What are the flaws inherent in the Fiat system?

Bitcoin has the potential to disrupt the global monetary system and provide individuals with an alternative to government-controlled currencies. In “The Bitcoin Standard,” Saifedean Ammous discusses several flaws of modern fiat currency systems and explores how Bitcoin addresses these perceived shortcomings.

• 💰Money is a market good that allows for the development of division of labor and specialization, enabling a more sophisticated and productive economy.
• 🥇”Gold became money and not copper, nickel, or bananas because gold is the hardest metal in the world and the hardest to increase the supply of, making it a reliable store of value.”
• 💹”The currencies that have held on to their value…are the ones that have the lowest supply growth rate…and the ones that grow…end up failing.”
• 📚”Keynesian economics is just inflation apologia, built on the idea that if you just make more money, you can stimulate economic production, which is completely nonsensical.”
• 📊”The austrian way of thinking which is think from first principles understand how the world actually works think about how humans act and understand that economics is really all about human action so it’s not about aggregates of goods. This is really the key distinction in terms of methodology and for the keynesians it’s physics envy.”
• 💳”The vast majority of fiat is not physical…it’s created when it is lent, so when you go to a bank to get a 1 million loan to buy a house, the money supply has increased by one million dollars to finance your home.”
• 🏦The richest and most powerful entities, including governments, are the biggest borrowers in the world, allowing them to devalue everyone else’s money and gain a share of the cut.

Government and Power

• 🤔”I don’t find any of them compelling for the reason that ultimately they all rely on putting a gun to somebody’s head and using the threat of force. So that’s for me. It can never be justifiable.”
• 💰The alternative to governments in a free market is not just another entity, but the ability for individuals to freely choose to provide or buy goods and services, creating a more equitable and voluntary system.
• 💰”When we make it mandatory, it’s violence…to force me to subsidize companies and force me to come to certain conclusions.”
• 💣”Bitcoin is the only technology that’s going to end World War I.” – Saifedean Ammous argues that the fiat monetary system has fueled endless wars and that Bitcoin, with its decentralized nature, can bring peace by removing the ability to easily finance conflicts.
• 🤔Saifedean Ammous argues that the key to being a good king is to leave people alone, let them do whatever they want, and only use power to punish those who aggress against others, rather than using power to enrich oneself or friends.

Bitcoin and Blockchain Technology

• ⚖️”Bitcoin is the most advanced form of money ever invented, with a fixed supply that is resistant to inflation, making it a qualitative leap forward in our technologies of money.”
• 💰Bitcoin fixes the problems caused by easy money and inflation, providing a sustainable form of currency that holds its value across time like gold, but with the added advantage of being more saleable and faster than fiat.
• 💰Bitcoin offers a way out of the destructive nature of fiat currency, which has caused hyperinflation, bank confiscation, and the destruction of wealth for countless individuals throughout the 20th century.
• 💡”The only working application of blockchain technology is bitcoin because with bitcoin you can move a billion dollars worth of economic value from here to china safely and reliably with just a few bytes of data.”

Fiat Currency and Inflation

• 💰”The government prints money because of a stupid reason because somebody in power decided. This was worth destroying everybody’s livelihood and savings for.” – Saifedean Ammous on the consequences of fiat money and its impact on people’s lives.
• ⚖️”You can’t have permanent war without fiat and you can’t really have fiat without war.” – Saifedean Ammous highlights the interconnectedness between war and fiat currency, suggesting that they both rely on each other to exist and escalate.
• 💰The increase in the supply of fiat money over the past 60 years has made it much harder for everyone to provide for their future, as saving becomes more difficult due to inflation.

Here are some key points from the book:

1. Inflation and Devaluation: Fiat currencies are subject to inflationary pressures due to central bank policies. Ammous argues that this constant devaluation erodes the value of savings over time. Bitcoin, on the other hand, has a limited supply capped at 21 million coins, making it resistant to inflation and theoretically maintaining its value over the long term.
2. Lack of Sound Money: Fiat currencies are not backed by tangible assets, and their value depends on trust in the issuing authority. Ammous advocates for the concept of sound money, which includes characteristics such as scarcity, durability, divisibility, and verifiability. Bitcoin is designed to exhibit these properties, with its fixed supply and cryptographic properties ensuring scarcity and verifiability.
3. Centralized Control: Fiat currencies are controlled by centralized authorities, such as governments and central banks, which have the power to influence monetary policy. Ammous argues that this concentration of power can lead to mismanagement, manipulation, and potentially harmful economic consequences. In contrast, Bitcoin operates in a decentralized manner, with no central authority controlling its issuance or policies.
4. Confiscation and Censorship: Fiat currencies can be subject to government intervention, including confiscation and censorship. Ammous highlights instances where governments have restricted access to funds or monitored transactions. Bitcoin, being a decentralized cryptocurrency, provides individuals with greater control over their funds and offers the potential for censorship-resistant transactions.
5. International Transactions and Financial Inclusion: Traditional banking systems can be restrictive for international transactions and can exclude individuals in underserved regions from participating in the global financial system. Bitcoin’s borderless and permissionless nature enables frictionless peer-to-peer transactions, potentially facilitating greater financial inclusion.

It’s important to note that “The Bitcoin Standard” presents a specific perspective on the flaws of fiat currency systems and Bitcoin’s potential as an alternative. These arguments have been subject to ongoing debates and critiques within the economic and cryptocurrency communities. Understanding different viewpoints and conducting further research is valuable to form a comprehensive understanding of the topic.