Money's value reflects real economic values, not inherent in any form of currency.
Gold standard limited government growth, promoting fiscal responsibility.
Inflation's deceptive allure as a 'magic syringe' masks long-term risks.
Transition to inflationary environment hinges on psychological factors, impacting real economy.
Deep dives
Introduction of Lester and Bitcoin Dinner
Lester and the host met at a Bitcoin dinner in Los Angeles in 2018 or 2019. They discussed monetary history, connected through Twitter, and exchanged insights on the world economy. This led Lester to recommend the book 'The Twilight of Gold' to the host.
Money as a Reflection of the Economy
Money serves as a reflection of the real salable values in the economy. Whether money is in the form of gold, paper, or digital credits, its value is derived from the economy it represents. The concept of money as a 'store of value' is not inherent to any currency but depends on the goods and services within the economy.
Gold Standard as a Check on Government Growth
The gold standard historically acted as a check on government growth by limiting their ability to finance operations through suspension of convertibility and debt issuance. Gold served as a disciplinary force, prompting responsible government actions to avoid depleting the gold reserves. Governments' movement away from the gold standard aimed to remove this constraint on their fiscal activities.
Inflation and Hidden Risks
Inflation introduces hidden risks into the economy, where the immediate benefits of money creation may mask the long-term consequences. The analogy of a magic syringe highlights the deceptive allure of inflation as a solution to economic challenges. The exponential nature of inflation implies that once initiated, it becomes increasingly challenging to reverse, leading to potential economic collapse.
Inevitability and Implications of Inflation
Inflation, as a consequence of governments' ability to create money, is considered inevitable. The primary ways to address government debt, including real growth, austerity, default, or soft default, highlight the challenges posed by excessive debt accumulation. The historical precedent of hyperinflation underscores the dangers of unchecked money creation and inflation.
Transition from Non-inflationary to Inflationary Environment
The transition from a non-inflationary to an inflationary environment is primarily psychological. The shift occurs when people's reservation demand for cash decreases, leading to increased spending and inflationary pressures. Money created by governments eventually flows into real goods and services, impacting prices and signaling the release of stored inflationary potential.
Impacts of Stored Inflationary Potential
Central banks, stock markets, and assets serve as reservoirs for stored inflationary potential. Once this potential leaks into real goods and services, inflationary effects become evident. New money initially affects cash balances and assets before circulating into the economy, potentially leading to substantial inflation when the balance shifts to real goods and services.
My friend and fellow student of money codenamed "Lester" joins me for a multi-episode conversation exploring the excellent book "The Twilight of Gold" by Melchior Palyi.
Be sure to check out NYDIG, one of the most important companies in Bitcoin: https://nydig.com/
OUTLINE 00:00:00 “What is Money?” Intro 00:00:08 Introduction to “The Twilight of Gold” 00:02:05 What is Money? It’s an Antivalue 00:08:59 Gold as the Governor of Government 00:12:16 Studying the Gold Standard as a Prism through which to See the Future 00:18:17 The Importance of the International Gold Standard to Humanity… 00:22:12 …The Closest the World has ever been to a Pure Laissez-Faire Economy 00:24:30 NYDIG 00:25:38 The Gold Standard as a Non-Legislated Fount of Freedom 00:29:21 Background on the Author: Melchior Palyi 00:32:11 The Author was Warning Us About the Gathering Forces of Inflation 00:34:33 Fiat Currency Inflation: The Recurrent Self-Deception of Humanity 00:36:29 Imagining Inflation as a “Magic Syringe” 00:40:28 The Explosion of Zombie Mythology After Abolishing the Gold Standard 00:44:11 Financing World War 1 with the “Magic Fiat Syringe” 00:45:53 The Only 4 Ways Public Debt Can Be Paid… 00:49:47 Inflations Build on Themselves Exponentially 00:51:33 Reservoirs and Psychological Triggers of Inflation
