‘The Bitcoin Standard’: A review

“[This] should be required reading for everyone in modern society,” writes Michael Saylor, CEO of MicroStrategy, in his foreword to the latest version of The Bitcoin Standard (subtitled, the decentralized alternative to central banking) by Saifedean Ammous.

Saylor suggests that “It was this book, more than any other, that provided the holistic economic framework that I needed to interpret the macroeconomic forces reshaping our world.” Online reviews, social media posts, and Twitter bios echo similar sentiments: the book is apparently revelatory and life-changing, putting people on The Bitcoin Standard pathway, initiating them into the HODL culture of BTC maximalism. The Bitcoin Standard has become, er, standard reading in the ‘crypto’ community.

The latest version, just released some three years after the original, is essentially unchanged other than the new foreword by the well-known BTC maximalist and promoter, Saylor. The previous foreword by Nassim Taleb was effectively withdrawn in an angry public disagreement with Ammous, implying he was “crankish” and a “lunatic”: Taleb pulled his endorsement of both the book and BTC as ‘digital-gold.’ So, what’s the fuss about?

The book’s 10 chapters are essentially in three parts: the first three chapters outline a particular theory and history of money; the next four intermix between a history of the gold standard and post-gold standard era, politics, and a kind of cultural anthropology of the impact of ‘sound money’ and time preference on society; the final three chapters are a more mundane description of the digital money vision of ‘Bitcoin.’

Jumping to the final three chapters, these are a worthwhile introduction to any newcomer wishing to understand the whole ‘crypto’ movement, although it should be understood that Ammous regards Bitcoin’s principal purpose as a form of universal ‘sound money’: a potential ‘Bitcoin Standard’ to replace the world economy’s long-abandoned gold standard. However, citing the white paper, Ammous clarifies Satoshi’s use-case for Bitcoin:

Satoshi Nakamoto’s motivation for Bitcoin was to create a ‘purely peer-to-peer form of electronic cash’ that would not require trust in third parties for transactions and whose supply cannot be altered by any other party.

Ammous describes what BTC has become in its promoters’ eyes: “a global hard money” to store financial wealth, which third party intermediaries can hold and trade on their platforms, much like banks do now. Noting the incongruity, he writes, “While this view of Bitcoin might sound like it is a betrayal of Bitcoin’s original vision [correct, emphasis added] of fully peer-to-peer cash, it is not a new vision.” The digital-gold-as-universal-money idea had indeed been around for over a decade before the white paper. But this had little (if anything) to do with Satoshi’s white paper, and was not the problem Satoshi was trying to solve: ‘casual’ transactions (read small and uneconomic for banks) settling with electronic cash without the need for a fiduciary intermediary.

The question we have to ask then is, if the Bitcoin described by Ammous and the vision around BTC does not actually serve Satoshi’s motivation or vision for creating Bitcoin, why is the book called ‘The Bitcoin Standard,’ and why should we be interested in it? The book would be better titled ‘The Digital Gold Standard’: reflecting what BTC maximalism stands for. What motivation lies behind a move back to a form of gold standard? This is how we need to interpret the modus operandi of the earlier chapters of the book.

Breaking down ‘The Standard’

The first three chapters introduce the theory and history of money. Ammous retells the standard barter-myth Austrian school approach (also known as the Metalist or Mengerian theory of money, after Carl Menger). There is a particular focus on Antal Fekete’s concept of the stock-to-flow ratio in determining how a monetary commodity emerges. It is a narrow and partial history of money, excluding the ubiquitous role of credit and governance which are detailed in more comprehensive treatments of monetary history.

The book’s readable style is likely a factor in its success, yet it must be recognised that this is not an attempt to describe the history and emergence of money as it actually happened. The only focus on non-commodity monies here is to highlight particular instances in history when they have catastrophically broken down: ‘unsound money’ is always presented as the single causal factor—the role of exogenous geopolitical shocks is not considered. This is not atypical of the Austrian approach: Menger and von Mises drew the same arbitrary line around money, seeking to deny the legitimacy of any form of top-down governance, asserting that the only thing that can legitimately serve as money is a commodity, emerging through a market search process.

