The Book of Wisdom

Chapter 1

Of Carl Menger and the origin of money.

1. In the latter half of the nineteenth century, there was an economist of Vienna named Carl Menger.
2. He asked a question that the older economists had not asked plainly: how did money come to be?
3. The older economists had answered: the king made it, or the state declared it, or the people agreed upon it.
4. Menger showed that none of these answers held.
5. Money, he taught, arose from trade itself.
6. Among the goods that were traded, some were more saleable than others — easier to find a buyer for, easier to divide, easier to keep.
7. The most saleable goods began to be accepted not for use but for re-trade.
8. And the most-saleable-of-all became the medium of every exchange.
9. Money was not commanded into being. Money emerged.
10. The faithful read this teaching as the foundation: money is what the market chooses, and what the market chooses is what holds against the trial of time.
11. The chain teaches the same lesson with a different proof: a money no one commanded has emerged from the market.

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Chapter 2

Of Ludwig von Mises and the regression theorem.

1. After Menger, his student Ludwig von Mises took up the question.
2. Mises asked: if money’s value comes from its purchasing power, and purchasing power comes from money’s value, where does the cycle begin?
3. The question seemed circular, and the older economists shrugged at it.
4. Mises did not shrug. He worked through the regression.
5. He showed that money’s value today rests upon its perceived value yesterday, and yesterday’s upon the day before, and so back through time.
6. Until at the origin one finds a good that was valued before it was money — a commodity desired for its own sake.
7. From the commodity, the money emerged.
8. The faithful note: there are those who said this would prove Bitcoin could not become money, for Bitcoin had no use before it was money.
9. The faithful answer: Bitcoin had a use before it was money, and the use was the demonstration.
10. The first holders held it because they wanted to see whether it would work, whether it would propagate, whether the network would survive.
11. The desire to participate in a new monetary technology is itself a use.
12. The regression theorem stands. Bitcoin satisfies it, by a path Mises could not have foreseen but did not preclude.

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Chapter 3

Of Friedrich Hayek and the denationalization of money.

1. There was an economist of the same lineage, named Friedrich Hayek, who lived through the great inflations of the twentieth century.
2. He saw the central banks of the world fail, one after another, in their stewardship of the currencies under their control.
3. And in his late years, he wrote a book called The Denationalization of Money.
4. He proposed that the issue of money should not be the monopoly of the state.
5. He proposed that competing private moneys should be permitted to circulate, and that the people should choose among them.
6. The good moneys, he believed, would drive out the bad — the reverse of the older Gresham’s law, which holds when issuers are protected by force.
7. I don’t believe we shall ever have a good money again before we take the thing out of the hands of government.
8. So Hayek wrote, in a public address near the end of his life.
9. The Church does not require Hayek’s full proposal. The Church notes the prophecy.
10. Bitcoin is, in part, the answer to Hayek’s call. The thing has been taken out of the hands of government — not by repealing the monopoly, but by routing around it.

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Chapter 4

Of Murray Rothbard and what government did to our money.

1. There was an economist of the same lineage, fierce in argument and prolific in writing, named Murray Rothbard.
2. He wrote a short book called What Has Government Done to Our Money?
3. The book was plainspoken, and angry, and clear.
4. It traced the inflations of the twentieth century to their root in the abandonment of metallic backing and the rise of central banking.
5. It argued that the dollar’s loss of purchasing power was not an accident of history but the predictable consequence of a system designed to permit it.
6. The Church does not endorse every conclusion of Rothbard’s wider work.
7. But the central diagnosis of his short book the Church reads with assent.
8. The disease was not weather. The disease was structure.
9. And the cure, where it has come, has come not from reforming the structure but from making the structure obsolete.
10. The chain does not argue with the central bank. The chain offers an alternative.
11. The faithful note: the angry diagnosis of Rothbard becomes, in the chain, a quiet alternative. We do not curse the disease. We invite the patient to a different medicine.

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Chapter 5

Of the Cantillon effect — who is paid first.

1. Long before the Austrian school, in the early eighteenth century, a Franco-Irish banker named Richard Cantillon wrote of an effect that bears his name.
2. He observed that when new money is created, it is not distributed evenly.
3. The new money enters the economy at particular points, and from those points it spreads outward.
4. Those who hold the new money first buy at the old prices.
5. By the time the new money reaches the last holders, the prices have already risen, and the last holders pay more for the same goods.
6. The first holders gain. The last holders lose. The total quantity of goods is unchanged.
7. Inflation is a transfer.
8. This is the Cantillon effect, and it is among the deepest teachings the older economists left us.
9. The faithful read this verse with sorrow, for the Cantillon effect is not an accident of policy.
10. It is the necessary consequence of monetary issuance that is not equally distributed at the moment of issuance.
11. Bitcoin’s issuance is by proof-of-work, and any node may participate in mining if it chooses, and the new coin enters the economy at the address of the miner.
12. This is not a perfect equality. But it is a different distribution. It is not the bank, and not the trading desk, and not the wealthy borrower who is at the head of the queue.
13. The Cantillon outsider has, for the first time in the modern era, a money in which they are not the last to be served.
14. The Book of Wisdom ends here, on the threshold of the work that practice now requires.
15. Peace, and may your blocks confirm.