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Bitcoin is Venice: Difference between revisions
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Perhaps this is the [[nocoiner]]’s fundamental misapprehension: have we been slating bitcoin for lacking qualities it isn’t even ''meant'' to have? If it is not a currency, then criticisms that it isn’t very good at the sort of things currencies are meant to be good at fail, defeated by the simple objection, ''so what?'' | Perhaps this is the [[nocoiner]]’s fundamental misapprehension: have we been slating bitcoin for lacking qualities it isn’t even ''meant'' to have? If it is not a currency, then criticisms that it isn’t very good at the sort of things currencies are meant to be good at fail, defeated by the simple objection, ''so what?'' | ||
Farrington correctly sees a “fiat currency” as necessarily an instrument of [[indebtedness]]: a person who holds it has a promise for value from someone else. He doesn’t say | Farrington correctly sees a “fiat currency” as necessarily an instrument of [[indebtedness]]: a person who holds it has a promise for value from someone else. He doesn’t say so but he may say regard [[indebtedness]] as, in itself, a form of compulsory trust — trust on pain of enforcement by the state, i.e., ''violence'' — and therefore intrinsically undesirable. | ||
Graeber might agree about currency, but not indebtedness. To the contrary mutual, perpetual, rolling ''non-monetary'' indebtedness is exactly the glue that binds a community together. It | Graeber might agree about currency, and monetary indebtedness, but not indebtedness in general. To the contrary, mutual, perpetual, rolling ''non-monetary'' indebtedness is exactly the glue that binds a community together. It creates ''voluntary'' trust. That kind of trust — credit — is fundamental to how any functioning civilisation works. Discharging that sort of indebtedness releases us from our ties and obligations to each other — thereby dissolves the “community of interest”. One of the things that is so pernicious about indentedness is that it is precisely quantifiable: it sets a precise value for loyalty, and therefore a price at which loyalty may be discharged. The vagueness and irreconcilability of “social” indebtedness makes this a lot harder to do. | ||
====Currency as an anti-asset==== | |||
Currency, on this view is tokenised, accountable unit of trust. That is a glass-half-full way of describing indebtedness — not financial indebtedness to or from a specific person, as arises under a loan contract, but disembodied, abstract indebtedness ''in and of itself''. This is quite an odd concept. | |||
Currency on this view | Currency is, on this view, not an asset, but an ''anti-asset'': something that has a negative value in and of itself, and which, therefore, you can only generate value from ''by giving it away''. I can discharge a private debt I owe by transferring away my public token of indebtedness — cash — to the lender. We can see there that to hold cash, and not use it to acquire capital, discharge debts, or create indebtedness in someone else, is a bad idea. | ||
There is an important distinction here between ''holding'' cash and ''putting it in the bank''. | |||
When, and while, you physically hold it, for all intents and purposes, the money is not there. It is meaningless. Worthless. Valueless. (If you are robbed it only creates a (negative) value when it is taken away, because it deprives you of the value you could create by giving it away to someone else, in return for something). | |||
Holding currency in person is to take capital off the table; to withdraw it from the market completely. Since capital’s value is a function of time, you would expect a capital instrument you have disengaged from the capital market to waste away, and so it does. Cash in your wallet attracts no interest so, relative to the value of a capital asset which can be put to productive means, hard cash must depreciate over time. That is the consequence of inflation. | |||
But cash you put in the bank ''is'' invested — with the bank. You have given the bank your token of abstract indebtedness in return for actual private indebtedness. The bank pays you interest — usually not much — but it pays you a return for your investment in its capital. It must sit on a portion of the cash its customers give it, but that capital reserve, too, will waste away. This is what | |||
bankers mean when they say capital is expensive. | |||
The rest a bank will punt out to its borrowers in the form of loans. The borrowers will want to use that cash quickly, because if they don’t, it wastes away, and they are paying interest for the privilege. | |||
Its bankers will find creative ways of punting out as much as humanly possible, to increase shareholder return. This is the bank’s leverage ratio. Nowadays the supply of actual printed money that can waste away in your pocket is dwindling, and now most currency exists electronically on a bank’s electronic ledger, but the difference between the liabilities a bank has to its depositors - a positive number — and the claims for repayment it has against its borrowers — a negative number — represents “under the mattress” cash. A negative energy ''until you have to give it away'' | |||
But let's not get distracted. That cash flies around the system, perpetually depreciating as it does it is a hot potato — everyone wants to pass it on — invest it — as quickly as they can, as it weighs on anyone who holds it like a dark energy. The best thing to do is to convert it into — in the vernacular, “buy” — something that will hold its value. An asset. | But let's not get distracted. That cash flies around the system, perpetually depreciating as it does it is a hot potato — everyone wants to pass it on — invest it — as quickly as they can, as it weighs on anyone who holds it like a dark energy. The best thing to do is to convert it into — in the vernacular, “buy” — something that will hold its value. An asset. | ||