A Bitcoin Standard World

A Bitcoin standard world doesn’t mean everyone uses Bitcoin to buy coffee. It means Bitcoin becomes the base layer — the thing everything else is measured against, the way gold was before 1971.

What would that actually feel like?

Government spending would get harder. Right now, when a government needs more money, it can print it. Under a Bitcoin standard, that option doesn’t exist. To spend, you need to earn it through taxes or borrow it from people willing to lend it to you. Governments would have to live more within their means.

Inflation would largely disappear. Prices would tend to slowly fall over time as productivity improves and more things get made with less effort — which is what actually happens in a growing economy, when the money supply isn’t being expanded to offset it. Saving money would mean your savings actually bought more over time, not less.

Credit booms of the 2008 variety would be harder to create. Those booms happened because central banks could keep interest rates artificially low, encouraging too much borrowing. Without that lever, the financial system would probably be less boom-and-bust.

But not everything would be easier. When recessions happen in a hard money world, there’s no monetary dial to turn to soften the blow. They can be sharper in the short term. The transition from today’s system to a Bitcoin standard would be enormously disruptive.

These are genuinely contested questions. Serious economists disagree. But they’re worth thinking about — because for the first time since 1971, they’re not purely hypothetical.

Tomorrow: hyperbitcoinization — revisited with 336 days of context.

— The Daily Bit