A New Information Theory of Money. George Gilder explains this is due to a misunderstanding of what monetary policy can do, and the creation of an anti-entrepreneur banking system dominated by Washington, DC.
I thought it was a smart, provocative piece. He covers a variety of complex topics on the future of money. The complete book is available online, at the link below. A section by section synopsis of the book, discussing the key arguments, is also printed in full below.
My complete dialog with George Gilder continues below the book. Given the absence of massive inflation and virtual consensus among standard economists against gold, why should anyone reconsider gold? The answer is that a decade of long economic stagnation is leading to a dangerous global revulsion against capitalism. A 21st century case for gold rests upon a new foundation.
The new information theory of economics sheds light on ongoing economic stagnation and requires new attention to monetary policy and the anti-growth alliance created between Wall Street banks and Washington. Wealth is created by learning curves that result from millions of falsifiable experiments in entrepreneurship by people in free market economies.
The most important role money is as the measure of that learning. Manipulating the value of money by printing currency or artificially suppressing interest rates, does not create wealth. State control of money has become a bastion of government economic centralization wreaking havoc on capitalist economies around the globe. Money must have an inelastic element to multiply or push against.
Velocity — money turnover — must be stable, unaffected by changes in M. Otherwise, the people, including bankers, could counteract any given monetary policy merely by changing the rate they spend or invest.
Why prevailing monetary theory disparages this possibility has long been an enigma to me. We now know without a doubt, from empirical evidence, that velocity is not constant.
Monetary policy and the economic theories that wrongly endorse manipulating money as the key to growth, have eviscerated the investment innovative companies need to create learning, wealth and jobs. Why are we still talking about gold? The reason is a decade and a half of economic failure so crippling and pervasive that it led to a global revulsion against capitalism.
The expansion of federal regulation increased federal control of credit and skewed it away from technology and manufacturing and toward real estate. By trivializing banks, government policy moved them to a role george gilder bitcoin news borrowing money from the Fed at near zero rates and lending it to the US Treasury at rates as high as two percent, yielding a tidy, risk free profit expandable through leverage and protected by implicit and explicit government guarantees.
By intimidating the george gilder bitcoin news sector with constant litigation and becoming addicted to fees and fines, government regulators turned banks into their harem. In the s, government policies, with litigation by non-profits, pushed U. Profiteering on the crisis was Washington, expanding controls under the amorphous Dodd-Frank blob of laws and enriching housing subsidies under Fannie Mae and Freddie Mac. Inas if nothing had been learned, the george gilder bitcoin news down payments for taxpayer guaranteed mortgages were dropped back down from 5 percent to 3 percent.
Average American households incomes and net worth are in steady deterioration with falling labor hours, anemic employment growth, and the breakdown of families. Digital alternatives george gilder bitcoin news gold are forms of money offering escape from the centralized regime of monetarism. Manipulating money cannot create growth, it distorts necessary information. Muddling much of economics is a mirage of george gilder bitcoin news itself george gilder bitcoin news power, as if supply of money itself can impel economic activity.
Monetarism control of moneyKeynesianism control george gilder bitcoin news spendingand Mercantilism control of trade all foster the illusion that government power can drive economic growth and wealth creation. What government does under this illusion is redistribute wealth, usually to the already rich and politically favored inside players. Interest rates register the average expected returns across the economy. With a near zero interest rate policy, the Fed falsely zeroes out the cost of time.
This deception retards economic growth. Rather than creating new assets, low cost money borrowed from tomorrow bids up existing assets today. It distorts the time value of money. The Fed george gilder bitcoin news confuses savers and investors and contracts the horizons of investment, that have shrunk to milliseconds in some trading strategies. The major Wall Street investment banks are too big to fail and george gilder bitcoin news dependent on government to succeed. They now make profits chiefly through what they call proprietary trading, with a time horizon measured in minutes and weeks.
The new Wall Street harvests gains through cheap borrowing from the Fed and accelerated cyber-buying and shorting of currencies and securities. In the s, there were 20 IPOs for every merger and acquisition. The last five years have seen a 30 percent rise george gilder bitcoin news the financial share of GDP, with as much as a 40 percent share of profits going to the financial sector. If government guarantees an investment, it is not economic george gilder bitcoin news.
The Securities and Exchange Commission favors boards that know nothing about the companies they rule and have no stake in them. The outsized role of venture capital in job creation is the exception, start-ups now produce 21 percent of GDP, 65 percent of market cap, and probably under 17 percent of all jobs. Venture capital represents just two-tenths of one percent of total capital, which is george gilder bitcoin news diverted massively into nonproductive uses. From tobig banks feasted on zero interest rate money from the Fed, and bought trillions of dollars of government bonds.
From the Fed, they received over one trillion dollars of largesse. According to the official consumer price index, or CPI, median family income has dropped roughly 5 percent since But the Walmart CPI shows median family income has dropped by an astonishing 17 percent. Time as money is an insight behind the value of gold and the creation of bitcoin as a form of digital gold.
But george gilder bitcoin news theory is incomplete without an understanding of velocity. The attempt to ground money in a basket of commodities will fail. Baskets of goods are always vulnerable to technology shocks, and they will not prevent political manipulation of money.
For the first time since the inception of our information society, we are moving toward what might be termed a new system of the world. Bankers, politicians, academics and bureaucrats must stop treating money as a manipulable tool of policy. Gold is gaining new supporters every year. Gold still far exceeds bitcoin and other new currency projects. Wikipedia consumer price index United States Department of Labor: Some comments on your theories.
The advantage of gold is its supply, and the growth of its supply, is limited, presumably. So the supply cannot be manipulated by government intervention — printing more money, etc. Bitcoin seeks to do the same thing by limiting the supply through its own algorithmic form of mining. But we can hypothesize the same phenomenon with gold. We can create diamonds artificially but that is simply changing the same element, carbon, from one state to another. Artificially creating an element like gold from a different element is more difficult, and has only been done so george gilder bitcoin news in minute quantities.
There is nothing preventing someone from eventually creating large amounts of gold inexpensively. Thank you, your view means a lot to me.
I agree on the hackability of chemistry. You and Isaac Newton together again in one sentence. I am betting, not so much on bitcoin, as on the huge proliferating learning curve it has unleashed in heterarchical security algorithms. I would be honored by any use you make of the paper. And of course, your comments are more than george gilder bitcoin news. I greatly appreciate your comments. Good examples of hacking physics are the atomic fission bomb, the thermonuclear fusion bomb, and the nuclear reactor.
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