Producers vs Money Producers, The Only Two Classes

While discussing the ruling System of the Monarchy on Al3a podcast, we briefly talk about the idea of class consciousness under the Royalist rule. The obvious two classes back in the day of the Monarchy everywhere in the world and throughout history, were the peasants and the aristocrats. It had always been the case of people against rulers, and somehow, the class consciousness was understood by both parties similarly and this kept the rulers in check, rather than being completely off the hook, which is almost always the case in the current form of government based on republicanism. In a republican rule, where rulers are chosen through a democratic process (the rule of the majority), the class consciousness is completely abolished. Ever since the concept of rulers was diminished to a popularity contest, people wrongfully stopped seeing the rulers as the enemies who need to be kept in check, but rather started focusing on the other competing party whose aim is to win the next election and represent the other group of people with which they do not agree. In the modern sense, we now have conservative vs progressive, left vs right, poor vs rich etc. In all these match ups, it is the people (the bottom) going against each other, and whenever a change of hand takes place, one cannot help but notice that no change of ruling behavior has taken shape in parallel whatsoever. Simply because the ruler is not kept in check, what can be done will be done, and one must respect the results of the popularity contest (aka Democracy). The whole idea of class consciousness was replaced by the “WE”. We chose the rulers, we are responsible for the decisions we made, and when they (we) tax us, we are simply taking money from own selves, we are taxing our own selves. This narrative has been induced into our understanding of money and monetary policy. Who was and is responsible of money production and based on what conditions the process was and is now being done.

Money Printers, The New Monarchs (Revisiting the Essence of Money Production):

When talking about the production of gold, miners are incentivized to produce this commodity based on the market demand for it. Either monetary or industrial. When the demand for gold increases, the price of goods (priced in gold) goes down, this incentivizes miners to increase mining operation and consequently increase the supply of the said commodity. When the supply has been increased, the prices of goods readjust accordingly. However, gold cannot be mined indefinitely or easily because of its stock to flow ratio. The stock of currently available gold in the world is far higher than what miners can produce. Therefore, any costly effort to increase the gold supply will not drastically sabotage the market for gold and its price action. This is how gold is considered ‘hard money’ and has been used as a store of value and medium of exchange for centuries. However, in order to be used more efficiently as a medium exchange, gold had to be minted into precise coins. This brings us to coinage production.

Ideally, coinage production must be left to the free market, just like every other good being produced. In a coinage monetary system, each minter in the free market would have the freedom to produce the coins that pleases his/her customers the most. People would use the coins of the minters with the best reputation for good quality and minimal to non existent fraud or error history. However, historically speaking, instances of minting fraud took place, but any fraudulent activity would naturally correct itself in the free market. Nevertheless, some rulers, kings and queens back then, took this opportunity to impose a royal monopoly on the minting process, a monopoly on money production.

Monarchs were self proclaimed protectors of the realm. They were the ones who led the army to defend the people of the ‘gated community’ against a foreign invasion. Naturally, although class consciousness existed under a monarchical rule, the people trusted the kings and queens precisely for that, for the lack of incentives to be corrupt. Therefore, taking away money production from the supposedly greedy minters and putting it in the hands of a monopolist monarch was generally accepted by the people who are the market participants engaging under the said coinage standard. They trusted that the monarch would reduce fraud in the money production process and honor the people’s trust. Although instances of debasement of coinage are very rare in any monarchy ever, they still did exist, which is something that would have never happened under an absolute free market coinage system. Often these acts of debasement led to the destruction of wealth of the population and ultimately the destruction of the entire monarchy and society, when taken to its extreme cases.

Minting Monopoly

Other than the Monarchs ability to gain the trust of the people when issuing a coin with the lord’s face on it, it had a competitive advantage over free market minter whose entire business model was to charge their customers for minting services. The Monarch’s minting service was offered for free or for “seignorage” cost. By setting such monopoly cost on coin production, the monarch was forcibly altering with market mechanism of price discovery and thus ending the market participant’s chances of survival. In the process of acquiring a monopoly, the new minting monopolist strived to change the denomination of the said coins and replace it with a royal one instead, it could be in the name of the monarch himself for instance.

The process of debasement (monetary inflation) was subtle and done secretly in the old days of the empires. The Monarch would call for gathering all coins in circulation by claiming the issuance of new and better ones. By doing so, the coins would get melted and new lighter ones with the same denominations get issued while the leftover of silver or gold would get pocketed by the protector of the realm. The most prominent example of debasement during the Roman Empire, was the with the Emperor Nero who was one the first Emperors to dare to do such act. The Emperors who came after Nero did not cease from performing the acts of debasement, and this led to an extreme economic crisis in the Roman Empire which lasted for more than a century. The Roman Silver coin went from being 90% pure in the reign of Emperor Nero which started in the year 54 to being reduced to as low as 50% in the year 217. This economic crisis inticed by hyperinflation was called “Crisis of the Third Century” in the Roman Empire.

Why do Monarchs Engage In Debasement

The Monarch’s entire purpose for creating a monopoly over coinage minting was to exercise control over the financial aspect of the realm. In many instances, the monarch being a separate entity from the people of the realm (Class consciousness), the minimal amount of money received in the form of taxation was not enough for the lord’s expansionary ambitions. And knowing that any military conquest is never in the interest of the peasants (the producers), it was never easy to convince this class of more taxation. Therefore, a roundabout route had to be taken by the Monarchy to ensure the necessary funds needed. However, the Monarchs did not engage in such acts too often, and even when they did, they understood that what they were doing is not exactly in favor of the people they rule over and thus going against the protection of the realm narrative. Having an understanding of class consciousness, people were always aware against such instances, and they always sought to opt out of the coinage standard set out by the Monarchy.

