Bitcoin and Macro

I am very surprised to hear bitcoiners talk about “wen lambo” scenarios for the next few years or decades. From my point of view, they are as lost as the non-coiners who do not conceive that the hardest money displaces others. And it is that if we talk about money, everything depends on design. In this article, I want to comment on the two big changes that I see between the Fiat and the Bitcoin design.

In my mind, I summarize the Economics career as Micro, Macro, and Econometrics. Econometrics is a tool that is used to analyze models created by humans to try to draw conclusions from the data. Micro studies the P2P exchange and explains the decisions of the agents according to their incentives. Finally, Macro explains at the national level how to justify the economic policies that are being taken, most importantly, fiscal and monetary policies.

Like any child who likes to understand what is being explained to him, I got lost in Keynesianism without being able to understand what the proposal was. With public spending always above its possibilities and public debt growing structurally. I remember asking in class what the average value of a country's public debt should be, and receiving the answer that it is not fully known. My next question was if one day we would see it at 1000% of GDP. I think you already know the answer.

Those doubts about the current model led me to Hayek and Mises and their ideas of denationalizing money. But their designs lacked technology to match; that's why when I found Bitcoin I felt closer to the prophecy. It is thanks to its cryptographic encryption that Bitcoin becomes the only form of non confiscatable money. The privacy that can be achieved in Bitcoin makes it difficult to trace and impossible to confiscate by the state, which ends the fiscal policies that we counted on at the macroeconomic level to play with our economic model. On the other hand, if the money supply in Bitcoin is fixed, the amount of bitcoins that will be in circulation is known from day 0; we do not have monetary policies. The four subjects that made me understand politics vanished all at once into thin air.

These two changes address two separate issues, with a different influence on our system design. A fixed monetary policy leaves the figure of the central bank out of the game, but even more importantly, it makes it impossible to execute Keynesian juggling with public spending. Due to its design based on scarcity, Bitcoin demonetizes the rest of competing assets as a store of value and many economists cannot understand this because of noise such as intrinsic value or the community concept. Bitcoin being the hardest money design on the market, it is destined to become a world reserve currency but the final design of how the user will interact is still a matter of debate and an arena of ideological battle. Based on these two proposed changes in the fiscal and monetary spheres, I would like to delve into some scenarios and some theories. In the articles derived from this, I will give my points about the concepts, models, and myths that I understand are redesigned.

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