Technology × Freedom

On Cryptocurrency and Culture

June 2, 2017 invisiblehand

What's so great about cryptocurrency? Most advocates will give you the usual answer: it has all the qualities of an ideal money. It's finite, fungible, incorruptible, counterfeit-resistent, and easy to store. And that's all true. But I would offer another answer.

Jörg Guido Hülsmann, in "The Cultural Consequences of the Federal Reserve", writes:

But in a fiat money system, as price inflation diminishes the value of one’s monetary savings, we are encouraged to adopt a short-term perspective. That is, we need to hurry up to obtain credit as soon as possible and obtain revenue from that debt as soon as possible, because savings lose value if we just hold on to cash.

You can imagine, then, how this inflation and debt-based system, over time, will begin to change the culture of a society and its behavior.

We become more materialistic than under a natural monetary system.

This is a sorely unexplored topic. A fiat money system - where a central bank has the power to indiscriminately print money in order to finance its debts - not only destroys the economy, but also destroys culture.

How? It's simple, really. When the Federal Reserve prints money or pumps government spreadsheets with "Excel" dollars, it drags down the purchasing power of everyone else's money. What a dollar can buy today, it won't tomorrow. This is inflation. With this kind of central-bank-caused inflation, the interest rate of money stays artificially low - because money is cheap, and everything else on the market is increasingly expensive. This process turns the natural course of things on its head. People are now rewarded for consuming and punished for saving.

In Democracy: The God That Failed Us, Hans-Hermann Hoppe draws the connection in the starkest terms possible:

Furthermore, whereas high or rising minimum interest rates indicate periods of generally low or declining living standards, the overriding opposite tendency toward low and falling interest rates reflects mankind's overall progress - its advance from barbarism to civilization. Specifically, the trend toward lower interest rates reflects the rise of the Western World, its peoples' increasing prosperity, farsightedness, intelligence, and moral strength…

Here's the rub:

…if government property-rights violations [i.e. currency devaluation] take their course and grow extensive enough, the natural tendency of humanity to build an expanding stock of capital and durable consumer goods and to become increasingly more farsighted and provide for ever-more distant goals may not only come to a standstill, but may be reversed by a tendency toward decivilization: formerly provident providers will be turned into drunks or daydreamers, adults into children, civilized men into barbarians, and producers into criminals.

A civilized society - one whose culture values law, prudence, planning, frugality, charity, and kinship - cannot last in a fiat monetary system.

It stands to reason, then, that cryptocurrency is not simply an incredible invention for its ideal qualities as a medium of exchange and store of wealth. It is also a moral invention, one that could - dare I say it? - save Western civilization.