Broken Money

The subtitle is Why Our Financial System is Failing Us and How We Can Make it Better, and the author is Lyn Alden (2023).

I feel like I have read books like this one before, which deconstruct the problems with a fiat monetary system and the issues of inflation / rampant money creation.  That said, the author does a nice job of supplementing the traditional view.

-The story over history is that hard money eventually wins out over weaker money.  Until now.  And the reason that fiat currencies won out in the recent era is because telecommunication systems introduced speed as a variable to the competition.  Gold/commodities inherently take longer to transport and authenticate, an inconvenience in the digital age.

-The short-term view that every politician has to take means that the problems of perpetual debt growth can never really be addressed.  It is not a problem that can be attributed to one politician or party.

-The reason that 2008 did not cause inflation was because the bailouts went to the banks and the average person did not have more money.  But the expansion of broad money during the pandemic did end up in the hands of average people, which meant that more money was chasing the same amount of goods and services.

-Bitcoin represents a solution to the speed gap between transactions and settlement.  And it has the added virtue of maintaining characteristics which resemble hard money (decentralized, no one else’s liability, high stock-to-flow ratio).

Layered Money

The subtitle is From Gold and Dollars to Bitcoin and Central Bank Digital Currencies and the author is Nik Bhatia (2021).

And further down the bitcoin rabbit hole we go.  This one was a short and easy read that looks at the history of money and how bitcoin can/does represent what gold used to be.  In particular, the author thinks about money in terms of layers.  The first layer, which is the primary asset without counterparty risk, used to be gold (as an example).  And each layer removed (gold certificates being next) carries slightly more risk, as it represents someone else's liability.  When we moved past the gold standard period, and into the era of dollar dominance, the first layer has been US Treasuries (even though they are actually liabilities of the US government), from which the Fed issues reserves to private banks as a second layer, who then make loans to retail customers as a third layer.

While less explicit in taking an Austrian view of things, the author definitely believes that the Fed has gone off the rails with its dollar creation (particularly since 2007), and that the world is primed for a new reserve currency asset -- of which bitcoin is a clear and obvious choice.  No one controls it, it is government-free, and also universally accessible with a computer.  Also, as compared to M. Ammous, he notes that the evolution of the Lightning Network has created greater efficiencies for bitcoin to be used in retail transactions.

And we learn a little more...

The Bitcoin Standard

The subtitle is The Decentralized Alternative to Central Banking and the author is Saifedean Ammous (2018).

When I looked around for a book that makes the investment case for bitcoin, this title kept coming up.  The author is an economist who subscribes to the Austrian school in his thinking.  You could expand that to say, substitute bitcoin with gold and you might have heard this story before.

The prevailing argument in favor of owning bitcoin is that it represents a hard currency that removes the need for any third party intermediary or trust between counterparties.  In a world of credit cards and wire transfers, coupled with endless bureaucratic overreach that invades your privacy, bitcoin is a currency that is peer-to-peer without any bank or other entity in the middle.  It only requires processing power to verify transactions amongst a network of nodes around the world that are totally decentralized.  Moreover, bitcoin's protocols ensure that there will never be more than 21 million coins created -- removing the ability for any government or centralized body to print it and inflate it away -- and so it goes that it represents a store of value, in the same vein as a precious metal with a high stock-to-flow ratio.  To put more of a fine point on it, as bitcoin's value rises, there is a difficulty adjustment that leads to even more processing power being required to commit transactions to the network, which is what leads to the creation of new bitcoin.

Much of this book is spent making the case for free markets without central planning and government intervention.  The author does a perfectly fine job of making that argument, but it's not the reason to read this book.  Notwithstanding that, he does draw an interesting connection between unsound money and war -- in particular, unsound money adds complexity to trade flows, due to the multiple currencies untethered to any standard involved, which creates animus; the ability to print money means that governments can continue fighting endlessly, where they used to be limited by the tax dollars that could be raised to fund such excursions; and sound money leads people to have a lower time preference, which generally leads to more cooperation.

The other interesting takeaway is how the author dismisses the notion that blockchain technology has so many important uses outside of a digital cash system.  To his mind, the technology is not a particularly efficient, cheap, or fast way to transact online.  It was created to operate as a sound, digital money, without any form of intermediation in the middle, and to promote individual sovereignty.  And in that endeavor, it has succeeded.

The Authoritarian Moment

The subtitle is How the Left Weaponized America’s Institutions Against Dissent and the author is Ben Shapiro (2021).

The story is one that I have dwelled on before – the lunatic left, while a minority in numbers, has somehow managed to hijack and coopt the message and views of corporate boardrooms, universities, the media, and the Democratic party.  And, in doing so, has used that position to silence its opposition in ways that are authoritarian and draconian, all with a view to gain leverage and power.  Theirs is a message that decries individualism and meritocracy, and harbors on disparate outcomes as if they are at all times and in all places the result of something evil, leading to policy and ideas that are bereft of logic and which fail to serve the greater good.

