In this episode, Lucas and guest discuss Sarah Kreps' essay "Easy Money, Easy Wars" from "The Satoshi Papers," focusing on how Bitcoin could restrain war spending by acting as a reserve standard.
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Summary:
The discussion begins with an overview of Sarah Kreps' essay, which posits that the current method of financing wars through borrowing distances the public from the costs, leading to more frequent and prolonged conflicts. The author argues that if Bitcoin were adopted as a reserve standard, its finite supply and public auditability would impose restraint on war spending. The hosts then delve into a historical context, outlining various methods of war finance, including seniorage, conscription, coalition building, and conquest, before focusing on taxation and borrowing. Taxation, historically supported by thinkers like Kant, Smith, and Keynes, directly links the cost of war to the public. However, governments have increasingly turned to borrowing, leading to "forever wars" financed by trillions of dollars, without direct public consent or awareness of the costs.
The hosts discuss the concept of "Easy Money, Easy Wars," emphasizing that reducing the monetary and moral costs of war leads to its proliferation. The moral costs are lessened by an all-volunteer army and remote warfare, while the monetary costs are negated by borrowing. Bitcoin, as a reserve asset, could reimpose monetary restraint due to its public transparency, decentralized ownership, and finite supply. A distinction is made between a monetary standard and a reserve standard, with Bitcoin seen as a more plausible near-term reserve asset. This would make the public more sensitive to the economic costs of war, as they would be spending a finite asset. The discussion then shifts to a critique of the idea that borrowing is a military technology.
The conversation touches on the perception of government money versus the people's money, with one of the hosts arguing that the illusion of government money obscures the fact that it is always the people's future earning power being used. The discussion also critiques Modern Monetary Theory (MMT), arguing that it leads to a misperception that war is costless and divorces the public from the true costs, leading to less opposition to wars. The historical context of currency debasement is also discussed, from coin clipping in ancient Rome to modern quantitative easing, illustrating how governments have always sought ways to finance their activities by devaluing currency. This leads to a discussion about the potential consequences of unlimited money creation, including debt accumulation and the erosion of purchasing power.
One of the hosts expresses concern about the United States unilaterally adopting a Bitcoin-backed currency while the rest of the world remains on an easy money standard. This could put the U.S. at a disadvantage in the short term, as other countries could borrow against their economies to exert more power. However, it's also suggested that democracies, when threatened, can mobilize with even more force than non-democracies, especially when the public is fully aware of the costs and sacrifices involved. The discussion also explores the role of due process and strong property rights in the United States as a factor that attracts trust and investment, even in the face of economic challenges. The potential for Bitcoin to expose and restrain frivolous government spending is also discussed, as it could make the costs more transparent to the public.
Finally, the hosts discuss the implications of government borrowing as a form of taxation without representation, particularly for future generations who do not have a say in the decisions being made today. The benefits of moving towards a more virtuous society where minds are applied to accretive instead of extractive industries is also addressed. They conclude by praising the quality of the essays in "The Satoshi Papers" and encouraging listeners to read and appreciate the work of the academics and authors involved.
