A friend of mine from my Army days recently gave me a rundown of the reasons he didn’t like bitcoin (he even wrote a Medium post on it), so I felt inclined to write a little FUD-buster piece (FUD-Fear, Uncertainty, & Doubt). Overall, he thought bitcoin was “the opposite of the American Spirit”, and well, them’s fightin’ words.
His first argument was that bitcoin’s deflationary nature will induce hoarding. First, to suggest that spending is some sort of foundation of the American Spirit is nonsense, but I digress. The typical argument bitcoiners (or followers of Austrian economics for that matter) like to use for why NgU (number go up) won’t result in massive hoarding is that credit cards already disprove this: everything a person buys on credit is an agreement to pay more for it than you would pay otherwise.
In a recent interview with George Gammon, Robert Breedlove posits the idea that a deflationary currency such as bitcoin could make for a better investing environment. His logic – similar to above – is that currently, an investment needs to beat inflation (in real terms) or else it simply doesn’t make sense to pursue.
If you follow the Chapwood Index (as many of the Austrian Economics school of thought do), inflation comes out to be in the range of 10% annually. That’s a lot of headwind to make up. However, in a hypothetical post-hyperbitcoinization world, bitcoin is deflating at roughly 1-2% per year. Breedlove’s hypothesis is that one would only need to beat that much lower 1-2% target to make an investment worthwhile, meaning the floodgates for capital could be opened.
Another argument my friend throws out is that governments could regulate or even stamp out bitcoin altogether. My view is the state actor threat only serves as a short term threat, and long term, it makes bitcoin more robust. Bitcoin is a cutting edge technology, and countries are going to want to be at the forefront of that technology. It may reduce a nation’s control over their citizenry, but the game theory incentive is generally that the payoff is better than the loss of control. In Western societies, countries will want to be leaders in the new technology. In Iran, for example, bitcoin will allow them to bypass the restrictions placed on them by the United State’s control over the US dollar.
Currently in the US, there have been decisions that were favorable to bitcoin, such as allowing financial institutions to custody bitcoin and allow banks to run full nodes. We are a tech leader, so even though there is a (currently perceived as very minor) threat to the USD, we would lose more as a country by ceding innovation to other countries.
Many bitcoiners think nothing is more true to the American ideals of freedom and self-determination than bitcoin. In an economy that allowed insane levels of gambling which all ended up being backed up by the taxpayer, there is a vision of a future money centered on bitcoin that would be more fair for the average person. A hard money wouldn’t allow for bailouts, which ultimately exacerbate income inequality. A hard money wouldn’t allow for the financing of an ever-increasing government constantly intruding on more and more of our individual freedoms.
In my humble opinion, saying bitcoin is un-American misses the point of what America is all about. It’s not about the exorbitant privilege of the US Dollar to control global trade and it’s not about our ability to print money to finance the constant expansion of government. The American spirit isn’t about being able to buy whatever you want, it’s about rugged individualism. It’s about freedom, a limited government, and a fair society where you are free to succeed to the best of your abilities. Propping up failures and picking winners and losers is un-American, and bitcoin has the potential to put an end to that sort of cronyism.
If you do share any of the concerns of my friend, bitcoin is really worth another look. My belief is that bitcoin is the most important technology of modern times—definitely of our lifetimes—and I really think it will unleash awesome new innovations when people buy what they need and invest everything else to build something that will get them even more bitcoin.
