Since the 1930’s Keynesian revolution, saving money has been criticized as selfish or destructive, akin to hoarding food when others are hungry. This gets it precisely backwards: hoarding money is the opposite of hoarding food. Indeed, hoarding is the kindest, most altruistic thing you can do with money. Making Bitcoiners’ extreme tendency to save a breathtaking level of altruism.
Keynes’ screwup launched a century of anti-savings propaganda that is very much alive, and still used to sell government spending as prudent economic management rather than the economy-wrecking vote-buying that it is.
For example, just a few weeks ago, a former undersecretary of commerce worried that Americans are saving too much to keep the economy going, suggesting the government should seize, and redistribute, yet more.
Why Hoarding Money is Altruistic
What the war on hoarding gets backwards is that, because money’s purchasing power varies with the amount being spent, every dollar you save effectively lends it to every other dollar spender, and by extension a tiny bit to every asset-holder, by increasing what they can buy with their dollars.
We have to first understand that money is not a good in the sense that you eat it or wear it. Rather, money has value because you can exchange it for other things that, ultimately, you can eat or wear. If the money is durable, you can use it for future exchanges, which makes it a good way to store purchasing power — to save. Empirically, savings makes up most of the value of money; about 80% going by the historical ratio of M2 to M1.
In other words, money has value not because it’s a real resource, but because it’s a “bidding ticket” for real resources.
This makes the hoarding of money very nearly the opposite of hoarding a real resource like food. After all, if I hoard food, everybody else goes hungry. But if I instead hoard my bidding tickets for food, I leave more for others — I’m effectively giving my “share” to everybody else. I “sit out” the metaphorical auction of dollars for food, making everybody else’s bidding tickets worth more. So I’ve effectively lent them my tickets — my dollars — for free. Meaning I’ve effectively lent them my share of the food, again, for free.
This purchasing power loan occurs through “pecuniary effects” that adjust prices to the amount of dollars being bid for the good. So if nobody wants Beanie Babies, Beanie Babies get cheap. And if everybody wants condos in Miami, condos in Miami get expensive.
Zooming out, if everybody’s saving in the whole world, the few remaining spenders get super deals on cheap stuff — also known as deflation, that handmaiden of prosperity.
Hot Dogs vs Dollars
To visualize these pecuniary effects, Rothbard used the mental image of two big piles: a pile of stuff for sale, and a pile of money for sale. Divide the two to get the price of stuff in dollars.
Now, “Money for sale” is counter-intuitive for most people, but remember every exchange is symmetric: Costco offers some of their hot dogs for sale every day, keeping the rest in reserve as inventory. And I offer some of my dollars for sale every day, keeping the rest in reserve as savings. Costco doesn’t auction off its entire hot dog inventory every evening, because they hope to sell their hoarded hot dogs tomorrow for dollars. And I don’t auction off all my money every day because I hope to sell my hoarded dollar tomorrow for hot dogs.
Incidentally, we’re both speculators – Costco is speculating on future hot dog purchasing power in dollars, and I’m speculating on future dollar purchasing power in hot dogs.
Now, when it comes to saving for years at a time, as any lender knows, lending for free is equivalent to giving money away. If interest rates are 5% and you lend me $100 for a year for free, you’ve effectively given me $5. A zero interest loan is, effectively, a slow-motion donation.
This makes hoarding the broadest altruism imaginable: It gives your dollar away, little by little, to every other dollar spender in the world. All at zero cost and zero transaction fee. They needn’t lift a finger — the purchasing power is airdropped into their wallet by the magical hoarding fairies.
In fact, hoarding is a far broader altruism than simply giving away the dollar. After all, hoarding effectively gives a tiny bit to every one of the 350 million dollar spenders in the world. If, instead, you tried giving that dollar to them directly, how would you even mail them their 3.5-millionth of a penny. Even if you upped your charity to a billion dollars, so $2.86 to each dollar spender, the transaction costs would chew it right up. And, yet, you can achieve all of this, little by little, simply by keeping that dollar in your pocket. It’s actually kind of amazing.
What’s In It for Hoarders?
Now, this sounds like a bum deal for the hoarder, right? I mean, super altruistic and all, but stupid.
Well, that’s why people invest some of their wealth in houses, stocks, or building a business. They might keep cash for smaller transactions, or as a stable “ballast” in an otherwise risky portfolio. But they keep cash recognizing it won’t earn as much. And that foregone interest – the opportunity cost of holding cash -- is precisely capturing the great hoarding giveaway to all of humanity. Well, giveaway to all of dollar-spending humanity. And that’s where Bitcoin comes in.
What’s in it for Bitcoiners?