Irrespective of the disapproval of the Austrian school, commodity monies have existed alongside other monies of varying types for thousands of years, variously competing and complementing according to context. Monetary systems largely emerged through top-down socio-political arrangements: from temples and priests, to Pharaohs, philosopher kings, Knights Templar, merchants, notaries, credit-brokers, bankers, governments and central banks. In contrast, the traditional methodology of the Austrian school seeks to develop theories and narratives based on a priori deductive reasoning of the presumed desires of individual human actions (praxeology they call it). Any legitimate role of governance in the multidimensional socio-political relations around money is assumed away by ideological fiat, derided as an unnecessary intervention in the market which can only end in disaster. More dogma than theory or history. The history of money is complicated, and far more interesting than the simplistic narrative presented.

It is when we get into the middle section of the book that things really get bad: it’s overly long, with ideas scattered and repeated; the only narrative thread being the twin evils of ‘unsound money’ and John Maynard Keynes. Chapter 4 on ‘Government Money’ is unscholarly in spirit. We’re told the gold standard is responsible for everything good that ever happened in the 19th century and civilisation essentially ended with the demise of the gold standard. The tale is right from the ‘fractional reserve banking is fraud’ sub-branch of Austrian economics. The legitimate—essential to capitalist growth—role of business entrepreneurs going to entrepreneurial bankers to seek fresh credit (new money created as a loan ex nihilo based on good collateral and good prospects) is completely ignored. Any expansion of money beyond gold is implied to be fraudulent and, again, destined to end in disaster. This is a fatal blind spot. Bitcoin is, after all, an electronic cash system, neither intended to, nor capable of replacing banking.

Politics not economics

Someone who knows the history of the Great Depression and Bretton Woods era may well recognise the characterisation of this era as a fairy tale. Stylistically, it’s essentially an extended, but bad, undergraduate essay: ranting and polemical. At its low points it’s moronic. Everything Ammous doesn’t like about the period is lumped into the devil incarnate, ‘Keynesian economics’, presented as one homogenous, sub-intellectual blob of stupid ideas, driven by the vanity of self-serving bureaucrats and academics. Any subtlety about the notion of good or bad political governance is simply a manifestation of the ‘Keynesian deluge’. The fact that many high-profile followers of Keynes actively refer to this ‘Keynesian Economics’ as ‘Bastard Keynesianism’—for more nuanced reasons—completely escapes Ammous.

People are allowed to have ideologies, but it shows good faith to be explicit that this is what is being discussed: this is political ideology, not economic or monetary theory per se. Ammous is at least clear in affirming that “The political vision of Bitcoin” is essentially based around Murray Rothbard’s anarcho-capitalism: government should stay out of people’s lives (other than helping secure property). The book’s principle citations are from Rothbard and his fellow travellers, von Mises and Hayek (with some reference to other libertarian thought and modern Austrian school writers such as Salerno and Hoppe). The middle section of the book is von Mises and Rothbard on steroids. It has a feeling of lecture notes stitched together without the benefit of a serious editor: almost plagiaristic in parts, dumbed down for mass-market appeal in others, always displaying a touch of venom.

An underlying political motivation of many BTC maximalists is likely true, but it does handicap the book as being extraordinarily partial at every turn. Everything is asserted to serve the purpose of demarcating history into good anarchy and bad government. Government intervention is always derided as ‘unsound money’; ‘sound money’ is promoted as the solution to all the world’s ills, even ending war. It is history painted in black and white, where good faith and scholarship require shades of grey. The tool Ammous uses to ‘justify’ this approach—to varnish it with scientific legitimacy—is the concept of time preference: the utility trade-off humans perceive in having something now rather than later.

