No One Understands Bitcoin with Allen Farrington - WBD673

Allen Farrington is a professional investor and the co-author of
Bitcoin Is Venice. In this interview, we discuss the problems
with fiat, or as Allen characterizes it “fiat fuckery”. We talk
about how money printing leads to inflation and a misallocation
of capital, the complexity of the fiat system hiding the
resultant theft of capital, the slow demise of pension funds, and
the confusion around what growth is and isn’t.


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Fiat currency experiments started centuries ago often resulting
in catastrophic failure; since fiat has been ubiquitously
assimilated into national economies. Whilst Bitcoiners are well
versed in the inherent weaknesses of fiat currencies, there is a
general ignorance of the long-lasting consequences for economies
and citizens of maintaining an unbending faith in fiat money.
Reducing this ignorance is perhaps the best way to grow Bitcoin’s
adoption.


The obvious problem with fiat currency is the tendency for
governments to print money to tackle economic exigencies. The
impact of this money printing is often inflation, in which prices
rise faster than wages and the purchasing power of money is
reduced. Eventually, the currency can be debased, causing
individuals to lose money without even realising it.


There is cruelty at the heart of this process: the complex nature
of the fiat economic system means individuals can easily lose
money without even knowing it. Many investors make decisions that
are far too complicated for them to understand, and so it is easy
to get caught up in financial schemes that value money to the
detriment of the individual.


But, it is the second-order effect of this inflationary impact
that is most pernicious. Businesses and investors are seeking to
add value, and the inflation rate is the baseline for any return.
When inflation increases, this puts pressure on those seeking
investments to match or exceed it. The result is investments made
in increasingly more speculative projects. This is the
misallocation of capital, which starves more productive uses of
capital.


The obvious topic of conversation following this is how Bitcoin
mitigates these problems. This is a question to be debated with
Allen Farrington for a future episode. However, understanding
what Allen calls “fiat fuckery” is a sound basis for building the
why of Bitcoin.