A Critique of Saifedean Ammous’ “The Bitcoin Standard”
When I heard Saifedean was preparing a book about bitcoin I had high hopes. I am looking for a narrative for bitcoin that properly deals with the international implications in regard to our actual existing global financial system-and I thought Saifedean might likely provide such a narrative.
Since the subject would obviously run parallel to John Nash’s Ideal Money I tried to approach Saifedean on twitter especially in case there was some material from Ideal Money he might decide to use. His response was that he would only debate me if I read his book first-alas, it wasn’t out yet!
Not long after, and to my delight, I found an earlier or less edited copy publicly displayed on the web and I immediately read it it one sitting (this is an admission I did not take my time to read carefully). I went back to him with constructive criticism but he was not responsive.
Recently I reminded him of his “promise” that he would debate me if I read his book, and he replied that he never said such a thing and promptly blocked me (I might find and link this exchange on twitter if I find it).
My review of his book starts here with Frances Coppola’s review of it, for the reason that I nearly perfectly agree with her observations. If I cared and also had the background and knowledge she did I would have written the exact same review, including pointing out that Saifedean is confused about the nature of causation.
However, my criticism of his book is more nuanced and has a specific purpose. The reader should note, the bitcoin community won’t receive this review well, or rather they will drown it out and ignore it. They were hoping Saifedean could be their savior from mainstream economists being able to control and hold the narrative that bitcoin is not an ideal money.
In mainstream economics, and from a national or central banking point of view, money must have an elastic supply, and “ideal” happens when the manger(s) of the currency properly match(es) the supply of the currency such that a certain goal is achieved. Since bitcoin’s supply is not elastic, mainstream economists will generally hold the opinion that bitcoin is not very good money.
Saifedean is tasked with laying forth an argument to counter this opinion.
He tries to do so with the concept of “sound money”. I admit I cannot remember if he defined “sound money” or not but I should think Saifedean would basically agree with this definition:
“sound money,” defined as money that has a purchasing power determined by markets, independent of governments and political parties. A true gold standard is one example of money that has an intrinsic value determined by markets rather than governments.
Before I get to my actual critique which is basically that Saifedean has no conclusion and therefore no real argument, we have to pause on something any reader of this book also paused on-Saifedean’s ad hominem attack on Keynes.
I accuse Saifedean of doing this specifically because he cannot properly refute Keynes theories or intelligence and so he must put into the mind of the reader that Keynes is a child molester comparable to Hitler.
Any reader would stop and ask “Why does he feel this is necessary?” and I can perfectly explain.
At the end of the world wars a conference was called in anticipation for a new basis for the global economy. It was understood that this basis could be a basis for peace and prosperity. Keynes played a part in the dialogue over the years and today is he is cited for being the godfather of our current banking system.
But Keynes did not get his way at the Bretton Woods conference. Instead the Americans birthed a system by which they would provide the world with settlement liquidity by pegging the USD to gold-it only lasted a few decades.
What did Keynes want for the world?
Keynes created a proposal for an international settlement unit he called the “bancor” which was meant to serve exactly the same purpose that bitcoin will serve as it rises to fulfill its predefined destiny. Here we can note that, in his lectures and writings on Ideal Money, John Nash doesn’t criticize Keynes, he criticizes the “Keynesian” belief that proper management of the money supply might result in a diminution of the purchasing power of the currency.
Nash’s proposal and Keynes’ proposal for the bancor run perfectly parallel to each other except in one way-Keynes proposal relies on cooperative altruism. Nash’s proposal, and if you understand game theory this is quite obviously fitting, relies on non-cooperative self interested agents.
If you are new to my argument and you do know of these subjects that is a very interesting point to make.
In regard to sound money and the re-solution of it with Nash’s Ideal Money or Keynes purpose for the introduction of the bancor, we can note that central banks ARE able to value target the purchasing power of their money.
In recent times they have sometimes found reason to lower the purchasing power comparatively to other currencies or commodities or baskets of commodities etc.
But that is not to say they cannot choose policies that would attempt to create a purchasing power trend that is effectively deflationary in nature. That is to say there is nothing really stopping a central bank from printing sound money.
I can’t remember Saifedean’s book perfectly well, and I read an earlier edition so I may have missed his conclusion. But I don’t remember him saying bitcoin will destroy all central banks, and I don’t remember him suggesting that central banks can print sound money.
I am not sure he would agree they can. I don’t think he has considered this otherwise he would have favorably mentioned Keynes proposal for a bancor (unless he judged and attacked Keynes’ and his theories without reading Keynes work).
I charge Saifedean with claiming to be some form of a macro-economics professor and student but totally missing the significance of a proposal of the opponent he is blasting on. Furthermore I charge him of lacking a conclusion to his repetitive assertion that bitcoin is sound money (ie so what?).
Lastly, most importantly, I charge him with ignorance with respect to John Nash’s Ideal Money. He could have easily have corrected himself had he have familiarized himself with the works.