Milton Friedman famously said, “Inflation is always and everywhere a monetary phenomenon.”
This idea has generally been regarded as bad ever since. Recently the nabobs at the Federal Reserve thought so poorly of it that they decided to stop producing reports of M1 and M2 money supply every week and will now produce them every month instead.
Of course, it is in the Fed’s interest to not report its constantly expanding money supply. And so, like a good bureaucrat, it’s dropping the reporting bit by bit. Perhaps it is right. What is money anyway?
A little after 6:00 this morning, our resident gold bug, Luke Burgess, Slacked me with this bit of knowledge:
“In the first edition of the Encyclopedia Britannica, dated 1768, money is defined thusly…
“‘A piece of matter, commonly metal, to which public authority has affixed a certain value to serve as a medium in commerce.'”
Bits Don’t Matter
This was interesting. “The piece of matter” was the relevant idea. Is Bitcoin matter? Does it have mass and take up space?
According to Brett Selph at Quora, the answer is no. He writes:
If by “bit” you mean a binary digit in the conceptual or mathematical sense, the answer is an absolute No.
If you mean bits stored on a physical device, the simplest approximate answer would still be “no” — neither bits nor bytes have mass in any “uniform” or conventional sense.
However, in the strictest sense, “bits have no mass” isn’t EVER true of physically stored bits, because all erasable storage devices, whether magnetic or capacitative, undergo a slight physical rearrangement of either electrical charges or magnetic orientations when bits are stored.
So neither bits, bytes, nor Bitcoin are matter except when stored. Therefore, by the definition of money from 1768, Bitcoin is not money!
I thought this was brilliant as I downed my first cup of Duncan’s Original fine-ground coffee and wondered what impact, once leaked, this would have on the looming Coinbase IPO… The Wall Street tremors would be enormous.
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But Luke, being always on the negative side of abstract monetary thought, wrote, “Well, either way, it was 1768. If they could have imagined digital assets, maybe they would have just said ‘an asset.’”
It was the “public authority” that mattered to Luke. He wrote, “Basically, money is whatever you can pay your taxes with.”
I concur in both in the limited and in a broader way. Money is the right of power, and all power ultimately derives from the military.
The U.S. Navy has 13 aircraft carrier fleets with destroyers, guided-missile cruisers, and nuclear submarines with which it can extend a massive force anywhere in the world at any given time.
For example, the Theodore Roosevelt Carrier Strike Group, which steamed across the Pacific last year, consists of 49 fighters or fighter-like jets and various ships containing 590 missile silos, each carrying one or more missiles. One of these carrier groups can destroy human civilization and most humans with it.
This is why the U.S. dollar will remain the global reserve currency.
All the best,
Christian DeHaemer Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
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