Bitcoin production rates become lower than gold production rates starting today.
Автор: Анкап-тян
On the difficulties of mutual understanding with communists
Imagine the following situation. You are the director of the “Ancapistan” insurance company, which governs a certain territory. I am the speaker for the “Ancomistan” commune (we have no leader, but I am usually entrusted with conducting meetings and going on diplomatic trips on behalf of the commune), which also owns a certain territory. We share a common water border on a lake. Ancapistan is on the right bank of the lake, and Ancomistan is on the left. Almost the entire coastline of Ancapistan, except for a single shipping port, belongs to one private individual who uses the water for his chemical plants. You supply us with fertilizers and complex machinery, and we supply you with agricultural products, timber, and metals.
Then, at one fine moment, the aforementioned private individual begins to delay the replacement of filters, and many toxic substances enter the water. Since we share a common lake, several dozen people in Ancomistan (the lake is our only external water resource, whereas you also have a river on your territory) drink water from this lake, and all of them perish. And here is where it gets interesting. In Ancomistan, negligence resulting in grave consequences is punished by 15-20 years of hard labor for the benefit of the commune or by death by hanging. In Ancapistan, it is punished only by compensating the victims for damages. I hold a meeting where I raise the question of how to assess the damages for compensation. 5% of the communards suggest taking money and placing it in the commune’s account at the bank for international trade, 10% suggest sending the private individual to 15-20 years of hard labor, and 85% suggest the gallows, given the cynicism of valuing lives in money. In the end, the commune issues a death sentence and instructs me to send an extradition request. You offer to compensate for the damages, but I show you the paper with the commune’s resolution and continue to insist on extradition. Upon receiving a refusal, I state that in this case, the commune will completely stop supplying resources to Ancapistan and stop buying from it. If we sever trade relations, Ancapistan will lose one of its markets for selling and buying resources. Besides Ancomistan, the only other raw material territories nearby are in Anprimistan. You can sell finished products to them, but due to their poverty, they will not buy your products at the high price we pay. Also, due to the higher complexity of resource extraction, they will not sell you resources at the low price Ancomistan provides.
Ancomistan itself will simply drill water wells and sign a trade contract with Transgumistan, which sells and buys products at almost the same price but is located slightly further away than Ancapistan. As a result, you will have an economic crisis, while our standard of living will practically remain unchanged. Question: will you extradite the private individual to Ancomistan and thereby violate the NAP regarding him, or will you lose one of your markets for buying and selling resources and find yourself in a deep crisis?
Ancom-kun (question accompanied by a donation in the amount of 0.00023397 BTC)
Thank you for this long and interesting story, which demonstrates the problems a territorial commune may face. Fortunately, Ancapistan is merely an insurance company. We insure lives, real estate, transport, risks of industrial disasters, and so on. The fact that an insured enterprise failed to change filters on time and we did not find out about it (although non-compliance with technical regulations by the insured party is grounds for terminating the contract or revising the premium size due to increased risk) means only one thing: our employee was negligent or was bribed by the insured enterprise. Naturally, this means we fire our agent and revise our own regulations to prevent this from happening again. We also refuse to pay insurance to the insured company and sue it for fraud—they did not perform the procedures required by the regulations but did not inform us, thereby saving on insurance premiums. If other clients approach us for insurance due to the lake pollution (for example, fishermen or travel agencies whose activities are affected), we will have to pay them premiums, after which we will file claims against the enterprise for reimbursement of our losses.
Additionally, it seems we insured the life of the enterprise owner. This contract remains in effect, and we are obliged to prevent attempts on his life within the limit of expenses agreed upon by the insurance premium. So, we either take him under protection or provide him with a comfortable shelter and give him the opportunity to safely negotiate with Ancomistan to settle the claims.
Furthermore, Ancomistan takes a principled stand and insists on executing the businessman who offended them, refusing all his offers of financial compensation, even the transfer of the plant to the commune’s ownership. Therefore, the businessman continues to stay in the shelter and manage the plant from there. When the time comes to renew the insurance contract, we face a dilemma: either refuse the renewal or set an exorbitant price, because we are effectively acting not as an insurer, but as a security company. In the end, we reach an agreement: he continues to pay the bills, and we continue to protect him.
After this, Ancomistan begins to blackmail our other clients, threatening them with the termination of contracts if we do not hand over the criminal. We realize that further protection is impractical and finally terminate the contract with him. The former client, not being a fool, immediately signs a contract with another security company operating in the middle of nowhere, and they organize his evacuation. Then, being physically several thousand kilometers away from the vengeful commune, he continues negotiations with them, because he does not wish to wake up one fine day with an ice pick in his head. But his negotiating position becomes stronger, as it is more difficult for the commune in this situation to pressure his new security company. Therefore, most likely, after some time, you will reach some compromise with him.
