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Bitcoin is Venice: Difference between revisions
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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 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. | 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 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. | ||
David 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 Graeber finds so pernicious about monetary [[indebtedness]] is that it is 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. There is always something on the table. These are the ties that bind. | |||
====Cash as an anti-asset==== | ====Cash as an anti-asset==== | ||
{{Drop|C|ash, on this}} view, is a tokenised, accountable unit of ''trust''. That is a glass-half-full way of describing [[monetary 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. | |||
A banknote is, on this view, not an asset, but an ''anti-asset'': something that has a negative value in and of itself, and which, therefore, only generates value ''when you give 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 wasteful. | A banknote is, on this view, not an asset, but an ''anti-asset'': something that has a negative value in and of itself, and which, therefore, only generates value ''when you give 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 wasteful. | ||
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So holding cash in person is a ''non''-investment. It is to ''disengage'' capital from the market. Since the value of capital is a function of the time for which it is productively engaged, a capital instrument you have ''disinvested'' should progressively waste away. So it does. Cash in your wallet, relative to a capital asset in productive use, must depreciate over time. That is the consequence of inflation. It has nothing really to do with central bank policy or fractional reserve banking. | So holding cash in person is a ''non''-investment. It is to ''disengage'' capital from the market. Since the value of capital is a function of the time for which it is productively engaged, a capital instrument you have ''disinvested'' should progressively waste away. So it does. Cash in your wallet, relative to a capital asset in productive use, must depreciate over time. That is the consequence of inflation. It has nothing really to do with central bank policy or fractional reserve banking. | ||
Compare that to cash you put in the bank. This ''is'' invested: with the bank. You have given | Compare that to cash you put in the bank. This ''is'' invested: with the bank. You have given away your token of abstract indebtedness to the bank in return for ''actual'' private indebtedness for which the bank pays you interest — okay, not ''much'' — as a return for your investment. Prudential regulation obliges the bank to sit on a portion of the cash its customers give it — to keep that cash disengaged, in reserve to manage the demand of those investors who wish to cancel their investments — but that capital reserve, too, will waste away, while the bank must still pay interest on it to customers. This is what bankers mean when they say “capital reserves are expensive”. | ||
The bank will lend all the cash it can to its borrower customers — giving away these tokens of abstract indebtedness in return for an investment in their ''actual'' private indebtedness. The borrowers, in turn, will want to use that physical cash quickly, because if they don’t, it wastes away, while they pay the bank interest for the privilege of holding cash. | The bank will lend all the cash it can to its borrower customers — giving away these tokens of abstract indebtedness in return for an investment in their ''actual'' private indebtedness. The borrowers, in turn, will want to use that physical cash quickly, because if they don’t, it wastes away, while they pay the bank interest for the privilege of holding cash. | ||
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Holders can stick it in the bank or give it away in return for capital — that is, ''invest it'' — in something that will be productive over time in an a way that an inert cash instrument in your pocket will not. | Holders can stick it in the bank or give it away in return for capital — that is, ''invest it'' — in something that will be productive over time in an a way that an inert cash instrument in your pocket will not. | ||
===Bitcoin as generalised capital=== | ===Bitcoin as generalised capital=== | ||
{{Drop|T|he thing about}} particular capital assets is that they are awkward. They are not to everybody’s taste. They are idiosyncratic; fallible: they take up space, require refrigeration, can rust, go off or | {{Drop|T|he thing about}} particular capital assets is that they are awkward. They are not to everybody’s taste. They are idiosyncratic; fallible: they take up space, require refrigeration, can rust, go off or out of fashion. They cost money to maintain and store. They can be invisibly encumbered.They are bad things, therefore, to use as a medium of exchange. There will always be friction, cost and doubt. They will always be subject to a ''[[haircut]]''. | ||
But, despite the conventional (fairy) story of the history of money, money did not come about in the first place as a substitute for the inconvenience of barter.<ref>{{author|David Graeber}}’s book is compelling that this is a fairy story with no grounding in reality.</ref> Currency was ''always'', from the outset, a means of creating [[indebtedness]]. | But, despite the conventional (fairy) story of the history of money, money did not come about in the first place as a substitute for the inconvenience of barter.<ref>{{author|David Graeber}}’s book is compelling that this is a fairy story with no grounding in reality.</ref> Currency was ''always'', from the outset, a means of creating [[indebtedness]]. | ||
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Now, conjured illusions can outlast your solvency, to be sure. We are no less enchanted by magicians now than were the Victorians. But more persistence does not change the fact that they ''are'' conjuring tricks. ''These assets are not real''. Just because a theatre’s patrons emerge into the chill night air happy that they have been well entertained does not change that fact. | Now, conjured illusions can outlast your solvency, to be sure. We are no less enchanted by magicians now than were the Victorians. But more persistence does not change the fact that they ''are'' conjuring tricks. ''These assets are not real''. Just because a theatre’s patrons emerge into the chill night air happy that they have been well entertained does not change that fact. | ||
===A thought experiment==== | |||
{{Drop|W|e can see that}} with the following thought experiment: imagine if ''everyone'' in the market decided to exchange its entire portfolio of traditional capital assets for universal “digital assets” of equivalent value. This could not happen: one vendor can convert its capital asset into digital assets only if another purchaser is prepared to do the opposite trade. ''Someone'' in the market has to stay long capital assets. | |||
Farrington’s argument might be that indebtedness is intrinsically pernicious, but this is a hard argument indeed to make out, and involves tearing down more than just the tenants of “[[degenerate fiat currency]]”. For mutual indebtedness, and intra-community trust is the special quality that lifts human society out of a Hobbesian nightmare. | |||
Farrington’s argument might be that indebtedness is intrinsically pernicious, but this is a hard argument indeed to make out, and involves tearing down more than just the tenants of “[[degenerate fiat currency]]”. For mutual indebtedness, and intra-community trust is the special quality that lifts human society out of a Hobbesian nightmare | |||
===Trust versus trustless=== | ===Trust versus trustless=== | ||
{{Drop|T|he nature of}} indebtedness creates obligations of mutual trust. Trust in a community is a series of continuing, undefined, interlocking, and ''perpetual'' dependencies. Monetising indebtedness has the effect of financialising it, in a bad way. | |||