Time preference is not new

Time preference is Econ101: probably the first thing anyone learns in an economics or finance class, often with a parable such as that of Robinson Crusoe stuck on his island with the choices he has to make in allocating his time and effort: catch a fish with your hands? make a trident? or build a boat and stitch a net? It is crucial to the theory of interest rates, financial markets, and discounting factors in economic models. Ammous holds a bachelor’s degree in engineering and a PhD in Sustainable Development, yet he claims that university curricula in economics ignore time preference, “to the point that many academic economists have no familiarity with the term time preference.

This is an extraordinary and absurd claim, yet it is crucial to driving the whole narrative of the middle section of the book. Based on his interpretation of the universal pre-eminence of time preference, Ammous pens a vitriolic morality play about the history of the world being determined by a struggle between two kinds of people. On the one side, a kind of Übermensch: the morally superior, low time preference types who piously save their metaphorical seed-corn in order that society can accumulate ‘capital’ and grow (fundamentally illogical and anachronistic as this argument is). In contrast, the low-quality, libertine Untermensch are wasting their lives away—so morally depraved that they borrow money from banks to buy things like houses and cars! He condescends that “there is no escaping the conclusion that ours is a generation that is inferior to its ancestors in culture and refinement.”

It’s a disconcerting reminder that ersatz ‘libertarian’ thought, at its edges, looks a little bit authoritarian: sound money forces you to be more morally upright. After all, the ostensible hero in this morality play is Rothbard whose ‘Ethics’ (cited by Ammous) ultimately resolve into allowing parents to starve their children to death if they wish (presumably a result of high time preference); a problem of neglect that, Rothbard tells us, could be solved through a free-market in babies. This is not classical liberalism, or even mainstream libertarianism, but the hard-core anarcho-capitalism of sociopaths.

From liberty to despotism

This tension of imposing ‘liberty’ on people by seeking to deny democratic governments any policy space whatsoever underlines the whole book. The most obvious manifestation of this ideological lens is in the repeated mischaracterisation of John Maynard Keynes and his ideas. Keynes is the anti-hero in this morality play: the necessary foil for the angelic, low time preference heroes. The lambasting of Keynes is in the well-established rhetorical tradition of the Austrian School: unevidenced assertion and straw manning. Of all the faults of the book—and there are many—the wanton misrepresentation of Keynes is perhaps the most indicative of bad faith.

Keynes, who we’re told “never studied economics or researched it professionally,” led to “a Keynesian deluge, from which the world is yet to recover.” Keynes is alleged to have “lived off his family’s considerable fortune without having to work real jobs, [hence] Keynes had no appreciation of saving or capital accumulation and their essential role in economic growth.” Yet the truth is that Keynes, human and imperfect as he was, was essentially a classical liberal who was mugged by reality. He worked multiple jobs in finance, academia, and government, which took their toll on his health (precipitating a series of heart attacks, eventually a fatal one at age 62). He came to fame in resigning from the highest ranks of the U.K. Treasury during the negotiations at the Treaty of Versailles, in order to warn the world (in The Economic Consequences of the Peace) that the unreasonable settlement imposed on Germany would lead to a cataclysmic social breakdown and a worse future war than the one just fought. He lamented the demise of liberalism as the despots took hold in the 1920s and ‘30s.

In contrast, von Mises and Hayek appeared to welcome the Wall Street crash and Great Depression as a necessary social cataclysm: a cathartic response to the failures of ‘unsound money,’ a view Ammous evidently endorses (because there is no original thought or further contemplation here). Their highbrow Viennese-cafe-seminar utopianism was ill-prepared for the less-enlightened folk turning towards Fascism, National Socialism and Communism. Keynes’ schema was to save a liberal capitalist order he was rather fond of from the despotism he was terrified of and despised.

