Does Fiat money ruin everything? Michelle Makori, Lead Anchor and Editor-in-Chief of Kitco News, engages in a conversation on this subject with Jimmy Song, Bitcoin Developer, Educator, and Entrepreneur. Song delves into the drawbacks of the Fiat system, emphasising how it distorts incentives in both personal and professional spheres, ultimately causing havoc. He advocates for the obliteration of the current Fiat monetary system, analysing its pitfalls and discussing how Bitcoin could serve as a viable replacement.
For a glimpse of their discussion, continue reading, or watch the full video by clicking the link here.
Michelle: Give us the overall big picture, the broad thesis of how Fiat ruins everything
Jimmy: The system of central banking that is allowed to put new money into existence changes the incentives all over the place. In our personal lives we don’t have savings vehicles, so that changes our behaviour or the incentives that most people have. Companies have access to these large loans, which means they must be big enough to qualify for them and often live out an existence without providing value to anybody. That causes distorted incentives all over the place in the economy. Governments can print money to buy votes, which leads to many distorted incentives. Things are all just quite different than they would be without the presence of Fiat money.
Michelle: In your book, you say Fiat money has in fact caused civilization to regress. The incentives are skewed, and merit is no longer a consideration. You could argue that it’s not disincentivizing people because they’re motivated to get the Fiat and because it is so fleeting, you’re driven to work harder…
Jimmy: Yes, and people certainly do that. It just turns out that going down the invention route or serving the market route is significantly more difficult than going down the rent seeking route of investment banking, for example. Banking is the ultimate rent seeking position where you’re getting in the middle of people’s money and collecting it in some way. That’s the place to make the most money for the least amount of time… in a Fiat money economy you have this alternate way of making money which involves rent seeking i.e., basically getting in good with the money printer.
Michelle: I know that you offer Bitcoin as a solution to the Fiat money problem, but Bitcoin doesn’t have any intrinsic value. Why does Bitcoin not fall into this category?
Jimmy: Certainly, the price of Bitcoin does have some of that dynamic going for it because it is a good store of value and people do not want to get debased on the dollars that they’re holding, so they want to put it somewhere else. If you’re doing that with stocks or real estate or so on, they’re much poorer stores of value I would argue because real estate has lots of transaction costs, lots of taxes and with stock you’re subject to all sorts of vulnerabilities which is why a lot of stock analysts are obsessed with diversification.
Michelle: With Spot Bitcoin ETF approval in mind, are we really adopting Bitcoin if it’s not working as a currency, and it’s effectively centralised with institutions that monopolise much of the supply?
Jimmy: It’s a step in the right direction. For those people that are really using Bitcoin as more of an investment; as a savings vehicle, they may or may not get burned by that. If you have an ETF the thing that you can do is fractional reserve lend. I guess the equivalent would be something like a naked short on that ETF and expand the supply. If you do that then there is incentive on the other side to withdraw the actual Bitcoin and because there’s a fixed limit, there is an absolute scarcity here.
The overall sentiment is that Fiat has led to a lot of problems, perhaps not the root of not all evil, but a lot of evil in society. Watch the video now and hear Jimmy discuss this subject in depth in this thought-provoking interview with Michelle!
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