After a tweet by Keynesian economist Frances Coppola, I got to thinking out loud. Meaning on twitter. So we had a short discussion about gold and bitcoin.
What history does show, actually, is that gold standards and similar fixed-supply schemes all fail. They don’t last thousands of years, or even hundreds. They last a few decades at best. The evidence for this is overwhelming.
She’s right about this argument. I’ve thought about it too. My only hope is that bitcoin can scale globally since it’s digital. Gold needed to switch to bank notes because, well, you couldn’t lug it around easily and safely.
I think historical gold standards have all been semi-fiat. For example, a Roman emperor could dictate the percentage of gold used in coins. Need to fund a war? Dilute the metal. Difficult to do with Bitcoin. Fractional reserve schemes eventually rekt by self-custodial ownership.
By the way, the Roman gold standard lasted for 300 years, and while it was constantly diluted, it was relatively stable. (Many metals were used in coins, but gold was the ultimate denominator.) Source with more details:
Fiat isn’t inherently bad. I’ve been reading @saifedean ‘s Fiat Standard and it’s easy to see how it was a much needed technology for global trade. What’s bad is the greed and abuse in money printing.
In her review of the Bitcoin Standard Frances Coppola says that Saifedean’s assumptions are wrong, societies didn’t thrive because of hard money, they had hard money because they were thriving. https://www.coppolacomment.com/2018/04/the-bitcoin-standard-critical-review.html
What do you think? Can a fixed-supply standard like gold or the proposed bitcoin one survive, and moreover thrive?