The Fiat Standard - Saifedean Ammous

The debt slavery alternative to human civilization

Transcript

1. Saifedean Ammous Milano January 20, 2020
2. Saifedean Ammous Milano January 20, 2020
3.  All historical examples of money were hard  As trade and technology advanced, only one winner remained at end of 19th century: gold  Banks would hold it for clients  Central banks allowed for faster more efficient settlement & clearance of payments  Banks would settle with international banks to clear client payments  Money was one across the world  Foreign exchange was a set of fixed constants, like conversion from metric to imperial units What makes good money?
4.  Government had to earn money to spend it. It couldn’t just print it  If government mismanaged its budget, it would go bankrupt and fall, either to domestic or foreign rivals.  Government had to be fiscally responsible. Monetary policy did not exist  Then World War I happened, and governments took over central banks, as a temporary measure to finance war.  Like all government temporary measures, this never ended.  By 1971, governments had entirely taken over the monetary system and replaced gold with their debt as money What makes good money?
5.  Governments took over central banks. Or banks took over government.  Details of who wore the pants in this relationship are not important.  What is important is the ugly bastard child that came from this unholy marriage: government- enforced banking monopoly, GBM  The GBM is: 1- A monopoly on determining the money supply 2- A monopoly on international payment settlement 3- A monopoly regulator of banks, holding their reserves 4- A perpetual lender to your government How governments ruined money
6.  The GBM is: 1- A monopoly on determining the money supply 2- A monopoly on international payment settlement 3- A monopoly regulator of banks, holding their reserves 4- A perpetual lender to your government  The central bank's cash reserve is now being used to: 1- Back the local currency with hard currencies 2- Settle international trade 3- Back all bank deposits 4- Buying government bonds to finance government spending How governments ruined money
7.  The central bank's cash reserve is now being used to: 1- Back the local currency with hard currencies 2- Settle international trade 3- Back all bank deposits 4- Buying government bonds to finance government spending All your savings, deposits, international trade, and remittances have to go through an entity given a monopoly by government, and tasked with lending to government. Everyone’s money is in the same pot as the government. There Is* No Alternative. If you want to bank, save, or trade or send money internationally, you must go through GBM. What could possible go wrong? How governments ruined money *Until 2009
8. 1- Ever-growing government deficits  Government deficits are constantly financed through borrowing from GBM.  GBM practically owns all of society’s financial capital  Government spending isn’t constrained by its own income, it is restricted by the sum of all of society’s financial capital.  The only real limit on government spending is the destruction of all of society’s wealth  A new breed of cranks now believe deficits don’t matter at all and government spending is forever cost-less What went wrong
9. 2- Continuous currency devaluation  Strong incentive to finance spending today by devaluing the currency  The Keynesian scam: you can always be happy today if you just sacrifice tomorrow  Lower interest rates create more lending, increasing the money supply, stimulating malinvestments, causing crises  Money is constantly losing its value, discouraging saving and incentivizing spending, borrowing  High time preference What went wrong
10. 3- Ever-growing governments  All bank deposits are used to finance government spending  All society’s money is at the disposal of government.  All government errors are forgiven with your money  Government is protected from the consequences of their stupidity by your money, so their stupidity has magnified  Nobody understands opportunity cost  All politicians want to satisfy all causes. Any stupid idea can be funded  Why does government control your electricity, water, garbage collection, child health, and much more? Because it can, not because it should. And because government officials benefit, not for your good. What went wrong
11. 4- War, empire, and despotism  Under the gold standard, governments fought until they ran out of money  Under the fiat standard, governments fight wars until their citizens’ money runs out of value  This is why WWI lasted so long and why the last century was the bloodiest ever  The fiat standard is what gave us the century of total war  All tyrants and genocidal maniacs were financed by their local GBM  Imperialism becomes much easier to promote since citizens don’t see the costs What went wrong
