The biggest space for bitcoin in the future should be "digital gold"
In 1694, Scottish William Peterson founded the world's first central bank, the Bank of England. The bank, chartered by the British royal family, was originally a private bank, mainly to raise money for the government's war and thus obtain the right to issue money._DJMINER
In fact, from the perspective of banking business, the establishment of the Bank of England is not groundbreaking. It has a precedent in the Netherlands for its loan note business. Its imitators are mainly Amsterdam bank, a joint-stock bank established in 1609 in the Netherlands. However, the Bank of Amsterdam was not established for the king's office or for the war. Its service objects were emerging international commerce and trade, including the Dutch East India Company, and later extended to the Republic Government of the United province of the Netherlands. It creates deposit accounts, accounting currency, overdraft credit and other financial instruments. Although the Bank of England imitated the institution and business, it surpassed its predecessors and became a milestone in the history of banking.
After the glorious revolution, England took the lead in achieving political stability in the western countries. There has never been a civil war again. Having bid farewell to the turmoil of imperial power and regime change, England can concentrate on dealing with external challenges and competing for world hegemony.
Historians believe that France was worth two Great Britain in terms of population and economic strength from the 17th to the 18th century. At that time, the population of France was nearly 20 million, three times that of Britain. But why did Britain finally win over France and achieve world hegemony? The support of modern finance is regarded as one of the important cornerstones. The establishment of the Bank of England is a great progress in the credit relationship between the public and the government.
In 1844, Robert Peel, the Prime Minister of England, introduced the peel regulation, a new banking law, which reorganized the Bank of England into issuing department and banking department._DJMINER
The peel regulations limit the rights of the major banks in England. Under the act, banks other than the Bank of England are not allowed to issue new banknotes (banknotes), and existing banks that issue banknotes need to recover their banknotes if they fail; at the same time, if the Bank of England issues new banknotes, it needs to have full gold as guarantee.
The peel regulation not only weakened the issuing right of private banks, but also controlled the amount of legal currency of private banks. More importantly, it has laid the foundation for the Bank of England to perform the function of the central bank from the organizational model of the central bank and the issue of currency.
This law is not only the great victory of the British monetary school, but also the key step of currency nationalization in the history of currency.
Later, in order to avoid the conflict of "being both a referee and an athlete", the Bank of England gradually gave up its commercial banking business and became the real central bank, which was nationalized by the labor government in 1946.
Since then, the Bank of England has become the standard template for other central banks, playing the role of "lender of last resort", namely "issuing bank, Bank of bank, Bank of government".
However, Herbert Spencer, a British philosopher at that time, questioned this issue after the adoption of the peel regulations (it can be seen that Hayek was not the originator of the idea of currency denationalization). Spencer put forward a proposal: to open the gold coinage market and allow free competition;
But Spencer's suggestion annoyed the famous economist at that time, Jaynes. "Nothing is more unsuitable for competition than money," says Mr jevans bluntly.
"In other commodity markets, everyone is driven by self-interest to choose the good ones and refuse the bad ones, but in the money market, the result may be that everyone abnormally keeps the bad ones and gives up the good ones," said jevans, who moved out of the Gracian rule
Later, it was generally accepted by the economists that the money market was prone to the problem of "bad money drives out good money", so the issue of money should be handed over to the state. In the war years, most governments took over the central bank and the right to issue money. Since then, people have become accustomed to the rules of currency nationalization and legal tender.
However, jevans actually ignored that there is a "Gresham rule" in any market, and the less competitive the market is, the more serious the phenomenon of bad money expelling good money is._DJMINER
The government stipulates that only gold and silver can be used for coinage, or the issuing market is monopolized, can bad coins drive out good ones. If the money market is fully competitive, bad money will be eliminated without being accepted. In fact, the international monetary market is a relatively competitive market, and no one will accept devalued currencies such as the Bolivar of Venezuela.
Therefore, the explanation of currency nationalization with "Gresham's law" is actually untenable.
The difficulty here actually comes from the misleading of our fixed thinking about money, or "general equivalent".
Since Adam Smith, economists have believed that money comes from common goods and belongs to the general equivalent. Money without condensation of human labor has no value. This concept of currency has been misleading economists and the public.
