The Case for Fiat

The Rebuttal Against the Austrians

Many have made cogent arguments for a stable money- a decentralized monetary system, tied to mathematical or physical reality that doesn’t allow politicians or economic elites to profit from Cantillon effects. However, to the surprise of the Bitcoiners and Goldbugs, many in the mainstream are slow to adopt their ideas. Why?

It’s time to make the Case for Fiat.

(Note, I do NOT believe all the arguments made in this piece. This is an attempt to present the Devil’s advocate- the rebuttals to the Austrians and others who so desperately want the current economic apparatus to end. I strive to not be caught in echo chambers and here I can present the oppositional views so they are at least understood)

The Austrian points will be made in bold, the fiat arguments in italics.

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The fiat system is immoral and evil. It corrupts and robs; enriches the wealthy at the expense of everyone else; and allows the ever-creeping growth of government surveillance and control. Inflation steals from the working class and rewards those institutions and individuals closest to the money printer- all while economic ignorance abounds as to the causes of the loss of purchasing power. 

Immorality or being “evil” is not a sufficient force to stop a system. Many “evil” systems (or, organizations that have done both evil and good) have existed for hundreds, sometimes thousands of years. The Mongol Empire, the Catholic Church, Tsarist and then Stalinist Russia- all were evil in some form or another, persecuting religious minorities, dissenters, and rebels, as well as oppressive against everyday people. 

Yet they existed for much longer than many thought. 

Most people feel powerless in the face of organized evil. Some even join the oppressors, coming up with rationalizations and arguments for why they are justified. Ordinary Men details the slow slide from normalcy into atrocity that a group of middle-aged German policeman undertook in the Second World War. Browning (the author) posits that the majority of the individuals in RPB 101 were not fervent adherents of Nazism. Instead, they were regular middle-aged, blue-collar men who engaged in these heinous acts for a variety of reasons. These motivations encompassed conformity to group dynamics, deference to authority figures, adaptation to their assigned roles, and the distortion of moral standards to rationalize their deeds. 

The same can be said for Stalinist Russia. Or the Khmer Rouge. Or Wall Street.

Those within the apparatus turn a blind eye, either because they are too afraid to stand up or they are directly profiting from the crimes committed, whether that be something as gruesome as outright murder or as mundane as white collar crime.

So a system can be immoral- indeed deeply immoral- and still survive. Some of the worst atrocities on earth were committed by ordinary people. And it took decades for the atrocities to end.

Immorality aside, the system is broken!

Broken in relation to what? If one considers the alternative- a pure gold based economy where everyone has to carry around flakes of gold dust to pay for coffee, or a barter system with the double coincidence of wants slows economic activity to a standstill?

The system is patchwork. Flawed. But it's better than the alternative- which is essentially nothing. It’s been working well enough to grant us massive innovation in artificial intelligence, technology, medicine, engineering. Sure, the pace of invention is slower than it might be under a different system- but isn’t that good? Societal change that is too rapid can dislocate people, which we are already seeing.

The “broken” system you speak of helped to lift billions out of poverty, and funded wars against communism and fascism. Governments, although flawed, protect the people from themselves and their own ignorance. High-IQ academics and analysts are much better equipped to deal with the shifting and complex geo-political landscape than everyday citizens.

Everyday citizens should have the right to choose the correct system.

Everyday citizens know almost nothing about the financial system, or indeed the political and economic system of the United States. In 2008, the Intercollegiate Studies Institute (ISI) found in its study Our Fading Heritage that 71% of Americans of all backgrounds, incomes, and education failed a basic civic literacy test. 

Youtube videos abound of Americans not being able to say the number of States in the Union, or the location of countries like France and China. What makes you think they can make informed, intelligent decisions about the financial system?

They should be able to. It's their right. 

This is the fundamental flaw of your thinking. You are working on the basis of “should”. What “should” happen, what “should” be right. But the world doesn’t operate on this basis. Most people don’t want the responsibility and duty of learning and understanding how the financial system works. Most people don’t want to hold ownership over their own private keys.

Most people don’t even want the right. If they did, Bitcoin would gain cult-like popularity overnight. But it hasn’t. Instead, what trends online? Fortnite. Tiktok. Pornhub. MrBeast.

The Bitcoiner’s fatal flaw is that they see the world as they WANT it to be, not how it ACTUALLY is. They are rugged individualists, libertarians, followers of Mises and Hayek. Their lens is orange-colored, their viewpoints Austrian. Lazer eyes and beef is all they consume.

But most people aren’t like this.

Most people want to go to work, come home, watch a movie, and go to bed. They watch Youtube and Netflix, they drink a few beers, they eat pizza. They don’t read libertarian philosophy, or read about monetary history, or watch videos on the technical functions of Open Market Operations.

Similar to people who are extremely creative, or musically gifted, or politically extreme- the majority of the population doesn’t see the world in the same way you do.

Convincing the general public to change is near impossible. I mean, can you make anyone interested in something? Not really.

Look at Michelle Obama’s Let’s Move Initiative launched in 2010. It was a joke. No one was motivated to work out because of that.

Those people will change their minds, there’s every incentive for them to do so.

Maybe from your point of view. It's much harder to leap into Bitcoin when you are 75 years old, and have lived in the fiat system your entire life. There’s been a 40 year bond and equity bull market. Why would anyone, especially those with most invested in the current system, see the incentive to dump it all and gamble on a new currency that they have never heard of before?

Remember who holds the wealth in the U.S., and indeed the West in general. It’s not Gen Z or Millennials. It’s the boomers and Gen Xers.

Most people are not risk takers. Most people do not have extremely high IQs. Most people are not interested in software or cryptography.

