What if there was only bitcoin? (2)

We explained HERE how fiat currencies end up in hyperinflation. Now, what about a world inheriting a single currency, bitcoin?

From solidus to bitcoin

Fiat money is intrinsically a Ponzian construction. His fate is sealed in advance. Only the year of its complete disintegration is unknown. This ultimately depends on our ability to produce ever more. And therefore to always find more sources of energy.

The scarcity of energy resources is often the cause of the fall of civilizations. A new theory proposes that the fall of the Roman Empire was caused by deforestation.

Wood was the main source of energy for Roman industries (90%). Almost all of them required wood. It was burned to cook the bricks used in the construction of aqueducts, for glass windows, for lime kilns (cement) or to melt metals. Not to mention the wood used for heating, cooking, buildings, etc.

Steve Hallett maintains in his book “life without oil” that the collapse of the Roman Empire could be linked to a peak in wood production in the Mediterranean basin. He suggests that as timber had to be transported further and further, the output of the economy began to wane, leaving Rome vulnerable to other well-documented problems of invasions, epidemics and internal divisions.

Other stalwarts advanced that the debasement of the currency would be the first responsible for the Roman collapse. The decrease in silver and coin(s) content would have caused hyperinflation and the economic collapse of Rome.

Inflation is certainly the place of the increase in the number of coins in circulation. As Milton Friedman said, “Inflation is always a monetary phenomenon in the sense that it is and can only be generated by an increase in the quantity of money faster than that of production”.

The end of this quote, often forgotten, and very interesting. It prompts us to wonder if the Roman monetary devaluation was not in some way forced by the drop in production (rarefaction of wood)?

As the great Roman orator Cicero said: “serit arbores quae alteri seculo prosint” (He plants trees for another age to enjoy).

Perhaps the drop in production triggered a drop in revenue for the Roman state, which was forced to reduce the amount of silver in its coins to create more.

Increase in the number of parts + decrease in production = inflation.

In other words, wouldn’t the egg be the drop in production, and the chicken, devaluation and inflation? Closer to home, remember that the FED has multiplied by 9 the size of its balance sheet since 2007, the date of the conventional oil peak. Could the oil of our thermo-industrial civilization be the wood of Roman civilization?

Another interesting question: Would the Roman Empire have collapsed faster if it hadn’t devalued its currency (because it couldn’t pay its army)?

Which brings us to the question that interests us. What about a world with a single currency in an absolutely fixed quantity. After all, the Roman Empire did run using gold, right?

Yes, but there were gold mines that always increased the money supply. At its peak mining, the Roman Empire is estimated to produce up to 9 tons of gold per year. Which was not enough to oil the exchanges of an empire of 70 million people.

Hence the use of silver, bronze, copper and zinc coins which increases the money supply. And monetary devaluation: the pure silver coins minted around 50 AD only contained 40% of it in the year 200. And more than 3% around the year 270.

In short, money was not created from debt as it is today. It was created in the form of metal coins by the state and fed into the economy forever.

The growth in output was more or less in line with the growth in the quantity of money. The sale of the Roman soldier suggests that there was still some inflation:

Roman Empire: salary and currency
Red curve: Balance of a Roman soldier / Gray curve: Percentage of silver metal in a silver coin

Legion salary inflation was therefore relatively low until the hyperinflation of the 3rd century. Add to that the difficulty historians have in explaining how the Roman Empire could have lost its sovereignty. And it would seem that the culprit was a slow deterioration in economic output. From the year 40, the wood used in Rome came from the Jura mountains, 1700 km away, with the barrier of the Alps in the middle…

Either way, the Romans had to continually create more currency(ies) out of necessity anyway. It was necessary to oil the exchanges. It is problematic that the population of the empire grows much faster than the amount of gold coins. Hard to pay in gold dust.

Bitcoin does not have this problem since it is highly divisible. Global debt ($300 trillion) divided by 21 million gives us $14 million per BTC. That is fourteen cents per satoshi. Knowing that we have to add several decimals to bitcoins if necessary.

It would technically be possible that 21 million BTC would be enough to oil the global economy. On the condition that the price reduces as the population increases.

Say fiat disappears and one BTC is worth $14 million. We have a deflationary currency. And then ?

What would happen if the extraction of the resources needed to run the economy (oil, gas, lithium, copper, etc.) fell? We assume inflation. Absolutely. A world with only BTC as its currency would not be immune to inflation.

In this scenario of rising prices, can the 21 million bitcoins still oil exchanges in the face of a growing population? No. There would be crises.

Let’s assume for a moment that energy and mineral resources are not a problem. We then have prices that naturally fall as the population grows. Another problem then arises. What about the borrower who sees his salary forced to measure that prices fall. Repaying his debt is becoming more and more difficult.

One way would be to create a society in which borrowing would be prohibited. It would be a profound paradigm shift. See a change of civilization.

In addition, and in the event that borrowing is not prohibited, how can large loans be made if everyone keeps their BTC in their own wallet?

How to borrow tens of billions to create a TGV line, a fleet of nuclear power plants where to fetch oil at sea? Will it be necessary to go door to door to convince Mrs. Michu to lend her money for the next ten years?

Bitcoin does not fit well with a complex society that requires a lot of energy and very expensive infrastructure to operate. Things could possibly work out in the event of a decline on all fronts (and a ban on borrowing).

Another way would be to keep monetary elasticity (for the borrowing necessary for a complex civilization) by simply replacing the central currency with bitcoin.

Central banks would disappear. There were only the banks left who would continue to do their job, namely to finance the projects that held the road back. No more “bailout”. It would be the return of the “bail-in”.

But then, as in the eighteenth century in the United States, the banks could go bankrupt and ruin their customers? Certainly, but everyone will be free to deposit all or part of their BTC in a bank to earn interest.

Finally, bitcoin may not need to become the sole global currency to fulfill its purpose. It can exist as the best store of value that humanity has ever known and drain a substantial part of the world’s wealth. Especially now that the ponzi is wavering against the backdrop of peak oil…

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Avatar Nicolas Teterel

Nicolas Teterel

Journalist reporting on the Bitcoin revolution. My solicited papers of bitcoin through geopolitical, economic and libertarian prisms.

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