Until the 1970s, economists began to reflect on the nature and origin of money. According to the latest monetary theory, money is a kind of contract about exchange right between the owner of property and the market, which is essentially an agreement between the owners._DJMINER
"I give all I have to the market, in exchange for what I need", money is the agreement of this process. This theory can withstand strict falsification and logical argumentation, explain all economic phenomena related to money, and is tested by all economic practices, which marks the end of the debate on the nature of money for hundreds of years.
However, no matter from the essence of money or from the history of money, money is not the prerogative of the state. Even in the era of legal tender, there are a large number of private currency and non legal currency as supplement. Then, whether the currency must be controlled by the state has become a new question.
In 1976, Friedrich Hayek, 77, completed the book "the denationalization of money", describing his ultimate liberal blueprint, and aiming at the last bastion of the free economy, the national legal currency.
In his book, he subverted the orthodox concept of monetary system: since free competition is the most efficient in the market of general goods and services, why can't free competition be introduced into the monetary field? Hayek put forward a revolutionary proposal: abolish the central bank system, allow private issuance of currency, and free competition, which will find the best currency.
But Hayek also made a mistake that many economists like to make, that is, "catch the problem accurately, but there are loopholes in the proposed solution."
There are two reasons for Hayek's proposal of "currency non nationalization":
1. Historically, money was formed spontaneously by the people rather than monopolized by the government at the beginning. Even, the time of denationalization of currency is much longer than that of nationalization;
2. The price, supply and competition mechanism of the market can prevent the over issuance of money and maintain the price stability, while the state monopoly will lead to the over issuance and devaluation of money.
Hayek's two points are true in fact, but he did not provide detailed historical data or reliable theory to prove the feasibility of currency denationalization. What's more, there are many loopholes in his proposal._DJMINER
First of all, money does form spontaneously, but the problem is that the national credit currency he criticizes also forms spontaneously, that is, a kind of contract with the nature of creditor's rights and debts. For example, "this note is legal tender for all debts public and private" printed on US dollar and "promises to pay the bear" printed on Hong Kong dollar refer to debt contractual relationship.
Even the state is essentially a contractual arrangement, but it has an evolutionary process. According to the theory of social contract put forward by Hobbes, Locke, Rousseau, Spinoza and other enlightenment thinkers, the state is a group of contracts reached by the people, which protects their property and life safety by establishing a state machine.
However, the level of the state contract is higher, and its power, obligation, responsibility and ability to perform are stronger. This is the difference between legal tender and other currencies.
In fact, the U.S. financial market has also experienced the great development of laissez faire, with private banks issuing their own banknotes. But the result is a run every few decades, especially in 1893, which not only made hundreds of banks fail, but also made many people's life savings go to waste overnight. Moreover, the entire American economy has also been stuck in a long period of stagnation due to the failure of the financial industry to operate normally, which has brought an unprecedented economic recession to the United States.
The frequent financial crisis also began to make the public gradually realize that there are great problems in the laissez faire financial market. Support for the establishment of an institution to properly regulate the financial market is growing louder. This is also an opportunity for the birth of the Federal Reserve.
Second, there is really nothing to say about the government's indiscriminate currency. But the solution proposed by Hayek is to let several big commercial banks monopolize the right to issue currency, and to maintain the stability of currency value by controlling the parasitic banks to create credit through mutual restraint of market mechanism + refusal to rescue the market declaration.
In short, Hayek is extremely wary of government power, but his confidence in capitalists is unprecedented. He actually thought that as long as they monopolized the interests of the distribution rights, they could control the internal power of the flood and famine and not touch the interests brought by credit creation.
However, in the era of free banking in the United States, private banks were independent, but they did not give up credit creation at all, but increased their efforts to get money.
So Hayek did make a shocking claim, but he didn't explain how people around the world could abandon legal tender to accept the money of private banks.
However, after the 2008 financial crisis, the central banks of major countries in the world have launched unprecedented loose monetary policies, the depreciation of the US dollar and major French currencies, and the flood of global liquidity, all of which seem to subvert people's traditional understanding of the central bank's mission and cause strong dissatisfaction of many people, but it seems helpless.
That's when bitcoin came out low-key.
