumers are misled by the cheap credit to take out loans in order to spend it on consumer goods. Andrew Dickson White, in his 1933 book Fiat Money Inflation in France, describes the results: “Then, too, as values became more and more uncertain, there was no longer any motive for care or economy, but every motive for immediate expenditure and present enjoyment. So came upon the nation the obliteration of thrift. In this mania for yielding to present enjoyment rather than providing for future comfort were the seeds of new growths of wretchedness: luxury, senseless and extravagant, set in: this, too, spread as a fashion.”503There are many other policies that also tend to have this effect on consumption. Bailouts and promises of bailouts for failing or failed businesses encourage riskier behavior. This includes the FDIC’s deposit insurance for banks, which also encourages those who keep their money in banks to be more complacent about the practices of their bank and the safety of their money. Various social-welfare policies also tend to have a deleterious effect. In the absence of such programs people must save for a rainy day and for their own retirement, or depend upon the generosity of others. When governments provide these necessities, the incentive to save for them is decreased or eliminated. When government promises to take care of your retirement, at least in part,