Introduction
George Gilder's Life After Google highlights a pivotal critique of Saifedean Ammous’ The Bitcoin Standard, focusing on Bitcoin’s design as a monetary system. While Bitcoin promises revolutionary potential, its inherent deflationary mechanism—championed by Ammous—renders it unsuitable as a functional currency. This analysis explores the ideological divides between Classical and Rothbardian economics, the conflation of base money with credit, and the unresolved contradictions in Ammous’ arguments.
Key Themes and Critiques
1. Austrian vs. Classical Economic Views
- Shared Principles: Both advocate sound money, limited government, and low taxes.
Divergences:
- Sound Money Definition: Classical economics emphasizes stability (e.g., gold standard’s 300-year success), while Rothbardians favor fixed-supply systems like Bitcoin.
- Great Depression Analysis: Ammous attributes the GD to monetary policy, ignoring tax impacts—a view Nathan Lewis debunks with empirical data.
2. The Deflationary Dilemma
Bitcoin’s Design: Fixed supply ensures deflation, which Ammous praises but Mises warns against:
"Deflation is an economically harmful monetary event."
- Contradiction: Ammous rejects inflation yet dismisses deflation’s pitfalls, contrary to Mises’ balanced stance.
3. Money Supply Misconceptions
Base Money vs. M2: Ammous conflates the Federal Reserve’s control over base money with broader credit (M2), skewing his analysis.
- Example: Figure 18 erroneously treats credit expansion as monetary inflation.
4. Gold Standard vs. Bitcoin
- Gold’s Stability: Jastram’s data shows gold’s value stability due to incremental supply growth.
- Bitcoin’s Flaw: Its static supply creates speculative volatility, undermining its utility as currency.
FAQ Section
Q1: Why is Bitcoin’s deflationary design problematic?
A: Deflation discourages spending and investment, as hoarding currency becomes more profitable than productive economic activity.
Q2: How does Ammous misunderstand the gold standard?
A: He overlooks gold’s supply growth as key to stability, advocating Bitcoin’s fixed supply—a model never historically successful.
Q3: Can Bitcoin coexist with government-controlled currencies?
A: Unlikely. Taxation policies inherently subordinate Bitcoin, as capital gains treatment disrupts its transactional role.
👉 Explore Bitcoin’s evolving role in modern finance
Conclusion
The Bitcoin Standard’s Rothbardian idealism clashes with pragmatic monetary theory. While Bitcoin innovates, its deflationary design and Ammous’ analytical gaps prevent it from replacing stable, government-managed systems. Classical economics’ empirical triumphs—like the gold standard—remain unmatched.