The ones who own the majority of the assets are old and ingratiated with the current system

They won’t change until they are forced to. This means pain.

Bitcoin will improve economic growth.

Will it? A true Austrian-based economic system has not been around for at least 125 years. Longer than that if you consider fractional reserve banking as an aberration of the system. 

Even if it does, that may take a decade. Imagine the short term pain of the entire monetary system unwinding. Not only are we talking the destruction of elites and politicians’ wealth- we’re talking about everyday people.

Grocery store owners in a rural town. Retired school teachers. Plumber’s apprentices. Doctors, lawyers, engineers- all their life savings, gone. Many will have next to no Bitcoin in the new system.

HyperBitcoinization could be a Great Reset all on its own. And what do you say to the newly impoverished and destitute? “Good luck, sucks to be you!”??!

It will take time to adjust to a new system with a fixed set of monetary units. If all fiat currencies are to fail- this process could take half a decade to play out, at least. Along the way there will be severe price volatility, even in Bitcoin terms, as demand ebbs and flows with the convulsions of a dying system.

The new system will be more equal.

Equal for whom? The majority of people right now own either a negligible amount of Bitcoin or none at all. The Bitcoiners who have been stacking for years will be newfound millionaires and billionaires. Those who have some will be thousandaires. 

There will be losers in this new paradigm. They will most likely be your parents and grandparents.

Bitcoiners hold onto their coins with a religious fervor- meaning that as the current system unwinds and the price goes to the moon, there will be few sellers. Closing the gates even firmer on those clamoring to get in.

Yes, the new “elites” may be more moral. More principled. 

But can that be said of several generations down the road? Won’t apathy, opulence and elitism come back, like it always does?

The new losers in this system will be scrambling for a few sats at a day job while wealthy whole-coiners parade around in vintage cars and tailored suits. Remember, Bitcoiners are people- not an idea.

What demographic takes up the majority of whole-coiners? Mostly wealthy Western men. 

Is that so different from our current setup?

Bitcoin will end violence and wars.

By stripping the State of its normal ability to tax and inflate away debt, sure you cripple their ability to wage violence. But all this means is that a fiat state is more dangerous than a Bitcoin one.

Consider two nations- one backed by Bitcoin, the other backed by fiat. Even if the Bitcoin nation “wins” with economic growth in the long run, does this really matter if they are getting invaded?

The fiat nation will be able to harness the resources of its people, steal wealth from the future, borrow extraordinary sums, etc to finance its warmongering. The Bitcoin state won’t be able to do that.

There is a clear advantage here, at least in the short run. 

The only way this doesn’t play out is if every nation on earth moved onto a Bitcoin standard. How likely is that to happen?

Bitcoin will end oppression.

Will it end some? Maybe. But all? 

The world, from 1950-2000, grew significantly more democratic, open and liberal. Yet North Korea still exists. Stalin’s Russia still existed. If people are forced at gunpoint to accept a fiat system, most will. 

Freedom is only worth dying for to those who value it. Most people don’t value it over their lives.

Bitcoin does not mean the end of wealth, or greed, or hatred, or violence, or any other human condition. Does it change the manner and way in which these desires are displayed? Maybe. 

Wars can still be fought. Shootings and killings can still happen. 

It could even be argued that Bitcoin could increase violence. With the dismantling of the State, a new power vacuum will need to be filled. In unstable locales, such as in the Middle East or Sub-Saharan Africa, the bloodshed could accelerate, not slow down. Ethnic and cultural differences could amplify, and without the steady hand of the police and local government (for a while, at least, until it could re-adjust to the new system) chaos and violence could rule.

The State presents a comfortable belief, a semblance of safety. With the majority of tax revenue gone from its coffers, it would have little defense against a strong and organized militia. 

Tax evasion will not be hard to do. Warlords and gangs, enforcing local taxes will violence, will be harder to evade.

Remember, the government is not all evil. It provides societal stability, even if much of that stability is an illusion in the minds of the citizenry. A lot of crime is prevented by the mere existence of a strong, centralized state with a judicial system.

Bitcoin will fix the legal system.

Will it? Imagine a world where monetary assets could not be seized, where funds could not be gained without prying seed phrases from people’s lips or devices. If your friend defrauds you today, you can sue them in court. The judge can issue account freezes, wage garnishments, and more. This is near impossible on a Bitcoin standard.

If someone refuses to pay, the only recourse would be jail. Literally hundreds of thousands of cases are tried in small claims courts every month- imagine if all these people had to go to jail. The jail would be full!

A whole new legal framework would have to be developed in civil, criminal, and corporate law to accommodate the uniqueness of the new currency. Legal scholars could debate the minutiae for a decade and not come up with a satisfactory answer. 

Bitcoin might simplify some parts of the legal system, but it would complicate others.

The fiat system is based on theft.

Sure, but again that’s been the norm for most of human history. Slavery was commonplace in basically every empire. Who built the Parthenon, or the Colosseum, or the Pyramids? 

Most empires, and indeed nation states, used slaves to build infrastructure or do menial labor. The Spartans were a warrior class only because there were helots, slaves who were bound to them and could not be sold or freed. Basically every people and tribe had them- and slavery is the epitome of theft of one's labor and time. With the fiat system everyone is slightly enslaved, but this is normal.

Most people work their 9-5, come home, watch sports or play video games, drink a beer and eat a pizza, and go to bed. They are too distracted with daily comforts to worry if they are being robbed. 

Even if they were, what can they do about it? What can anyone do against an institution as mighty and ephemeral as the IRS or the Fed?

Most people feel disempowered. Alone. Helpless. 

They will not unite until things get extraordinarily bad. And they haven’t gotten there yet.