View profile

The Economics of Bitcoin (The Bitcoin Consultancy - Issue 4)

The Bitcoin Consultancy
The Economics of Bitcoin (The Bitcoin Consultancy - Issue 4)
By David Veksler • Issue #4 • View online
Since the dawn of humanity, mankind has been striving for a better life. It’s what makes us human.
If your father plowed a field, you built a dam to flood it so you can increase the harvest. Your son will build a water wheel on that damn to mill the wheat.  
We call this “economic growth.” Despite the rhetoric of some, untamed nature isn’t friendly to human beings. It wants to kill and eat us. Even rabbits and deer will eat your carcass, given the opportunity.
So, humans naturally want to better our situation vis-à-vis nature through capital accumulation. Capital may be material or intellectual, but slowly over the eons of history, and much more rapidly recently, it has made life more comfortable.
Saving the surplus of what we produce is what allows us to build a better future. Money is what human societies inevitably invent to have a universally accepted store of value. Saving money is a necessary part of all material progress.
Even primitive tribes such as the Mundari tribe of Africa use cattle as money. They would like to acquire more cattle, but they have reached the limit of what they can sustain given their environment and their cultural capital. Humanity as a whole has not reached a limit. We are accumulating more capital every day. Global poverty fell from 94.4% in 1820 to 9.2% today.
Not only does humanity have more wealth than ever before, but we are creating it at a faster pace than ever before. Not only that, but the pace of change is accelerating too, and so is the pace of the pace of change, so there are at least three derivatives in the progress of acquiring capital.
It’s not a great mystery why this is. The more people there are, the more we can specialize, the more we can collaborate, the more minds there are to invent new ideas and capitalize on them. Human beings are more than the sum of our minds, but a synergy, and perhaps one day, a singularity of progress.
This is why ever since the times of Babylon people have saved and lent their money. In a growing economy, a fixed quantity of sound money (like gold or Bitcoin) will keep increasing in value. This is because the same supply of money is needed by an ever-larger economy. We can further increase the value of our savings by lending it out. By lending our money, we forfeit current pleasure to use the stored energy of our labor to accelerate the success of others. That is how savings have always worked. 
Until the Federal Reserve Bank of the United States set interest rates near 0 in 2008. Saving doesn’t pay anymore, because the government is creating vast new money to support the welfare state - I mean mostly the welfare of powerful elites. Not only does our money lose value every year due to inflation, but it’s also impossible to benefit from economic growth by lending it out in a savings account.
This is why the majority of households now own stocks – not because they want to be market speculators, but to safeguard their wealth and share in the growing economic pie.
Governments are making life more and more difficult for savers. Not only are our savings progressively less valuable and less profitable, but governments confiscate them with capital gains taxes.  
If you buy a house for $100K and sell it for $200K, you owe taxes on $100K. But how much of that gain is due to the government making the dollar worth less?  No matter how you try to shelter your savings from inflation, the politicians want a cut.
Democrats are now proposing to tax “unrealized capital gains,” which means you will owe taxes even if you didn’t sell your assets. While these proposals are currently limited to “billionaires,” the income tax was originally only for the top 3%. The inevitable bankruptcy of the welfare state means the political class will be increasingly more desperate to sustain their spending spree with even more brazen wealth confiscations.
It’s not a coincidence that economic progress in the U.S. slowed dramatically in 1971 after Nixon ended the gold standard. To restore the pace of human progress, we need to take money out of the hands of the State. 

The Economics of Bitcoin with Daniel J. D’Amico
The Economics of Bitcoin with Daniel J. D’Amico - Bitcoin One On One Episode #2
The Economics of Bitcoin with Daniel J. D’Amico - Bitcoin One On One Episode #2
The Economics of Bitcoin is the second episode of the Bitcoin One on One Podcast.
Daniel J. D’Amico is the Associate Director of The Political Theory Project and a Lecturer in Economics at Brown University where he teaches and coordinates student programs dedicated to the study of institutions and ideas that make societies free, prosperous, and fair.
Episode Notes:
4:00 How governments create perverse incentives in criminal justice by manipulating incentives
5:56 FA Hayek predicted Bitcoin
8:15 Why is it important to have money that is not controlled by the government?
12:20 Business cycles are a phenomenon enabled by fiat money
13:13 Three problems with fiat money
15:30 Will all fiat currencies collapse?
17:00 Does Bitcoin have a secret back door?
19:20 The “moneyness” of Bitcoin
24:00 The blockchain as a revolutionary technological innovation
24:50 Is Bitcoin better than gold?
26:50 How much of a threat is inflation?
30:45 Why are interest rates so low?
32:30 Low-interest rates cause business cycles
34:20 Bitcoin holdings as savings
36:00 Is Bitcoin a good currency today?
37:10 How the volatility of Bitcoin decreases with Bitcoin adoptions
38:50 How Bitcoin will win in the long run
47:50 What’s your strongest criticism of Bitcoin?
49:40 Why the entire world will soon have access to Bitcoin
50:30 Will governments shut down Bitcoin?
53:20 Did China’s Bitcoin ban work?
Ready to get started with Bitcoin?
Crypto 101, One on One” is your personal deep dive into the cryptocurrency space.
I will teach you both the essential skills and advanced techniques needed to be successful in Bitcoin/crypto, whether you are an investor, HODLer, or want to join the blockchain ecosystem.
Crypto 101, One on One – The Bitcoin Consultancy
Next: The HODLers Guide to Personal Finance
My next email will present “The HODLers Guide to Personal Finance”
So you bought Bitcoin. Now what?
Bitcoiners are excited about Bitcoin’s ATH (all-time high) this week. But there is more to Bitcoin and crypto assets than the latest price, and there’s more to being an enthusiast than just HODLing it.
If you want to understand the potential of Bitcoin, you need fully engage with the Bitcoin ecosystem.
I will discuss topics such as:
  • Why HODLing Bitcoin isn’t enough
  • How to think about allocating Bitcoin vs stocks/bonds
  • Where and when to buy Bitcoin (dollar-cost-averaging vs market timing)
  • When to sell Bitcoin within the context of your personal financial goals
  • How to spend Bitcoin to fund your lifestyle
  • Avoiding paying taxes on Bitcoin with tax-smart moves
Stay tuned for more Bitcoin & cryptocurrency insight!
Did you enjoy this issue?
David Veksler

The Bitcoin Consultancy (Formerly
A weekly newsletter about the history, finance, and technology behind Bitcoin.

In order to unsubscribe, click here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Powered by Revue