Max's Blog+Forum

Factum Money

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Changed my mind

I think I've changed my mind about Bitcoin as money. Particularly: it's a fiat currency (factum money is just fiat in disguise), and I don't think it's sound money anymore. Just because it doesn't have government backing doesn't mean that it isn't fiat.

The reason for the change-of-mind is that I've started reading Theory of Money and Credit by Mises (TMC). I don't think Mises would be in favor of Bitcoin; how does one answer what is the origin of Bitcoin's value? -- I don't think there's a substantive answer.

Related discussion: https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/18 (this post and on).

I am planning on writing a post about this soon (after I finish and understand TMC).

Addendum by u/max after 2021-12-02 21:38:02 UTC 1 day
Attribution re changing my mind: Why did I start reading TMC?

Elliot criticized this post for not giving proper attribution:

@Max blogged:
I think I’ve changed my mind about Bitcoin as money. Particularly: it’s a fiat currency
The reason for the change-of-mind is that I’ve started reading Theory of Money and Credit by Mises (TMC).
Related discussion: https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/18 (this post and on).
This doesn’t give proper credit. It makes it sound like your idea that you came up with after you started reading the book on your own initiative. “Related discussion” doesn’t communicate “where I got the idea, and the book recommendation, from someone else”.

I started reading TMC entirely because Elliot referenced it in the original 'related discussion' link. Elliot's original post:

Bitcoin is not a commodity money. Its value is meant to come from being a medium of exchange and that’s it. That’s bad. See Mises (Theory of Money and Credit) and Reisman (Capitalism) on commodity and fiat money.

Particularly: That’s bad. was the bit to convince me that it was worth reading TMC. The idea that Bitcoin (or anything) trying to be something other than commodity money was bad: I got that from Elliot. I was especially interested in reading TMC because I first learnt about Mises through articles and discussion around Bitcoin-as-money (prior to writing n/2002) and Elliot's comment implied there was a conflict between Mises's ideas and the reasons I thought Bitcoin was sound money (I now agree there is a conflict there). I thought (and, IMO, many Bitcoiners did and still do think) that Mises would have liked Bitcoin -- I was convinced otherwise by the first ~7 chapters of TMC which seem pretty cut-and-dry WRT the important qualities of the origin of the value of a money.


Additionally wrt other unattributed ideas: re-reading the original factum money post; most of the foundational ideas (like non-monetary use-value) seem to be lifted from TMC, or at least they're descendants of ideas in TMC and elsewhere too (IDK enough about the history of econ ideas to know what they're descendants of, exactly). And, ofc, I was way less rigorous with them than Mises is in TMC.

There's also at least one thing I said that Mises refuted in TMC -- we also know that the value of fiat money is derived from legislation; I haven't closely re-read OP to know if there are more. That mistake is a key point behind my argument in n/2002 that Bitcoin isn't fiat, which is the excuse to invent factum money. I now think the entire bottom row of the table in n/2002 is all fiat:

Deferred Value     | Direct Value    |
--------------------------------------------
commodity-backed   | Commodity       | Has non-monetary
Money              | Money           | use value
---------------------------------------------
Fiat Money         | Factum Money    | No non-monetary
Generic IOUs (e.g. | e.g. Bitcoin    | use value
paypal-us-dollars) |                 |