For those interested, the practice of debasement actually predates the middle ages by, a lot. By 301 inflation was so bad Diocletian had to put out a price fixing edict. It didn't work. It took Constantine's Solidus (basically solid gold coin - that will stay stable for almost a thousand years) to stabilize the currency. By the early fourth century the denarius that used to have 50% silver contained almost no silver at all (something like 1 to 5%).
Between the years 150 and 100 BC, the Seleucid tetradrachm went from 95% silver to 65%. As the name suggests, it continued to weigh four drachms.
Debasement occurs any time the government runs out of money and can force people to take the debased money. The previous ~150 years of the same government minted tetradrachms that were all silver, probably because their main use of the silver was paying foreign mercenaries.
> By the early fourth century the denarius that used to have 50% silver
This is already a heavily debased coin. Nobody starts by adulterating their coins down to 50% monetary content.
> It took Constantine's Solidus (basically solid gold coin - that will stay stable for almost a thousand years) to stabilize the currency.
This isn't plausible; gold coins barely transact (gold is too rare). Minting coins that nobody uses won't affect the currency that people do use.
Wikipedia notes that, on issuance, Constantine's solidus was worth 275,000 denarii. The denarius was debased, but it was also a coin that people carried around and used to buy things. Think about the number of transactions that might plausibly have involved one or more solidi. If we underestimate the 4th-century denarius as being roughly as valuable as a US penny... how much use would you have for a $2,750 coin?
It's just a way to bypass the cantillion effect and hoard the benefit of debasement for the lord. That's why he exempted the aristocracy, he had to cut them in to maintain his power.
So, suppose the ruler begins a debasement. You have a lot of coins. You take them into the mint and exchange them for debased coins but more coins than you had minus a cut to the king, go buy some asset that can't be debased like salt, wait and then sell it on the market after price inflation occurs. You benefit from the cantillion effect because you got the fresh minted money before prices rose to compensate.
Now with the extortion scheme, you lose that. The revenue goes straight to the king in the form of the tax, the king might make do with the same revenue as before, thus significantly reducing the inflation that occurs, or maybe raises his revenue to the match the cost to the economy before but now the aristocracy get nothing. To compensate, he had to exempt them or they would overthrow him, and now they get benefit in that regular people get directly fleeced, price deflation occurs but regular people don't gain purchasing power because it was their money taken from them out of circulation, but the rich people don't have that problem so their purchasing power increases.
Some democracies in the 20th century have tried a form of cash debasement to fight inflation.
The example I’m familiar with is from Finland in 1946, when the most popular and largest circulating bills were required to be physically cut in half and lost 50% of their upfront value.
The idea was that the left half of the bill remained valid cash (although not for long — you needed to exchange it for a new type of bill within a few months). The right half of the bill became effectively a treasury note with three-year maturation: in 1949 you could present it to a bank and get your money back from the government, but no sooner.
The operation was expected to reduce inflation, but apparently it didn’t work out that way. It did provide the Finnish government with about half of the funds loaned that year, but it was very unpopular among voters and never repeated.
Nowadays debasement and the resulting inflation comes from loans creating cash flow out of thin air. The 20% debasement has turned into the functionally zero percent interest rates. The ritual of bringing coins to the mint for exchange has turned into investments. The feudal lord's turbocharged revenue has turned into the profits of billion dollar corporations.
Ah yes, taxes on money holding and land, two of the most evil taxes ever invented.
The average citizen prefers paying income taxes, payroll tax and sales tax and VAT to the government and paying the land tax aka rent to land holders and the money tax aka interest to money holders to maximize the dead weight loss. Then they complain that the government is bankrupt and is doing inflation.
A 100 years from now, someone is going to write an article about the insanity of today's advertising models that is going to be immediately obvious to anyone from that era, while we, much like the feudal vassals, are unable to see it, having experienced no alternative.
The internet is today's TV. Did you complain so much about TV ads back in the day too?
(Surveillance is a different thing, and no, advertising isn't the main driver for surveillance. State actors are, and ad tech is just piggybacking on what state actors want to do anyways.)
Although there are other things we can do, like simplify regulations for truly small businesses so people have a chance to start something without needing legal expertise, lots of paperwork, etc.