Keynes’ essay, ‘The End of Laissez-Faire (1926), cited disapprovingly and disingenuously by Ammous, is not some authoritarian agenda but a warning cry, to remember the true purpose of liberty against the despotic mastery of feudal lords, monarchs and church: abstract rentier capital had come to serve that role. Keynes recognised that to fight the more terrifying despots, liberal democracies needed to fight the lesser despotism of post-feudal rentier capital—largely based around the ‘sound money’ gold standard. A modicum of reform in the direction of intervention would allow individual human flourishing in a world gone bad. A kind of Biblical Jubilee to avert the End times. In contrast Ammous suggests that:

Keynes expresses his opposition of liberalism and individualism, which one would expect, but also presents the grounds of his opposition to socialism […] that its end goal was increasing individual freedom […] Keynes wanted government enslavement for its own sake, as the ultimate end.

This is grade F stuff. Keynes is branded an authoritarian despot for arguing for individual liberty and freedom against the everyday suffocating threat of revolution and war. It’s not clear whether the wanton misrepresentation of Keynes’ thinking—and by implication, everything he allegedly represents as the Antichrist of ‘unsound money’—is due to ignorance, or mendacity. Perhaps Ammous has a high time preference when it comes to studying what Keynes actually wrote. Some compensation for fans of Keynes is that Ammous is nearly as dismissive of Milton Friedman and the “Friedman brand of libertarianism.” It’s Rothbardian anarcho-capitalism or bust.

The chapter on ‘Capitalism’s Information System’ promises something interesting for really understanding the true purpose of Bitcoin: Hayek’s more profound thinking on the role of information and coordination in economic activity. The opportunity to link Bitcoin, as a global, public information-transaction database, to Hayek’s coordination problem is fluffed. It’s just more ranting against the evils of socialism and central banking (in case you hadn’t already got the point). A fuller critique of this chapter is worthy of an essay in its own right, because if BTC is digital gold, the Bitcoin blockchain is the digital copper essential for building the information-transaction revolution of Hayek’s dreams.

The system needs a better critic

There are good books available which give an introduction to Austrian School economics, not wholly tinged by a militant brand of libertarian ideology. There are good books about the political philosophy of liberalism. There are also good books on the history of monetary systems, and critiques of our current economic and monetary system, and the failures of central banking. This book is not one of them.

None of the criticisms here are seeking to deny either that we have a major problem with runaway central banking, or that much of modern economics has lost its way. But far better critiques are out there. Lovers of ‘DeFi’ should appreciate that post-Keynesian monetary economics, while generally coming from a more left-wing perspective (take it or leave it), is deeply critical of the system but has a far superior understanding of the internal workings of our bank-credit based monetary system and the failures of central banking. Similarly, Free Banking literature critiques from the other side.

The Bitcoin Standard combines the arrogant self-assurance of both kindergarten Austrian economics and an anarcho-capitalist ideology into a folksy (yet vitriolic) morality play about the espoused benefits of thrift and self-denial. A 21st century re-writing of The Richest Man in Babylon, without the charm but with a vindictive and patronising attitude towards anyone who disagrees: “The vanity of the insane,” we’re warned. The book’s blind spots also demonstrate what undermines BTC’s ultimate narrative: like it or not, governments will regulate and seek control, regardless.

As polarising as the book’s rhetoric is, it works in winning converts apparently. Maybe we are a lost society, so inferior in taste and refinement that this is regarded as high learning. The book acts like a Pied Piper for the disenchanted children of a confused and challenging time in global society—people looking for that easy to swallow magic pill solution to all the world’s problems: ‘Bitcoin.’ Yet Ammous has already told us that BTC is not the Bitcoin described in the white paper. The emphasis then on BTC as digital gold is ironic, as it may be understood that those patiently building a comprehensive transactional information management system on the back of the Bitcoin SV blockchain (a truly Hayekian notion) are the low time preference Übermensch of Bitcoin’s morality play—compare these to the lazy libertines seeking the get-rich-quick highs of playing with BTC. Michael Saylor doesn’t see this. But maybe Ammous is having a subtle dig at his readers after all?

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