Nakamoto pointed to the key point of French currency: "the fundamental problem of traditional currency is that they must be fully trusted to play a role.". The central bank must be trusted not to devalue the currency, but there has been a history of breaking this commitment... "
Nakamoto's approach is to issue bitcoin, a borderless currency, and establish "a point-to-point electronic cash payment system". There are at least three meanings behind bitcoin:
1. Bitcoin is a non legal and borderless currency, that is, the non nationalization of currency;
2. Bitcoin network is a decentralized distributed network, a borderless bank transfer and payment system;
3. The emergence of bitcoin means the attempt of a kind of non national super sovereign currency and borderless financial system.
Now, a lot of articles about bitcoin we see will mention Hayek's "currency denationalization" as a theoretical endorsement, but it is not the same thing at all.
First of all, although Hayek advocates completely free market competition, at least in terms of currency issuance, Hayek still advocates a certain degree of control in order to pursue stable currency. In Hayek's cognition, the circulation of basic currency is not the most important, but the mechanism to ensure the stability of currency value. In other words, compared with the simple and crude approach of "bitcoin only limits the total amount of issuance", Hayek's design of free currency actually pays more attention to how to "maintain the stability of currency value".
And "currency stability" has a "mission nature" obligation for all currency contracts.
Although Nakamoto expressed his distrust of the traditional banking system and dissatisfaction with the over issuance of currency, he tried to keep bitcoin from devaluing by issuing it in a fixed amount (21 million). In fact, this method is mechanical and ineffective.
It is precisely because of the fatal defect (contract defect) of its currency issuing mechanism itself that bitcoin has lost the transaction function attribute of currency, gradually separated from currency and lost the value of currency.
Therefore, those who used Hayek's theory to endorse bitcoin, many of them were taken out of context and distorted Hayek's pursuit of currency stability. However, the emergence of bitcoin is indeed a practice of Hayek's theory.
So, after losing the value of money, is bitcoin really just a speculative digital asset? What is its future value?_DJMINER
In fact, only from the bitcoin white paper, Nakamoto's wish is not to build a borderless currency, but a global distributed banking system. Therefore, as a borderless distributed transfer system, once the international situation is tense, such as the situation in Iran and the inflation of French currency, the value of this system will inevitably increase - capital outflow and money laundering.
Moreover, bitcoin's liquidity is stronger than gold and global trading is more convenient. Therefore, in the future, bitcoin may replace gold index to become the "barometer" of international situation.
In other words, the biggest space for bitcoin in the future should be "digital gold"._DJMINER
In fact, from the perspective of banking business, the establishment of the Bank of England is not groundbreaking. It has a precedent in the Netherlands for its loan note business. Its imitators are mainly Amsterdam bank, a joint-stock bank established in 1609 in the Netherlands. However, the Bank of Amsterdam was not established for the king's office or for the war. Its service objects were emerging international commerce and trade, including the Dutch East India Company, and later extended to the Republic Government of the United province of the Netherlands. It creates deposit accounts, accounting currency, overdraft credit and other financial instruments. Although the Bank of England imitated the institution and business, it surpassed its predecessors and became a milestone in the history of banking.
After the glorious revolution, England took the lead in achieving political stability in the western countries. There has never been a civil war again. Having bid farewell to the turmoil of imperial power and regime change, England can concentrate on dealing with external challenges and competing for world hegemony.
Historians believe that France was worth two Great Britain in terms of population and economic strength from the 17th to the 18th century. At that time, the population of France was nearly 20 million, three times that of Britain. But why did Britain finally win over France and achieve world hegemony? The support of modern finance is regarded as one of the important cornerstones. The establishment of the Bank of England is a great progress in the credit relationship between the public and the government.
In 1844, Robert Peel, the Prime Minister of England, introduced the peel regulation, a new banking law, which reorganized the Bank of England into issuing department and banking department._DJMINER
The peel regulations limit the rights of the major banks in England. Under the act, banks other than the Bank of England are not allowed to issue new banknotes (banknotes), and existing banks that issue banknotes need to recover their banknotes if they fail; at the same time, if the Bank of England issues new banknotes, it needs to have full gold as guarantee.
The peel regulation not only weakened the issuing right of private banks, but also controlled the amount of legal currency of private banks. More importantly, it has laid the foundation for the Bank of England to perform the function of the central bank from the organizational model of the central bank and the issue of currency.
This law is not only the great victory of the British monetary school, but also the key step of currency nationalization in the history of currency.