Bitcoin fixes this for the first time in human history. I’m excited about a future without monetary debasement. How many wars have been started by the “print more money until it is worthless, oops I have to start a war to fix it” spiral?
It doesn't in any way fix things. The underlying point of debasement and other schemes outlined in the article was to generate revenue for the government. Now governments use taxes to generate revenue and inflation to encourage circulation.
While taxes and inflation are generally unpopular they are also vital to the functioning of society and the economy. BTC and many other token schemes implicitly or explicitly stand in the way of that.
Breaking a system you don't like doesn't automatically get you a system that's better.
Bitcoin has debasement, it's called altcoins and hard forks.
More generally, Bitcoin solves the wrong problem, because Austrian economics got the history of money wrong. Money wasn't invented to track scarce resources, money was invented to track who had paid taxes to the correct military invaders. The traditional / pre-money form of economic system (in the sense of it being a system to track the usage of scarce goods) is the gift economy. This is the system humans are built to work in. But gift economies are backed by strong promises of identity in close-knit groups. A bunch of rapacious murderers extracting food out of the fifth town they've sacked this week aren't going to be able to tell the difference between John, son of John, John, son of the brother of John, and John, son of the cousin of John.
What money does is separate a person's identity from their ability to access scarce resources. This 'paraidentity' of money is rendered in the most extreme in crypto. Your identity means nothing, just the size of your wallet, to the point where even voting in cryptocurrency is proudly for sale. The thing is, separating access to resources from personal identity also centralizes control of those resources. Printing money to fund war is not a bug, it is a feature.
In fact, it's not even something Bitcoin fixes. The primary source of liquidity in the Bitcoin ecosystem is businesses buying it to pay data ransoms. Bitcoin, in the name of opposing statism, invented a new kind of state whose military consists of hackers penetrating and encrypting systems to force you to buy Bitcoin to decrypt them.
The way you debase Bitcoin is by inventing new kinds of Bitcoin. Because, remember, the scarcity isn't the thing bringing liquidity into the system. If the ransomware people decide they're only taking Ethereum this week, then people are buying Ethereum, not Bitcoin. All money exists to pay taxes, and if the tax collector wants a different kind of money, then they've successfully debased the old money.
Almost. Because Bitcoin is highly energetic compared to currency, it isn't all the way there. And novel attacks exist for digital currency that are not present in physical currency. Currency has to be tradeable with marginal cost nearly zero (will never be exactly zero), and in my view digital currency has this as an issue. The analogue for digital currency, when appropriately crafted and not a sh*tcoin, is gold. Hard to get, limited in volume, costly to secure and appropriately manage. Gold can be used for currency, but it is awfully insecure to hoarding and banditry.
Fiat currency solves a _lot_ of problems while also having limitations broadly railed against by digital currency advocates.
You don't need Bitcoin to save you from the inevitable war that's caused by an inflating money supply and printing money out of thin air because the opposite of this is happening!
The money printer has been replaced by a money shredder!
The end of war is a pretty big deal, how will you celebrate?
Bitcoin is basically the worst kind of currency I could imagine (well actually I couldn’t, if I didn’t know anything about it and someone told me to design the worst currency I can think of that would still be practically usable I wouldn’t be able to come up with something as bad…)
If due to some episode of mass psychosis everyone collectively decided to make bitcoin the default global currency it would result in the biggest economic/financial catastrophe in human history..
Extreme deflation, unlimited price volatility etc. but most importantly it destroys any reason for investing your money into anything potentially productive.
Why take any risk when you can just become richer and richer by hoarding cash?
Literally freeloading with zero effort whatsoever because you get a cut from anything that anyone does that might result in any economic growth (i.e. productivity increases -> prices constantly get lower -> if you’re an early “adopter” you just stay permanently rich with zero risk or effort). It’s basically if we just took some of the biggest flaws in our current economic/financial system and multiplied them by 10-100x for some insane reason).
Of course that whole problem is mostly hypothetical since there would be no real growth anymore and we’d just be permanently stuck in a severe economic depression…
It’s even much worse than gold/silver that was a compromise because no trustworthy and stable governments could exist in the premodern world and because economies were mostly static over multi-decade periods (of course there was still a huge amount or volatility year to year)
Bitcoin would make an awful legal tender, because by its design supply decreases while demand for it increases. An ideal, 0% inflation currency (assuming that is ideal) would expand and contract automatically with economic conditions. Satoshi considered this problem but decided it was too complicated to implement, which is why he went with the fixed supply route.
