first majestic silver

No Money Exists Without The Majority

June 5, 2013

At the conclusion, I will offer a solution.

Society requires money to be maximally fungible, as this maximizes the division-of-labor which increases efficiency, productivity and prosperity.

Every possible form of fungible money is backed by the trust that it will maintain a healthy balance between the desirable qualities of wide acceptance (medium-of-exchange), liquid, and a store-of-value.

During a financial crisis, neither fiat nor gold maintains all of these qualities. For example, gold is a better store-of-value as fiat is destroyed by sovereign debt collapse, but the majority can't widely accept gold's value because it entails fiat collapse and pestilence. During the collapse to the destitution (often including wars and megadeath) at the bottom, the majority will steal gold's value via the (currently escalating) threat of confiscation of wealth which can force gold into hiding, thus killing liquidity and wide acceptance.

Only agreement of the majority for a shared partial default of the value of all money and bonds as Julius Caesar did, will restore trust in money, entice gold out of hiding, and usher in a new period of growth and prosperity. For as long as there is a standoff between the insistence of monetary capital (regardless of the type of money or investment it is stored in, including gold) to not allow even partial losses and the insistence of the masses for socialism funded with debt to avoid temporary reduction in their standard-of-living, then the financial system will further self-destruct towards a Mad Max Dark Age.

Side note, Martin Armstrong's 78 year (i.e. 3 x 26 year human maturity generations) real estate cycle predicts that bottom in 2033. I wrote that the 26 year downhill portion of this cycle appears to repeatably correspond with massive unemployment (and a major war) due to a new technological paradigm, e.g. the early 1900s destruction of cottage industry by mass production and now the destruction of menial labor by the personal computer automation and robotics. In the 1700s, it was agricultural technology disruption of employment. The masses delay their adjustment to the new skills with debt and socialism, which thus causes the resultant financial crisis to drag on longer and be more severe.

We technologists have looked deeply for an alternative to Bitcoin, that would eliminate its 51% attack vulnerability, and have concluded with the 51% Rule of Decentralized Agreement,   which implies that no decentralized digital currency will ever be able to (sustain an) escape from the desires of the majority of society.

There will never exist a form of highly fungible money (not gold, fiat, nor digital currencies) that will escape from the desires of the majority of society.

The desires of the majority of society will always migrate towards boom and bust socialism.

We elect leaders because we can't agree on everything we individually want (including controlling what others individually do and want), because these leaders are able to employ the top-down power of the majority to give all of us something we want by funding with debt and then take it away from us again at the resultant financial collapse. The leader who promises the most wins, because we don't agree on the tradeoffs between wants and available resources. Thus leaders are forced to promise nearly everything. The only way to fund everything is widespread debt and unfunded future promises, i.e. funding by obfuscating mutual self-destruction in debt and misallocation (causing destruction) of human capital.

This insoluble political power vacuum exists in all facets of individual freedom where technology does not exist to empower the individuals to route around top-down control.

The insoluble socialism would destroy all production if it were not for technology to escape from top-down control. Thus all increased prosperity and standard-of-living throughout human history is due to personal empowerment technology, e.g. portable energy-dense compact carbon fuels, the automobile, telephone, personal computer, internet, the open source software model, and coming 3D printers.

Even mass production (i.e. automation) empowered individual freedom away from top-down control by eliminating human menial labor, because a (e.g. prison ward) manager can measure in real-time if one is producing menial labor and thus force one to work productively because nearly every human can do the task, but it is not possible that every human can do every knowledge task thus the individual can feign inability or otherwise only produce when he/she chooses to do so. Humans are fungible w.r.t. to menial labor but not w.r.t. knowledge production.

Thus what gold standard proponents don't understand is that the insoluble political power vacuum that gives rise to booms and busts does not exist nor derive from the form of money used, but rather exists naturally in every society as explained above. The malfeasance of the leaders is not the source of the problem either, rather exist as a manifestation of the insoluble political power vacuum described above. So changing the form of money used or regulating or removing the corrupt leaders won't fix the fundamental driver of the phenomenon, and the insoluble outcome will occur again as exhibited over and over again throughout human history. The power elite are not even in control.

It must be the case that savings in fungible money can not be a perfect perpetual claim on future human productivity, because otherwise past innovation eventually owns all future innovation. Because new knowledge is not fungibly created by any human, and thus can't be financed by savers (the material needs of a knowledge producer are growing ever smaller relative to value of knowledge produced). That fungible money is dependent on the majority is a feature which allows old money to be destroyed in favor of future growth and innovation. A strict gold standard is equivalent to Marxism as both require innovation to stop (Byzantine and the USA were never on strict gold standards, due to private banks fractional reserve debt and proxy debasement via international immigration of capital). Martin Armstrong explained this as a relative value issue as follows.

Converting money into some savings account will not work. The medium of exchange has no mythical perpetual value while everything else floats including wages and investments. Yet if everything else floats, how is it possible that only money remains fixed? If everything else can rise in value, it is measured in MONEY and thus the purchasing power of money MUST decline. You cannot have it both ways.

Money and socialism are intertwined and this will never change. To survive the near total wipeout of fungible money in a Mad Max Dark Age, store production in non-fungible knowledge or technologies that continue to generate revenue during or at least after the crisis.

I am proposing a more modular paradigm for open source software to enable storing knowledge value in revenue producing long-lived modules.

Disclaimer: The above expressed opinions and citations are my own and not necessarily endorsed by this site. My opinions and citations are shared as alternative perspective for your entertainment only. I cannot prevent you from deeming that my essay is educational. I am not a professional advisor, thus I claim safe harbor and I am not responsible for any outcomes, mental state, decisions or actions you experience or make after reading this essay or cited sources.

Gold is still being mined and refined at the rate of almost 2,600 tonnes per year.
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