Book Review - The Bitcoin Standard & The Fiat Standard

Hello,

Whilst on holiday I managed go get some lounger time to catch up on some reading. The first book that I read is called The Bitcoin Standard, followed closely by The Fiat Standard. This is a follow up to the original with some more in-depth analysis of the first book covering the workings of the fiat system and how Bitcoin fixes this type of thought.

Rather than do two separate reviews, I thought they are pretty similar and I could cover them in one post. The great thing about reading this first book was I met a fellow Bitcoiner at the pool and he gave me a high 5!

I'll take the Bitcoin standard please Bob.

These books are on a small recommended reading list for those interested in crypto and bitcoin and after reading them, I can understand why.

The books are written by a professor belonging to the Austrian School of Economics. I think this school was founded by Ludwig von Mises who was Austrian and/or lived in Austria 😀. I presume thats why its called the Austrian school.

Generally the Austrian school is about the economic school of thought in economics that ties econmics to human action or scientifically something called praxelogy.

This ia markedly different from the mainstream monetarist school of economics that is about inflation and debasement of money that can be summed up as a few mathematical equations, or better known as mumbo jumbo led by Keynes, the leading economist thinker in this area.

Some famous Austrian economists are Hayek and Rothbard and they have written many books on the subject. The most infamous is probably the gold bug Peter Schiff who is famously anti-bitcoin and thinks that we need to return to a gold standard like before the Fed.

The Bitcoin Standard first spends alot of time covering lots of economics material that is pretty heavy going but condensed down for those new to the Austrian School. If you have read any Austrian Economics before, then it is nothing new and repeating what you already know through many of the standard texts on the subject.

What I was mostly interested in was if and how Bitcoin and other cryptos could be classed as money and what the author thought about this and how deep his knowledge was and any biases.

After the first 7 or so chapters of economic theory and explanatios of what is money, its function, history etc, there is some good information about the fiat system and then bitcoin.

It starts getting into the crux of the topic and really shows that Bitcoin could be the replacement monetary system of the future with its many benefits and that good money will drive out bad.

There is a nice intro by Michael Saylor for Saylor fanboys and girls.

Some good points raised for me were the fact that bitcoin is an asset backed monetary system that will maintain or grow its value over time. Everyone will be forced to invest at some point in Bitcoin or they will end up continually losing wealth compared to those who do.

The other thing with bitcoin having an open and transparent ledger compared to fiat, makes it a far more honest and just monetary unit than a fiat currency that is continually debased and benefits those who can get access to debt instruments first.

The crux of the fiat debt money system is that those who get access to debt and buy productive assets, and manage this debt, will be the most well off in society. This is then in more details explained in The Fiat Standard book where the author even praises the cleverness of the fiat system even though he thinks it is ghastly.

The book also goes on to explain how the fiat monetary system has changed all aspects of our lives and society as money is the life blood of the economy. Sadly this has not been in a good way. There is a bitcoin saying that a society has been infected with the fiat rot and this book explains how in great detail.

For example, as fiat money does not hold its value, peoples time preferences are much shorter, so people do not save for the future as much and therefore the soceity is much worse off for its capital investment and goods and technology invested. I guess we can see this in real life countries where they have had very high inflation and it can cause a collapse of the economic system.

There are many other bad side effects of fiat money 💸 such as people buying up hard assets in order to try and preserve some store of value. We see this in housing for example and the author tries to get us to imagine where assets will stay at similar values year after year like on a gold standard.

Some chapters of the Fiat Standard I had to skip through as these were ideological ramblings of the author and I did not agree with all of it, such as his eating preferences, I think these things are far more subjective and not layed out in concrete as he portends.

However, the books come into their own in many sections and the worst elements of the fiat system are explained in the books covering the centralisation of power and the power of banks being able to create money from nothing. Those connected with the money printers do very well, at the expense of everyone else and the consequences for society.

Usually this level of debasement leads toward a collapse of a civilisation. I don't know if we are at that level though.

Yes, that is my knee

The biggest moral questions are raised in the book such as about our society having a monetary system built on theft through monetary debasement... what does that say about our society and its morality and how that purveys itself throughout many aspects such as in art, buildings, people's behaviours etc.

The books also looked at some of the possible weaknesses of bitcoin and its wide scale use as money. Such as the limited number of transactions and that this may only be useful for central banks to use as assets because of the cost and size of moving them may only make sense and for smaller transactions, a centralised system is more efficient and not necessarily necessary to have bitcoins great decentralised security in moving €10m vs say €10. This was explained well in the Lightning section which also compared to how Visa settles transactions.

There were also some arguments that banks could move back to their traditional business and that is of custodial services instead of all this speculation, lending and debasing the money supply, as although bitcoin removes the need for banks, many people may still want these services.

Overall, the author of this book is orange 🍊 pilled, but still holds onto many facets of the mainstream propaganda which can make you shrug now and then.

The main thought and takeaway I took from the books is that even those heavily invested in the fiat system may want to have a store of value for their wealth, so this is something that could be the reason for the adoption of the Bitcoin Standard and why it hasn't been stopped in it's tracks yet.

There is a great inequality in the world and things need be made more fairer and adopting the Bitcoin Standard looks like one way that could happen. How this will affect our society remains to be seen though.

Credits:
The title image and photos are my own creation.

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