12. 5- Hyperinflation  Only GBM can achieve a rapid destruction of the value of money in a society  57 recorded cases in the 20th century. Only one before, but it was also by a GBM 6- Capital destruction and flight  Reduces the incentive to accumulate and preserve capital.  Human, physical, and financial capital prefers to leavea  At some point in time, almost every country in the world implemented capital controls  Capital controls are counter-productive, as they scare capital from coming, and destroy the incentive to accumulate it  Far less capital controls under the gold standard What went wrong
13. 7- Balance of payments and trade problems  GBM makes individuals’ trade with the rest of the world a threat to the local currency and government solvency  Government imposes idiotic protectionist measures to prevent foreign exchange from leaving  These raise real prices more than the original inflation  Particularly destructive to capital accumulation  Creates trade wars, pivotal in starting real wars  Far less protectionism under the gold standard  Constantly shifting exchange rates makes international economic calculation very difficult What went wrong
14. 8- Protecting banks from market competition  Banks own/control the central bank, and use it to prevent competition  Central bank has an incentive to bail out banks  Banks have an incentive to take extra risk  Banks become a systematic parasite, constantly devaluing society’s money to their benefit What went wrong
15. 9- Kleptocracy  Being in power means being in charge of all of society’s wealth  Attracts the worst kind of people to power  Fiscal responsibility is political suicide. Elections are won by whoever promises to steal more money from people  Government doesn’t need the consent of its people when it owns their money  World Bank and IMF always stand ready to lend to incompetent governments. The more incompetent, the more lending  WB & IMF have virtually unlimited capital from US Federal Reserve.  No budget constraints, no market test, no accountability  They only know how to lend, and they are always lending. What went wrong
16. 10- International debt slavery via International Financial Institutions  World Bank and IMF always stand ready to lend to incompetent governments.  The more incompetent, the more lending  IMF & WB tell potential rulers: get rich and powerful by pillaging your nation’s future  Strong subsidy to criminal, wasteful and thieving governments  WB & IMF have virtually unlimited capital from US Federal Reserve.  No budget constraints, no market test, no accountability  They only know how to lend, and they are always lending.  IMF & WB get multinational corporations to pick at the carcasses of the pillaged nations What went wrong
17. 11- Universalisation of debt  As debt becomes money, the incentive to create debt rises  Debt issuance is to the fiat standard what gold mining is to the gold standard  Generating debt allows for the creation of new money, and increases the money supply  Generating debt devalues the existing stockpile of money  Generates an enormous incentive for everyone to get into debt  Everyone, individuals, corporations, and governments is constantly indebted, with no prospect for repayment. More income just means bigger debt What went wrong
18.  There are only three ways to improve material quality of life: 1) Capital accumulation 2) Trade 3) Technological advancement  The fiat standard heavily discourages and forestalls all three  The developing world consists of countries that adopted the fiat standard before they imported modern industrial technology.  Poor countries don’t need loans and aid. They need a free market monetary and financial system. The Fiat Standard and global poverty
19. BITCOIN FIXES THIS
20.  Bitcoin is the only working alternative to central banks and government-enforced banking monopolies.  Bitcoin allows for settlement of international payments as a purely technological operation, without recourse to political or legal systems.  There is no longer a justifiable rationale for governments and banks to collude via GBM  Bitcoin neuters governments by making the GBM obsolete.  It is the only alternative available because it is decentralized  Gold’s monetary policy is good enough, but its centralization means it will always end up captured by a GBM. This is what bitcoin fixes
21.  Bitcoin is money whose supply cannot be inflated by anyone. The hardest money ever  GBM currencies are built to be inflated and devalued to finance your local kleptocracy.  The economics of scarcity make Bitcoin more likely to hold on to value and appreciate over time as GBM shitcoins devalue.  Bitcoin doesn’t need people to be ideologically or politically motivated for it to succeed. This is what bitcoin fixes
22. Thank you! Online courses & research: Saifedean.com The Bitcoin Standard is now available in English, Arabic, French, Spanish, German, Italian, Korean, Traditional Chinese, Russian, Finnish, and Turkish. Soon to be translated to Simplified Chinese, Croatian, Polish, Hungarian, Japanese, and Vietnamese.