Still, it's worth remembering that a fixed supply currency will inevitably fail just as the metallic standards (which were semi fixed supply) did, and for the same reasons: politics. Metal backed currencies fell because the political will required to coordinate the system fell apart. Newly-enfranchised workers didn't find the message "suck it up, the gold standard requires it" very appealing politically, so they voted for other things that entailed fiscal and monetary policy. Central Banks, seeing the writing on the wall, abandoned gold en masse, with the US retaining it only for other central banks.
Bitcoin would have the same problem. It would be inevitably deflationary - halvenings, for example, are tied to computational power. Presumably, more demand for Bitcoin means more computational power, so its supply decreases just as demand increases.
Deflation is even worse than inflation for working people. Investment dries up, because why would somebody take a gamble on a business if they can keep their cash in their closet and make money, risk free? Employment therefore drops, while people decrease spending - why spend $100 on something today, if you can buy it for $85 in a year? Additionally, loans get more expensive in real terms, wages decline, and a whole host of other bad things happen.
That's why central banks target +2% inflation, in part. Inflation is preferable because it encourages investment, discourages nominal (and only nominal) wage decreases, decreases the real value of loans to the benefit of the debtor class, and other benefits. Central Banks also have a pretty successful record dealing with runaway inflation - hike rates, cause a recession, wait - whereas they lack tools to deal with deflation. At its simplest, the solution to deflation is for everyone to get a check from the government, but this whole field is considered weirdo experimental land and has only barely been tested.
All that is to say: Bitcoin is fundamentally ignorant of history and is incapable of becoming anything other than digital gold. It has a floor value which it cannot sink beneath: online gambling, illegal things, and privacy advocates (in that order) guarantee it will never truly hit $0.00. But it would be an absolute catastrophe for any country to adopt as its actual currency.
Now that I think of it, Bitcoin is perhaps one of the earliest examples of technophiles assuming society should work according to computer code, thereby "cleaning" these imperfect human systems by replacing them with the inevitable future: A philosophically-driven (rather than pragmatically or empirically, for example) system, with clear and inviolable rules, limited to no exceptions, and a happy ignorance of why existing systems came to be. After all, why study the past when we're creating the inevitable future?
[+] [-] OriPekelman|1 year ago|reply
[+] [-] thaumasiotes|1 year ago|reply
Debasement occurs any time the government runs out of money and can force people to take the debased money. The previous ~150 years of the same government minted tetradrachms that were all silver, probably because their main use of the silver was paying foreign mercenaries.
> By the early fourth century the denarius that used to have 50% silver
This is already a heavily debased coin. Nobody starts by adulterating their coins down to 50% monetary content.
> It took Constantine's Solidus (basically solid gold coin - that will stay stable for almost a thousand years) to stabilize the currency.
This isn't plausible; gold coins barely transact (gold is too rare). Minting coins that nobody uses won't affect the currency that people do use.
Wikipedia notes that, on issuance, Constantine's solidus was worth 275,000 denarii. The denarius was debased, but it was also a coin that people carried around and used to buy things. Think about the number of transactions that might plausibly have involved one or more solidi. If we underestimate the 4th-century denarius as being roughly as valuable as a US penny... how much use would you have for a $2,750 coin?
[+] [-] big-green-man|1 year ago|reply
So, suppose the ruler begins a debasement. You have a lot of coins. You take them into the mint and exchange them for debased coins but more coins than you had minus a cut to the king, go buy some asset that can't be debased like salt, wait and then sell it on the market after price inflation occurs. You benefit from the cantillion effect because you got the fresh minted money before prices rose to compensate.
Now with the extortion scheme, you lose that. The revenue goes straight to the king in the form of the tax, the king might make do with the same revenue as before, thus significantly reducing the inflation that occurs, or maybe raises his revenue to the match the cost to the economy before but now the aristocracy get nothing. To compensate, he had to exempt them or they would overthrow him, and now they get benefit in that regular people get directly fleeced, price deflation occurs but regular people don't gain purchasing power because it was their money taken from them out of circulation, but the rich people don't have that problem so their purchasing power increases.
