Countdown to Christmas
9 - Sound Money
The principle of sound money that guided nineteenth-century monetary doctrines and policies was a product of classical political economy. It was an essential part of the liberal program as developed by eighteenth-century social philosophy and propagated in the following century by the most influential political parties of Europe and America. [...] It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights. The demand for constitutional guarantees and for bills of rights was a reaction against arbitrary rule and the nonobservance of old customs by kings. The postulate of sound money was first brought up as a response to the princely practice of debasing the coinage. [...] Thus the sound-money principle has two aspects. It is affirmative in approving the market’s choice of a commonly used medium of exchange. It is negative in obstructing the government’s propensity to meddle with the currency system.
- More than two billion people are currently experiencing the effects of double or triple-digit inflation. This means they are suffering from seeing their wealth decline and real wages drop right in front of their eyes…in real-time…through no fault of their own. While the causes of inflation are multi-layered, liberals from Mises to Friedman have always highlighted the importance of monetary policy.
- sound money ≠ stable money. While stable money can (at least in theory) be achieved through skilled central bank policy; sound money is more political & normative. By limiting the government’s ability (and propensity) to manipulate the currency system for its own ends and allowing people to choose their preferred medium of exchange freely through a market process, sound money aims to limit government power and expand individual liberty.
- While the debate between sound and fiat (i.e. created out of thin air) money seemed to be settled for a long while, the emergence of Bitcoin and the astronomical rise of global inflation rates in recent years, have once again sparked interest in the topic.
Gift Idea
Crypto Bros & Gals will have a hard time this Christmas. It’s that time of the year when our boomer relatives are mocking our early retirement plans of last year and accusing us of shilling magical Internet money at the market top. But “Hey!”, at least people are still talking about it, right? (That was different in 2018)
So, instead of lamenting about your portfolio being down bad, you might want to seize the opportunity and do some ideological work: Open wtfhappendin1971.com on your smartphone and let them browse through the astonishingly widespread consequences of fiat money. Now that you have their attention and the realization that the fiat system is doomed has settled in, tell them about the difference between Bitcoin and shitcoin—and why they should probably sell all their remaining Doge, Solana, or Ethereum (no financial advice). And lastly (and most importantly), help them to take their satoshis off a centralized exchange and put them in self-custody, like a proper self-sovereign individual.