Later, in order to avoid the conflict of "being both a referee and an athlete", the Bank of England gradually gave up its commercial banking business and became the real central bank, which was nationalized by the labor government in 1946.
Since then, the Bank of England has become the standard template for other central banks, playing the role of "lender of last resort", namely "issuing bank, Bank of bank, Bank of government".
However, Herbert Spencer, a British philosopher at that time, questioned this issue after the adoption of the peel regulations (it can be seen that Hayek was not the originator of the idea of currency denationalization). Spencer put forward a proposal: to open the gold coinage market and allow free competition;
But Spencer's suggestion annoyed the famous economist at that time, Jaynes. "Nothing is more unsuitable for competition than money," says Mr jevans bluntly.
"In other commodity markets, everyone is driven by self-interest to choose the good ones and refuse the bad ones, but in the money market, the result may be that everyone abnormally keeps the bad ones and gives up the good ones," said jevans, who moved out of the Gracian rule
Later, it was generally accepted by the economists that the money market was prone to the problem of "bad money drives out good money", so the issue of money should be handed over to the state. In the war years, most governments took over the central bank and the right to issue money. Since then, people have become accustomed to the rules of currency nationalization and legal tender.
However, jevans actually ignored that there is a "Gresham rule" in any market, and the less competitive the market is, the more serious the phenomenon of bad money expelling good money is._DJMINER
The government stipulates that only gold and silver can be used for coinage, or the issuing market is monopolized, can bad coins drive out good ones. If the money market is fully competitive, bad money will be eliminated without being accepted. In fact, the international monetary market is a relatively competitive market, and no one will accept devalued currencies such as the Bolivar of Venezuela.
Therefore, the explanation of currency nationalization with "Gresham's law" is actually untenable.
The difficulty here actually comes from the misleading of our fixed thinking about money, or "general equivalent".
Since Adam Smith, economists have believed that money comes from common goods and belongs to the general equivalent. Money without condensation of human labor has no value. This concept of currency has been misleading economists and the public.
Until the 1970s, economists began to reflect on the nature and origin of money. According to the latest monetary theory, money is a kind of contract about exchange right between the owner of property and the market, which is essentially an agreement between the owners._DJMINER
"I give all I have to the market, in exchange for what I need", money is the agreement of this process. This theory can withstand strict falsification and logical argumentation, explain all economic phenomena related to money, and is tested by all economic practices, which marks the end of the debate on the nature of money for hundreds of years.
However, no matter from the essence of money or from the history of money, money is not the prerogative of the state. Even in the era of legal tender, there are a large number of private currency and non legal currency as supplement. Then, whether the currency must be controlled by the state has become a new question.
In 1976, Friedrich Hayek, 77, completed the book "the denationalization of money", describing his ultimate liberal blueprint, and aiming at the last bastion of the free economy, the national legal currency.
In his book, he subverted the orthodox concept of monetary system: since free competition is the most efficient in the market of general goods and services, why can't free competition be introduced into the monetary field? Hayek put forward a revolutionary proposal: abolish the central bank system, allow private issuance of currency, and free competition, which will find the best currency.
But Hayek also made a mistake that many economists like to make, that is, "catch the problem accurately, but there are loopholes in the proposed solution."
There are two reasons for Hayek's proposal of "currency non nationalization":
1. Historically, money was formed spontaneously by the people rather than monopolized by the government at the beginning. Even, the time of denationalization of currency is much longer than that of nationalization;
2. The price, supply and competition mechanism of the market can prevent the over issuance of money and maintain the price stability, while the state monopoly will lead to the over issuance and devaluation of money.
Hayek's two points are true in fact, but he did not provide detailed historical data or reliable theory to prove the feasibility of currency denationalization. What's more, there are many loopholes in his proposal._DJMINER
First of all, money does form spontaneously, but the problem is that the national credit currency he criticizes also forms spontaneously, that is, a kind of contract with the nature of creditor's rights and debts. For example, "this note is legal tender for all debts public and private" printed on US dollar and "promises to pay the bear" printed on Hong Kong dollar refer to debt contractual relationship.
Even the state is essentially a contractual arrangement, but it has an evolutionary process. According to the theory of social contract put forward by Hobbes, Locke, Rousseau, Spinoza and other enlightenment thinkers, the state is a group of contracts reached by the people, which protects their property and life safety by establishing a state machine.