The question of your sanctions against my insurance company remains. We protected our client within the framework of the contract, and as for what “extradition” is, we don’t understand it at all, because in our language it is called “kidnapping.” Refusing to protect is one thing, but kidnapping a person and handing them over to some bandits for subsequent execution is something entirely different. Nevertheless, we bear part of the responsibility to the commune because we poorly monitored our agent who was tasked with overseeing the compliance of technical regulations for our client. We offer Ancomistan compensation, and since there is no question of direct guilt in this case, we will most likely reach an agreement. After this, I have a claim against our former employee, but that is a completely different story.
1965-2020. 55 years of dancing with a coffin.
Since 1965, May 9 has been an official holiday in the territory of present-day Russia.
Domestic violence
The artificial isolation of citizens in their apartments has already led to a surge in domestic violence. And while this is happening haphazardly and spontaneously worldwide—one cohabitant beating another—in Russia, the state is taking over the organization of domestic violence; it is seriously intent on defending its monopoly on violence, as it understands it.
For example, it recently organized armed robberies with breaking and entering targeting several members of the “Association of People’s Resistance,” as well as Vladimir Vorontsov, the lead of the Telegram channel Police Ombudsman. The former were released after being robbed and beaten. The latter was kidnapped and is still being held. The criminals chose an opportune time, while the entire country is locked in their homes and people cannot provide serious mutual support—aside from informing each other of danger and providing situational assistance in dealing with the aftermath.
However, classic non-state domestic violence has not disappeared either, and here civil society has slightly more opportunities, provided, of course, that the state does not throw a wrench in the works, as it loves to do. The Civil Society movement announced the launch of the Fortress project, under which it will provide temporary shelter for victims of domestic violence (alas, not from the cops), and the Open Russia movement announced that it would provide Fortress with organizational and legal assistance (which would include protection from the cops).
I very much hope it takes off.
Registration of property rights under ancap
What will the registration of property rights for assets (land, real estate, enterprises, securities, files(?)) look like in the absence of a monopoly registrar (USRN and others)? Will it be mandatory? And what about bundles of rights under ancap?
Free Reader
Bundles of rights are simply an analytical tool for a deeper understanding of the phenomenon we commonly call ownership. Any relationship between a subject and an object can be described through bundles of rights, regardless of whether it is ancap or socialism. It is simply that under socialism, a certain property, for example, does not grant the right to derive profit from it, while under ancap it does. Also, for instance, rights to a plot of land may imply the right to prohibit boundary violations, or they may be encumbered by an easement requiring the provision of, say, free passage. All these bundles of rights are formed both as a result of concluding direct contracts and simply by virtue of established traditions. Any right is a claim that is tolerated, and if a certain claim is contested, it means that specific right is under threat.
For those who struggle to understand what the previous paragraph is about, I recommend watching Boris Yurovsky’s video, which is titled: Property as a Bundle of Rights.
Now let’s move on to the registration of property rights. A title of ownership for any object that can be uniquely identified is very easily stored in one registry or another. These could be objects such as “a plot of land with such-and-such boundaries” or “a smartphone with such-and-such a serial number” or “a file with such-and-such a checksum.”
How do titles of ownership get into registries? They are entered there by the owners of the property assets to inform everyone of their ownership right, which is primarily necessary to confirm that this right exists. Maintaining a registry requires resources, so those who decide to engage in this will have to think through a monetization scheme for the service. One could charge money for placing information about a property asset in the registry. This risks the registry being incomplete. One could charge for obtaining information from the registry. This risks people obtaining information through cheaper means. One could establish a fund, feed it for some time, and once the registry begins to demonstrate its utility to a wide circle of people, the fund could quite possibly develop the registry through donations.
The alternative to registries is the archaeology of property titles, where, wanting to ensure that the property being purchased actually belongs to the seller, a potential buyer examines the document recording the acquisition of the property, for example, a purchase and sale agreement, then turns to the previous owner, finds out how they acquired the object, and so on until their paranoia is satisfied. In effect, this is the same methodology as blockchain analysis—just without the blockchain. Additionally, if we are talking about a plot of land, for example, one can ask the neighbors whether they truly know the seller as the owner of the plot or if he is an impostor.