[+] [-] unknown|1 year ago|reply
[deleted]
[+] [-] readthenotes1|1 year ago|reply
The USA got rid of silver in its coins in 1964 and I believe copper in its pennies recently.
The modern version of debasement is in the feds balance sheet, they've gotten so efficient there's no need to affect the physical substance.
[+] [-] pavlov|1 year ago|reply
The example I’m familiar with is from Finland in 1946, when the most popular and largest circulating bills were required to be physically cut in half and lost 50% of their upfront value.
The Wikipedia article seems to be only in Finnish: https://fi.wikipedia.org/wiki/Setelinvaihto
The idea was that the left half of the bill remained valid cash (although not for long — you needed to exchange it for a new type of bill within a few months). The right half of the bill became effectively a treasury note with three-year maturation: in 1949 you could present it to a bank and get your money back from the government, but no sooner.
The operation was expected to reduce inflation, but apparently it didn’t work out that way. It did provide the Finnish government with about half of the funds loaned that year, but it was very unpopular among voters and never repeated.
[+] [-] matheusmoreira|1 year ago|reply
[+] [-] Arainach|1 year ago|reply
[+] [-] fny|1 year ago|reply
[+] [-] panarky|1 year ago|reply
Because the opposite of "debasement" has been happening for some time now.
https://fred.stlouisfed.org/graph/fredgraph.png?g=1rdgN
[+] [-] imtringued|1 year ago|reply
The average citizen prefers paying income taxes, payroll tax and sales tax and VAT to the government and paying the land tax aka rent to land holders and the money tax aka interest to money holders to maximize the dead weight loss. Then they complain that the government is bankrupt and is doing inflation.
The average citizen is incorrigible.
[+] [-] lomase|1 year ago|reply
[+] [-] tempodox|1 year ago|reply
[+] [-] hliyan|1 year ago|reply
[+] [-] c22|1 year ago|reply
[+] [-] otabdeveloper4|1 year ago|reply
(Surveillance is a different thing, and no, advertising isn't the main driver for surveillance. State actors are, and ad tech is just piggybacking on what state actors want to do anyways.)
[+] [-] RachelVander|1 year ago|reply
[deleted]
[+] [-] lifeisstillgood|1 year ago|reply
[deleted]
[+] [-] epicureanideal|1 year ago|reply
[+] [-] thaumasiotes|1 year ago|reply
And maybe used a second-person form of the verb. He's French, not Spanish.
[+] [-] yowlingcat|1 year ago|reply
[+] [-] Mistletoe|1 year ago|reply
https://en.wikipedia.org/wiki/Debasement
[+] [-] MadnessASAP|1 year ago|reply
While taxes and inflation are generally unpopular they are also vital to the functioning of society and the economy. BTC and many other token schemes implicitly or explicitly stand in the way of that.
Breaking a system you don't like doesn't automatically get you a system that's better.
[+] [-] kmeisthax|1 year ago|reply
More generally, Bitcoin solves the wrong problem, because Austrian economics got the history of money wrong. Money wasn't invented to track scarce resources, money was invented to track who had paid taxes to the correct military invaders. The traditional / pre-money form of economic system (in the sense of it being a system to track the usage of scarce goods) is the gift economy. This is the system humans are built to work in. But gift economies are backed by strong promises of identity in close-knit groups. A bunch of rapacious murderers extracting food out of the fifth town they've sacked this week aren't going to be able to tell the difference between John, son of John, John, son of the brother of John, and John, son of the cousin of John.
What money does is separate a person's identity from their ability to access scarce resources. This 'paraidentity' of money is rendered in the most extreme in crypto. Your identity means nothing, just the size of your wallet, to the point where even voting in cryptocurrency is proudly for sale. The thing is, separating access to resources from personal identity also centralizes control of those resources. Printing money to fund war is not a bug, it is a feature.
In fact, it's not even something Bitcoin fixes. The primary source of liquidity in the Bitcoin ecosystem is businesses buying it to pay data ransoms. Bitcoin, in the name of opposing statism, invented a new kind of state whose military consists of hackers penetrating and encrypting systems to force you to buy Bitcoin to decrypt them.
