Hard Money vs Easy Money

Hard money and easy money represent two fundamentally different philosophies about what money should be and what it should do.

Easy money — the dominant philosophy since 1971 — holds that money supply should be flexible. Economies need stimulus during recessions. Credit creation drives growth. A central authority should be able to expand the money supply when conditions demand it. Mild inflation is a feature, not a bug — it keeps economies moving and gives governments room to manoeuvre.

Hard money — the Austrian view, and Bitcoin’s design philosophy — holds that money should be a reliable store of value above all else. Its supply should be fixed or predictable. Nobody should have the power to create more at will. The discipline of a hard money standard forces governments, businesses, and individuals to operate within their means rather than borrow from the future.

The easy money case: flexibility allows economies to recover from shocks faster. The 2008 crisis was contained, in part, by massive monetary expansion. A rigid gold standard might have produced a depression.

The hard money case: easy money creates the conditions for the crises it’s used to fix. Cheap credit produces bubbles. Inflation transfers wealth from savers to borrowers and from the poor to the rich. The Cantillon Effect runs every time the printer runs.

Bitcoin is explicitly hard money. Its 21 million cap is the hardest monetary constraint ever encoded. No central bank. No governor. No emergency override.

Which philosophy you find more compelling shapes almost everything else about how you think about Bitcoin.

Tomorrow: why some long-term holders see inflation as a moral issue.

— The Daily Bit