To wit, the pandemic offers an example of what I mean.  When it came to the vaccine roll-out, with the explicit understanding that the elderly were always the most at-risk, CDC officials pushed for a plan where essential workers were treated first, acknowledging that it would likely lead to more deaths by up to 6.5%, because “racial and ethnic minority groups are underrepresented among adults over 65”.  This view was endorsed by other public health officials, including an expert from Penn who actually said: “Older populations are whiter.  Society is structured in a way that enables them to live longer.  Instead of giving additional health benefits to those who already had more of them, we can start to level the playing field a bit.”  Because we live in a world where systemic racism allegedly is the biggest problem going, these are the ideas that get oxygen.

The foregoing anecdote represents the corruption of science to serve a political end, but the impact of the Authoritarian Left is felt across industry.  I have seen it in my professional life where diversity training, which is effectively racism by another name, is mandated.  Institutions of higher learning largely have no faculty members these days who represent anything other than the Leftist view.  And there are only too many stories of corporations and media companies who fire corporate leaders and others for suggesting that America is not just some systemically racist place.

I don’t have any clever rhetorical flourish or deep takeaway to close today.  I will simply say the book is an eye-opener (if you need one) and worth the read.

Quote of the day

 Courtesy of Tyler Cowen:

"One thing the contemporary world definitely has not come to terms with is how much a highly feminised culture will be (rather strongly) enforcing new forms of discrimination, albeit cloaked under different and rhetorically emancipatory principles."

An Interesting Aside...

In writing this blog, I clearly made the decision to remain anonymous.  So, when I relate stories from my real life, my sharing will be always be limited by the first sentence.

With that said, I will soon be forced to participate in racial sensitivity training sessions.  Not because of anything I've done, but because of a professional association with a company that has totally bought in on the idea of systemic racism.  No doubt, I know to keep my thoughts to myself on this topic.  The interesting factoid is that we were provided with some reading materials to review in advance.  And my main takeaway is the following...

There is plenty of evidence if one looks at this country's history of grave injustices and governmental action that is clearly reprehensible.  Those periods in time, those laws, those court cases, those policies, need no further explanation to see what they are and the motivations behind them.  But, there is also plenty of history of our country recognizing these wrongs and then doing something to correct them, such that it is much better to be a minority, women, etc. today than at any other point in time.

But, what the advance readings seem to be doing, one and all, is referencing these histories, and then offering a data point about today, as if one is clearly caused by the other, but not doing any of the work to show you how.  These works clearly choose to ignore the possibility that something else may be going on (h/t Thomas Sowell).  For example, there was slavery in this country and the founding fathers owned slaves.  You know what else, today black families have lower median incomes than white families.  Two facts, not sure that they are necessarily related.

Over and over, the practice seems to be, here's the belief and conclusion that we want to draw, here's some data that could be interpreted in any number of ways, we offer no additional context other than what happened 150/100/50 years ago, go draw some conclusions.  I guess that I would expect more from a theory that seems to be taking hold of our government, corporate boardrooms, and every single school and university.

But maybe I am asking too much.

Discrimination and Disparities

The author is Thomas Sowell (2019).

I like folks who formulate their views of the world based on facts rather than groupthink and emotion – and, better yet, understand that there is commonly more than one reason for why something has happened.  Sowell fits that bill.  And this book makes that point.

It is very much written to be a retort to the politics and prevailing views of today.  His premise: “…we should not expect success to be evenly or randomly distributed among individuals, groups, institutions or nations in endeavors with multiple prerequisites – which is to say, most meaningful endeavors.”  In other words, we should not ever expect equality of outcomes, and always trying to explain such reality in the form of an -ism or malevolent action is incredibly naïve.

He does a good job of explaining, so I plan to quote generously:

“People from different social backgrounds may also have different goals and priorities – a possibility paid little or no attention in many studies that measure how much opportunity there is by how much upward movement takes place, as if everyone is equally striving to move up, and only society’s barriers produce different outcomes.”

And:

“Social mobility is the extent to which a society permits upward and downward movement.  How much movement actually takes place depends also on the extent to which individuals and families avail themselves of the opportunities.  Measuring social mobility by how much movement takes place proceeds as if nothing depends on how individuals and families behave.  That certainly avoids complications for those promoting the prevailing social vision.  But it also avoids empirically testing that vision.”

To wit:

“Deliberate, biased suppressions of other people’s opportunities are just one of the various other impediments to equal outcomes.  But those things which offend our moral sense do not automatically have more causal weight than morally neutral factors such as demography, geography or language differences.”

His book reminds me of what Douglas Murray had to say – the utopia against which our racist and sexist society is compared simply has never existed.  We have never seen equal outcome, distributions, or proportional representation.  And complaining in advocacy of something which is unrealistic strikes me as a waste of time and resources.