Bitcoin as Synthetic Commodity Money

Gold Standard Basics

• A gold standard involves converting official paper U.S. dollars into a fixed quantity of gold
• Implementing a gold standard gives money stable purchasing power
• Selgin does not advocate for renewing the gold standard based on its historical preeminence

Challenges of Renewing Gold Standard

• Simultaneous adoption by economically advanced countries would be necessary
• There is no guarantee that the government would uphold the standard
• Commodity money is subject to shocks from new discoveries or changes in demand

Bitcoin as Synthetic Commodity Money

• Bitcoin possesses characteristics of both the gold standard and fiat money

Bitcoin's Gold Standard Similarities

• There is a limited supply of Bitcoin (21 million)
• Mining Bitcoins requires time and energy to solve digital mathematical puzzles

Bitcoin's Fiat Money Similarities

• The supply of Bitcoin is controlled by Bitcoin's programmed open-source software

Hayek's View on Choice in Currency

• Freedom to choose currencies prevents government abuse of money
• Currency choice incentivizes governments to maintain monetary stability

Limits to Absolute Currency Choice

• Leveling capital gains tax for all money substitutes is necessary
• Trade depends on parties agreeing to a common medium of exchange

Free Banking Definition

• Free banking involves banks issuing their own IOU notes
• Banks have the freedom to establish branches, lend, set rates, and determine capital reserves

Selgin's View on Free Banking

• Allowing banks to issue notes or stored value cards is feasible
• Free banking can provide efficient exchange if the government does not require banks to rely on government securities

Traditional Banking Functions

• Lending/financial intermediation
• Making payments ("plumbing")
• Creating money

Impact of Interest Rates

• Interest rates reward lenders for deferring consumption
• Higher interest rates increase lenders' willingness to lend
• Interest rates are the price borrowers pay
• Lower interest rates increase borrowers' demand for loans

Factors Determining Economy's Interest Rate

• Economic strength leads to increased investment and higher rates
• Willingness to save impacts interest rates; higher savings drive rates down
• Expected inflation affects rates; higher inflation raises rates
• Borrower risk: greater risk demands higher rates
• Tax treatment: favorable treatment lowers rates
• Loan duration: longer loans have higher rates

Interest as a Price

• Interest is the price of borrowing
• Borrowers pay to obtain purchasing power

Saving vs. Investment

• Saving: Short-term income not spent, avoiding consumption to reduce expenditures
• Investment: Long-term allocation of savings generating income/benefits

Stocks vs. Bonds

• Stocks: partial company ownership with capital gains/losses based on performance
• Bonds: corporate/government indebtedness with fixed income and repayment of principle at maturity

Beating the Market

• Efficient market theorists and behavioralists agree that beating the market is not possible

Market Efficiency Theories

• Market pools information to accurately reflect prices
• Both rely on anomalies: efficient markets depend on driving out inefficiencies and behavioral theories rely on deviations from a rational baseline

Investing Strategy

• Buy and hold, diversify, invest in index funds, control costs

Income Distribution

• Income distribution is a product of supply and demand for productive services

Human Capital's Role

• Distribution depends on individual ownership/use of productive resources (human capital)

Competition and Wage Rates

• Employer competition drives wages up
• Competition among workers lowers wages
• Unions restrict worker competition, increasing wage rates

Licensing Boards and Competition

• Licensing boards restrict competition
  • Limiting training programs
  • Challenging experience requirements
  • Entrance exams
  • Fees
  • Strict personal requirements
  • Different state requirements
• This scarcity increases wages for practitioners and fees for consumers

Unemployed vs. Not-Employed

• Unemployed: Actively seeking employment
• Discouraged workers who stop seeking employment are not counted as unemployed

BLS Unemployment Measurement

• Unemployment rate = (#Unemployed / Total Civilian Labor Force) x 100

Minimum Wage Definition

• Minimum wage are legal minimums for hourly wages

Intention of Minimum Wage

• To secure minimum living standards for unskilled workers

Minimum Wage and Eugenics Movement

• Late 19th century: designed to support 'superior' races/classes and discourage procreation of the 'inferior' ones
• Designed to reduce "racial inferiors" in the labor force

Occupational Choices and Gender Pay Gap

• Occupational distribution accounts for 15% of the gender pay gap
• Business/finance has larger gaps, tech/science has smaller gaps
• "Nonlinearity" in labor value exists in business/legal sectors

"Bad" Discrimination in Economics

• Discrimination related to job performance is not objectionable
• Market punishes employers for bad discrimination with financial penalties related to prejudice
• Customers pay more to satisfy discriminatory preferences

Cryptocurrencies as Medium of Exchange

• Cryptocurrencies are new, synthetic options designed to be attractive mediums of exchange
• Bitcoin's open-source software is protected from centralized control

Private Banks vs. Central Banks Credibility

• Government intervention is unnecessary
• Reduced involvement in currency provision and last-resort lending decreases importance of regional Fed banks
• Government restrictions on note distribution led to "notorious abuses and failures"
• Australian case study: government intervention undermined confidence/led to suspensions
• Private banks provide better services
• Least regulated systems are the most competitive and least crisis-prone
• Private banks were not prone to inflation, did not show signs of natural monopoly, and boosted economic growth
• Private issuers have incentives to maintain currency quality

Willingness to Pay Interest

• People pay interest due to a positive rate of time preference
• Higher value placed on present enjoyment than future enjoyment
• Interest payments incentivize lenders to forgo present enjoyment
• Interest rates give lenders more future purchasing power

Harmful Effects of Minimum Wage

• Minimum wages reduce employment among low-skilled workers
• Higher minimum wages make unskilled workers expensive
• Low-skilled workers are "priced out" of the labor market
• Employment reduction impacts low-income families/rural areas
• Employers cut benefits to offset higher minimum wages
• Minimum wage laws reduce training opportunities

Is Government The Answer To Bad Discrimination?

• Arguments may be made that bigots need need anti-discrimination laws to minimize influence
• This idea contradicts democratic society if society is filled with racists and minorities don't stand a change in the free market, why would they empower a government based on electorial majority rule
• In the market, a bigoted employer may face penalties, however when they vote for politicians harms are passed down to millions of others
• The worst abuses occured because of government, markets can correct swiftly, therefore government is not likely to be answer

Pakaluk on Licensing/Certification

• Licensing/certifications are necessary when they create standards, but are not necessary to have control
• Licensing needs competition

College as "Certification"

• In majors like healthcare, nursing and accounting they are needed as they have standards which need to be met to earn trust and credibility