But this will be of little help in a situation where the owner of a property asset sells it to several people simultaneously, takes money from each, and then leaves them to figure it out however they want. This is the very “double spend” against which, in the case of bitcoin transactions, it is recommended to wait for several confirmations before considering the transaction complete. Unfortunately, blockchain is not the Internet of Things, as Ivan Ivanitsky aptly formulated in his article on Habr. Information in a registry, whether centralized or distributed, may differ from the conditions of the transaction. To protect against most such fraudulent transactions, a temporary freeze of the funds paid for the acquired object is sufficient. During this time, the problem of multiple claimants to one title of ownership will have time to surface, but the seller will not have had time to secure the money, and it can be returned to the unsuccessful buyers. Such a payment delay can be implemented either through a trusted intermediary or, possibly, through smart contracts (although I am not an expert in this area).
Money, a continuation of the discussion
I am grateful to Grigory Bazhenov for continuing the discussion about the future of money. Cross-posting on Telegram is a somewhat autistic format for conducting a conversation, but what can you do—it’s a quirk of the platform.
Consumer inflation in the USA.
Here is my quote from our discussion in the YouTube comments:
If people are sitting at home in quarantine, then the production of consumer goods and services will decrease one way or another. Meanwhile, governments are proposed to subsidize people’s lost wages, meaning they will have money to go to the store, but goods will appear there in smaller quantities. In other words, either the government regulates prices, as already announced in Russia, and gets a shortage, or it doesn’t regulate, and gets price increases.
After some time, I read in a post by the authoritative Americanist Dudakov:
The forecasts of economists, who predicted that after the epidemic the USA and other Western countries would experience a jump in consumer inflation for the first time in 40 years, are coming true.
The spike in meat prices served as an illustration there, but the problem is much broader. I had not read the economists’ forecasts mentioned by Malek, and I made my own forecast based on the simplest logic. To be fair, I thought governments faced a dilemma—regulate prices or accept their growth. It turned out that Trump resorted to a third option—direct directive management of production.
However, the assumed rapid recovery of developed economies will most likely lead to the fact that prices for temporarily underproduced consumer goods will return to values close to pre-crisis levels. So, on this relatively unimportant issue, I see little sense in debating for long.
The role of Bitcoin
My original question to Grigory was formulated as follows:
How will an economy behave in which money created in a fractional reserve banking system and money that does not provide for fractional reserve circulate in parallel on comparable scales?
I am not an economist, and I was interested to know the opinion of professionals about how the behavior of a system with the proposed parameters would look. Alas, instead of an answer, I received assurances that Bitcoin’s capitalization today is too small, its volatility is too high, it cannot be used as money, it is poor as a hedge asset, and so on. In short, I was told about today’s Bitcoin, not about a hypothetical situation in which its capitalization has already reached values comparable to the money supply of global reserve currencies, or at least gold.
Well, for now—yes, I fully agree that Bitcoin is more volatile than gold, that it is a poor hedge asset, and that its liquidity is lower than that of the dollar (although on the global market, Bitcoin’s liquidity is much higher than that of the Russian ruble). Today, the role of Bitcoin is less an instrument for short-term speculation and more an instrument for long-term investment. For someone who bought Bitcoin five years ago, it doesn’t matter much how much today’s rate jumps, because they have been firmly in the green for a long time. Similarly, for today’s buyer, it doesn’t matter much at what price they buy if they intend to hold Bitcoin for at least five years. They will be in the green anyway. If Grigory disagrees with this statement, it would be interesting to read his arguments.
However, even in that unlikely situation where the long-term trend of the BTC/USD currency pair turns from growing to horizontal or even falling, Bitcoin retains its significance as digital peer-to-peer cash—that is, value that can be passed from hand to hand via communication channels without using unreliable intermediaries such as state-regulated banks or transfer systems. However, my question to Grigory concerns only that hypothetical situation where the capitalization of BTC and the volumes of trade in it have already grown significantly—not the current picture, which we already know.
Unsecured obligations and fractional reserve
Separately, there is a post by Artem Seversky stating that money is an anti-commodity, and that issuing loans from own savings is inefficient, and it is much more sensible to issue loans with money created out of thin air. I see no reason to forbid anyone from giving others unsecured obligations; it is quite enough for me that secured and unsecured obligations cannot be confused, and beyond that, let market mechanisms work.
For example, I can use Bitcoins in settlements, and if I receive a Bitcoin loan, it is only because the lender actually had those Bitcoins on hand before kindly lending to me. Or I can issue my own ancap-tokens, tie their price to a single commissioned article—and sell tokenized obligations for creating texts to anyone willing in exchange for consumer goods. This would be an unsecured obligation, but what does fractional reserve have to do with it? Fractional reserve is if someone buys a hundred of my tokens and issues a thousand of their own, with an obligation to exchange them for mine upon first demand.
Morality. A new video from Libertarian Band.