Just as hoarding dollars effectively lends to every other dollar spender, hoarding your bitcoin effectively lends it to every other bitcoin spender, in the form of higher purchasing power for the bitcoin they spend. Their Bitcoins buy more Lambo because you hodled.
This is pretty intuitive; if I find a bitcoin at the bottom of a lake and feel hungry, I am very thankful that Bitcoiners’ near-pathological savings rate means I can trade that bitcoin for several thousand Big Macs.
Now, it might rankle that your hard-saved bitcoin is going to subsidize lowly bitcoin spenders or degenerates who lend it out like some cheap tramp. In the same way a prudent dollar saver might be annoyed that imprudent spenders are out there consuming up a storm with their foregone purchasing power.
Of course, keep in mind it’s not all bad; some Bitcoiners could use the higher price to borrow more fiat using their bitcoin as collateral, as Michael Saylor advocates. In which case your decision to hold bitcoins makes those borrowers (and you) able to borrow more dollars. You could use the fiat loan to buy groceries, for example, instead of selling your sats for groceries, or even use it to buy more bitcoins.
Moreover, a big reason to save in bitcoin in the first place is because you think the price will go up. In which case, yes, you lent a tiny bit to traitorous spenders – that was your opportunity cost of holding bitcoin — but you still got the vast majority in capital appreciation.
So if the speculation works out — if bitcoin’s price goes up — the hoarders will do just fine.
Are Bitcoiners a Drain on the Economy?
Let’s extend this to a mainstream critique of Bitcoin more broadly, one alluded to in a recent hyperventilation about Bitcoin causing social collapse: because Bitcoiners park wealth in Bitcoin, are they draining the vitality out of the economy?
Here we want to remember how Bitcoiners get bitcoins in the first place. They had to earn something else, like dollars, and trade those dollars for bitcoins. Even if they’re miners, they had to use dollars to buy gear and electricity.
So let’s say, like most people, our Bitcoiner worked a job, earned dollars, and traded it for bitcoins. She cooked, say, restaurant meals for the world, and parked the proceeds in bitcoin instead of demanding real goods in return.
Now, let’s say there are three possible outcomes for Bitcoin’s price: it goes to zero, it stays about the same, or it goes to the moon. What’s the social impact of each?
If Bitcoin’s price goes to zero, then our generous Bitcoiner would have given the world delicious meals and gotten nothing in return. Effectively, she forgave the world’s debt, squandering it on imaginary nothings, and handing the rest to whichever scheming bastard sold her that Bitcoin. So no harm to the world, thanks for the delicious meal.
Next, what if Bitcoin’s price stays the same. Here, as above, our hodling cook is still lending restaurant meals to the world instead of demanding real goods in return. And she’s still parking the proceeds of her work in a speculative asset. From the perspective of the rest of the world, they got a meal and she’s not asking for anything in return. So, again, thanks for the meal.
Third, what if Bitcoin’s price goes to the moon. Like, say, $5.3 million per bitcoin. Here, it gets interesting: on the one hand, our lucky Bitcoiner can buy Lambos and other real resources from the monetary Luddites. Indeed, for many Bitcoiners, this was probably the reason they bought Bitcoin in the first place.
But the moon scenario is actually the most altruistic of all. Because Bitcoin will only hit those kinds of numbers if it is a superior money. And, if it is a superior money, then she deserves every bit of that reward, just as early investors in dot-coms earned their millions for believing when nobody else did. After all, a superior money is far more valuable for humanity than the paltry trillions of any Amazon or Facebook.
So the moon scenario, counterintutively, is the most altruistic of all, akin to being the one crazy investor who believed in Thomas Edison or James Watt. You would deserve a statue.
Conclusion
No matter the price outcome for Bitcoin, hoarding in general, and Bitcoin hoarding specifically, is an unmitigated social good for the world at large.
Now, hoarding, whether in dollars or Bitcoin, may not turn out well for the hoarder herself — it depends how her speculations turn out, and how her opportunity costs turn out.
But we can say with confidence that hoarding is the broadest, purest, most efficient form of altruism money can buy. At worst, it benefits strangers at no cost to them. And, at best, it creates one of the most valuable technologies humanity has ever conceived — an uncensorable, unconfiscable, peer-to-peer money that can be instantly sent across the planet for almost nothing. And one that is orders of magnitude harder than gold and orders of magnitude greener than fiat money.
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I challenge your use of altruism.
If one believes in Kant's moral philosophy, then actions are only good if universalizable. One person hoarding money may seem good, but if everyone refuses to spend, then the economy fails.
Providing a service for free is fundamentally different from providing that service for money, then burning the money. I fear you may have equalized these.