However, the level of the state contract is higher, and its power, obligation, responsibility and ability to perform are stronger. This is the difference between legal tender and other currencies.
In fact, the U.S. financial market has also experienced the great development of laissez faire, with private banks issuing their own banknotes. But the result is a run every few decades, especially in 1893, which not only made hundreds of banks fail, but also made many people's life savings go to waste overnight. Moreover, the entire American economy has also been stuck in a long period of stagnation due to the failure of the financial industry to operate normally, which has brought an unprecedented economic recession to the United States.
The frequent financial crisis also began to make the public gradually realize that there are great problems in the laissez faire financial market. Support for the establishment of an institution to properly regulate the financial market is growing louder. This is also an opportunity for the birth of the Federal Reserve.
Second, there is really nothing to say about the government's indiscriminate currency. But the solution proposed by Hayek is to let several big commercial banks monopolize the right to issue currency, and to maintain the stability of currency value by controlling the parasitic banks to create credit through mutual restraint of market mechanism + refusal to rescue the market declaration.
In short, Hayek is extremely wary of government power, but his confidence in capitalists is unprecedented. He actually thought that as long as they monopolized the interests of the distribution rights, they could control the internal power of the flood and famine and not touch the interests brought by credit creation.
However, in the era of free banking in the United States, private banks were independent, but they did not give up credit creation at all, but increased their efforts to get money.
So Hayek did make a shocking claim, but he didn't explain how people around the world could abandon legal tender to accept the money of private banks.
However, after the 2008 financial crisis, the central banks of major countries in the world have launched unprecedented loose monetary policies, the depreciation of the US dollar and major French currencies, and the flood of global liquidity, all of which seem to subvert people's traditional understanding of the central bank's mission and cause strong dissatisfaction of many people, but it seems helpless.
That's when bitcoin came out low-key.
Nakamoto pointed to the key point of French currency: "the fundamental problem of traditional currency is that they must be fully trusted to play a role.". The central bank must be trusted not to devalue the currency, but there has been a history of breaking this commitment... "
Nakamoto's approach is to issue bitcoin, a borderless currency, and establish "a point-to-point electronic cash payment system". There are at least three meanings behind bitcoin:
1. Bitcoin is a non legal and borderless currency, that is, the non nationalization of currency;
2. Bitcoin network is a decentralized distributed network, a borderless bank transfer and payment system;
3. The emergence of bitcoin means the attempt of a kind of non national super sovereign currency and borderless financial system.
Now, a lot of articles about bitcoin we see will mention Hayek's "currency denationalization" as a theoretical endorsement, but it is not the same thing at all.
First of all, although Hayek advocates completely free market competition, at least in terms of currency issuance, Hayek still advocates a certain degree of control in order to pursue stable currency. In Hayek's cognition, the circulation of basic currency is not the most important, but the mechanism to ensure the stability of currency value. In other words, compared with the simple and crude approach of "bitcoin only limits the total amount of issuance", Hayek's design of free currency actually pays more attention to how to "maintain the stability of currency value".
And "currency stability" has a "mission nature" obligation for all currency contracts.
Although Nakamoto expressed his distrust of the traditional banking system and dissatisfaction with the over issuance of currency, he tried to keep bitcoin from devaluing by issuing it in a fixed amount (21 million). In fact, this method is mechanical and ineffective.
It is precisely because of the fatal defect (contract defect) of its currency issuing mechanism itself that bitcoin has lost the transaction function attribute of currency, gradually separated from currency and lost the value of currency.
Therefore, those who used Hayek's theory to endorse bitcoin, many of them were taken out of context and distorted Hayek's pursuit of currency stability. However, the emergence of bitcoin is indeed a practice of Hayek's theory.
So, after losing the value of money, is bitcoin really just a speculative digital asset? What is its future value?_DJMINER
In fact, only from the bitcoin white paper, Nakamoto's wish is not to build a borderless currency, but a global distributed banking system. Therefore, as a borderless distributed transfer system, once the international situation is tense, such as the situation in Iran and the inflation of French currency, the value of this system will inevitably increase - capital outflow and money laundering.
Moreover, bitcoin's liquidity is stronger than gold and global trading is more convenient. Therefore, in the future, bitcoin may replace gold index to become the "barometer" of international situation.
In other words, the biggest space for bitcoin in the future should be "digital gold"._DJMINER
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