The way you debase Bitcoin is by inventing new kinds of Bitcoin. Because, remember, the scarcity isn't the thing bringing liquidity into the system. If the ransomware people decide they're only taking Ethereum this week, then people are buying Ethereum, not Bitcoin. All money exists to pay taxes, and if the tax collector wants a different kind of money, then they've successfully debased the old money.
[+] [-] tomrod|1 year ago|reply
Fiat currency solves a _lot_ of problems while also having limitations broadly railed against by digital currency advocates.
[+] [-] panarky|1 year ago|reply
Since early 2022, the US central bank has been "unprinting" money. Their balance sheet is shrinking and the money supply is falling.
https://fred.stlouisfed.org/graph/fredgraph.png?g=1rdgN
You don't need Bitcoin to save you from the inevitable war that's caused by an inflating money supply and printing money out of thin air because the opposite of this is happening!
The money printer has been replaced by a money shredder!
The end of war is a pretty big deal, how will you celebrate?
[+] [-] ffgjgf1|1 year ago|reply
If due to some episode of mass psychosis everyone collectively decided to make bitcoin the default global currency it would result in the biggest economic/financial catastrophe in human history..
Extreme deflation, unlimited price volatility etc. but most importantly it destroys any reason for investing your money into anything potentially productive.
Why take any risk when you can just become richer and richer by hoarding cash?
Literally freeloading with zero effort whatsoever because you get a cut from anything that anyone does that might result in any economic growth (i.e. productivity increases -> prices constantly get lower -> if you’re an early “adopter” you just stay permanently rich with zero risk or effort). It’s basically if we just took some of the biggest flaws in our current economic/financial system and multiplied them by 10-100x for some insane reason).
Of course that whole problem is mostly hypothetical since there would be no real growth anymore and we’d just be permanently stuck in a severe economic depression…
It’s even much worse than gold/silver that was a compromise because no trustworthy and stable governments could exist in the premodern world and because economies were mostly static over multi-decade periods (of course there was still a huge amount or volatility year to year)
[+] [-] thaumasiotes|1 year ago|reply
Not many. The more typical case is that you're in a war, and you want to spend more money than you have, so you make some up.
[+] [-] idontknowtech|1 year ago|reply
Still, it's worth remembering that a fixed supply currency will inevitably fail just as the metallic standards (which were semi fixed supply) did, and for the same reasons: politics. Metal backed currencies fell because the political will required to coordinate the system fell apart. Newly-enfranchised workers didn't find the message "suck it up, the gold standard requires it" very appealing politically, so they voted for other things that entailed fiscal and monetary policy. Central Banks, seeing the writing on the wall, abandoned gold en masse, with the US retaining it only for other central banks.
Bitcoin would have the same problem. It would be inevitably deflationary - halvenings, for example, are tied to computational power. Presumably, more demand for Bitcoin means more computational power, so its supply decreases just as demand increases.
Deflation is even worse than inflation for working people. Investment dries up, because why would somebody take a gamble on a business if they can keep their cash in their closet and make money, risk free? Employment therefore drops, while people decrease spending - why spend $100 on something today, if you can buy it for $85 in a year? Additionally, loans get more expensive in real terms, wages decline, and a whole host of other bad things happen.
That's why central banks target +2% inflation, in part. Inflation is preferable because it encourages investment, discourages nominal (and only nominal) wage decreases, decreases the real value of loans to the benefit of the debtor class, and other benefits. Central Banks also have a pretty successful record dealing with runaway inflation - hike rates, cause a recession, wait - whereas they lack tools to deal with deflation. At its simplest, the solution to deflation is for everyone to get a check from the government, but this whole field is considered weirdo experimental land and has only barely been tested.
All that is to say: Bitcoin is fundamentally ignorant of history and is incapable of becoming anything other than digital gold. It has a floor value which it cannot sink beneath: online gambling, illegal things, and privacy advocates (in that order) guarantee it will never truly hit $0.00. But it would be an absolute catastrophe for any country to adopt as its actual currency.
Now that I think of it, Bitcoin is perhaps one of the earliest examples of technophiles assuming society should work according to computer code, thereby "cleaning" these imperfect human systems by replacing them with the inevitable future: A philosophically-driven (rather than pragmatically or empirically, for example) system, with clear and inviolable rules, limited to no exceptions, and a happy ignorance of why existing systems came to be. After all, why study the past when we're creating the inevitable future?