In the new video, the Libertarian Band team and I examined morality from the same perspective we previously used to examine law, namely as a spontaneous order, so it is better to watch both videos one after the other. I don’t recall anyone describing morality in this way before, but I hope we managed to provide a sufficiently coherent, consistent, and practically applicable vision of the topic.
And next will be a video on a topic that many libertarian theorists have clashed over — about children. So don’t forget to subscribe to the channel.
Bitcoin’s Ascent
I rarely initiate public discussions myself; far more often, I publish reactions to my own texts and answers to those reactions. But not long ago, I couldn’t resist. In the video Money printer go brrr on the FuryDrops channel, Grigory Bazhenov attempted to present the basics of macroeconomics regarding the money supply, the workings of the money printer, and the money shredder in fairly popular terms. The video suggested that the Federal Reserve pumping trillions into the economy would not lead to inflation, but would merely compensate for the decrease in the multiplier.
In the comments, I inquired how the presence of a factor like Bitcoin—where the user chooses whether to operate within full reserves or turn to centralized intermediaries whose multiplier may be greater than one—would affect this entire model. I also predicted consumer inflation in the USA. The discussion was quite long; it’s better to look at the thread under the video yourself. There, Grigory Bazhenov and Artem Seversky objected both to the applicability of Bitcoin as money and to the possibility of inflation in a shrinking US economy. Artem even wrote a separate post about how money, by its very nature, means unsecured obligations and therefore can only be based on fractional reserves; otherwise, the economy stalls.
What do we see literally two weeks later. Consumer inflation indeed spiked in the USA. Using Trump’s helicopter money, people actively bought Bitcoins; this is evidenced by a beautiful graph showing the share of deposits of exactly 1,200 dollars (the amount paid to all US citizens) arriving at the most popular American crypto exchange, Coinbase, immediately after citizens received gifts from the federal treasury.
Finally, yesterday the Bitcoin price, as I promised on March 16, the day the price dropped to 4,400 dollars, shot up, and if anyone failed to buy in over the past month and a half, they must be feeling sad now. Though, it wasn’t the most suitable time for investments.
Finally, during this time, it has become clear that one should not pin hopes on corporate cryptocurrencies like Libra or Ton: they are too vulnerable to the ill will of regulators. Therefore, Bitcoin still looks like the only alternative money for a bright stateless future, and I feel sorry for clever economists like Grigory Bazhenov, who consciously try to distance themselves from this future: after all, you might find that there is simply no suitable place left for you there.
Mechanics of Freedom, Chapter 48
I have finished the last chapter of the second edition of The Mechanics of Freedom, from 1989. Only the relatively fresh chapters of the third edition, published in 2015, remain. The chapter is strange and looks like a bit of an off-topic addition to this book, because instead of the mechanics of freedom, it tells about a little-known author of detective stories from the beginning of the 20th century – G.K. Chesterton. The ending of the first edition seemed somewhat more logical, in my opinion, and as it stands, this chapter looks like a kind of expanded appendix to the book.
The review describes what a great man Chesterton was, a true old-school liberal who successfully combined this with Catholicism and a certain indifference toward Jews. This is probably interesting to connoisseurs of Chesterton, and I generally like the stories about Father Brown — but, in my view, this chapter is redundant in The Mechanics of Freedom.
Next, I will give you a break from Friedman for a while and switch to Molinism.
Freedom and Security
In the video about coronavirus and the state, I pointed out that the main danger of the epidemic is not in the deaths, nor even in the fact that the state, under the guise of security, is encroaching on freedoms—but in the fact that this encroachment will be welcomed, and after the epidemic ends, many of the introduced restrictions will remain.
And indeed. Mikhail Svetov likes a post stating that in Miami, not a single murder occurred during seven weeks of isolation. Mikhail Pozharsky writes an article about what cannibals the Swedish socialists are for starving their elderly with COVID. And literally almost everyone snorts with disapproval at anyone who admits they are not following the ban on walks or other excursions from home unless for an urgent need.
Yes, if everyone is locked in their homes, there will be fewer killings in the streets. There will be more killings at home. If people are not allowed to go to work, they will not die of pneumonia. They will die of hunger. Any restrictions introduced by the state to save lives have a price, which is expressed not only in money, but in those same lives.
I sincerely hope that the Swedes hold their ground and ultimately do not trade freedom for security. And I also sincerely hope that when all this is over and we count the excess mortality among the Swedes and their neighbors, it turns out that by choosing freedom, the Swedes won not only money, but also lives, and the praised security provided by the state actually meant not only the destruction of the economy but even more deaths. If this turns out to be the lesson for humanity, I will be happy. But even if it turns out that freedom means an increased risk of death, it is still no reason to abandon it. Otherwise, what is the point of it all?