The two classes were very clearly defined under the Monarchy, as mentioned in the introduction, it was peasants vs aristocrats, which can be translated as producers vs money producers, hence the title of this article. Having this obtained understanding of class, kept the monarchs from abusing their power to debase the currency. One might ask however, How is this different from current rulers (the money producers) and their clinginess to Modern Monetary Theory.

The Case for Money Printers (The New Monarchs)

In the good old days, the Monarchs were the money producers and the peasants were the producers of everything else. In the modern form of government based on republicanism, the ‘we’ is everyone and everything.

In order to understand this notion in a more practical way, one must dive deep into the essence of money production in its modern form of fiat (government decreed paper money). Money production is done by the central bank. In the modern world, any economy without a central bank at its base is considered ‘backward’ or ‘primitive’ (the shift in narrative). The central bank has a monopoly over the issuance of currency, but the central bank policy for currency issuance is not secretive, it is out there for the world and taught to the public. As mentioned above, commodities used as money are produced based on the simple market mechanism of supply and demand. Whenever a shortage of gold takes place in the market, the gold miners are incentivized to produce more gold, as it becomes more profitable to do so. One might think that monetary policy of the central bank is based on the same mechanism of the free market, but it is not. Having the ability to create money out of thin air gave the money producers all the incentives to create money indefinitely. Unlike Monarchs, the modern money producers (money printers), are convinced and strive to convince everyone else that they are doing so in favor of the public. This led to the destruction of class consciousness. The money producers are now producing money for the sake of everyone in the nation (the new realm). They produce money to ‘fight’ the business cycle and create a prolonged boom. The money producers produce money to distribute it in the form of Universal Basic Income. By doing so, they ‘stimulate’ the economy, the receiver of the UBI is now using that money to consume and entice money circulation. This way everyone is happy. ‘We’ are all happy. Not quite. Inflation’s effects can never be dodged.

The Drastic Consequences of Inflation

Inflation, whether it was used for imperial expansionism or economic bail out, will always distort the keystone of the economy: business calculation. In a free market, prices do not change all together and at the same speed. Therefore, businesses can simply account for the cost of production and set their pricing strategy based on that and the market demand for the goods being produced. When inflation takes place, the cost of production becomes misrepresented in the books which leads to the disruption of pricing strategy. Businesses would have to constantly change their accounts and perform calculation accordingly. Knowing that businesses cannot do so, based on their gullibility towards the effects of inflation, which is more often than not seen in the price levels after a specific period of price discovery, they will tend to either overstate their profits (in real value) and end up consuming capital while presumably increasing their investments. Moreover, when businesses are hit with a sudden inflation, they are more likely to reduce quality of the products and services, since consumers tend to resist price increases. Business calculation can also be disrupted from the perspective of the consumers and not only businesses. When consumers realize that price levels will keep going up on the short and the long run, they will tend to increase consumption now and postpone saving and investing for later. This process will alter with the individual’s time preference, as people would be less likely to account for the future and ultimately pause the process of development.

But Who Benefits From Inflation?

The inflationists themselves. The Monarchs, the aristocrats, the central bankers, the bankers, the crony corporations, the politicians in other words the money producers. Having exclusive access to the money produced, the money producers are the first to benefit from money production. As they are capable of using this money in its ‘fake’ value not yet destroyed by the process of price discovery when the new money streams down to lower factors of the economy. Before the Cantillon Effect take its toll.

This simple act of money counterfeiting should be enough for us to establish the real understanding of class and that is Producers vs Money Producers.

Bitcoin, The Abolishing of Class and The Creation of Natural Hierarchies

This is not about left vs right or the proletariat vs the bourgeois, this is about our established understanding of the only two classes, the producers, which are the real useful, productive people in society and the money producers, which are the useless, non-productive parasites in society. What puts the money producers in a privileged position is this class’s ability to create wealth from doing nothing for the betterment of society and economy. Not only do they not add anything to society, but they also intervene with the lives of those who do, the class of producers. Money producers in their sneaky ways are transferring time and energy away from the producers and using those absolute scarce resources for their own benefit.

In a society built on top of Bitcoin as its base monetary system, the class of Money producers gets abolished. In the Bitcoin network exists miners. Miners are the party in the network responsible for performing proof of work, by validating Bitcoin transactions. They do so through a process called ‘mining’, by validating a Bitcoin block, miners receive a block reward of 6.25 BTC. One might think that the miners in the Bitcoin network fall under the class of Money Producers. It is true that miners are money producers in the full sense of the word, but the difference between Bitcoin Miners and Monarchs or Money Printers, is that Miners do not control the monetary system of the Bitcoin Network, miners can only mine as much as the Bitcoin protocol allows them to. In the words of Saifedean Ammous:

“Miners are bitcoin’s slaves, not masters.”

In conclusion, the class of Money Producers gets reduced to simple math and code. Incorruptible, Un-hackable & Censorship resistant Bitcoin Network is the ultimate decider of monetary policy. A Money producer that functions based on a predetermined protocol. The problem of messing with Business calculation seizes to exist, every economic decision will always be made based on the prior knowledge of a Bitcoin supply of 21 million coins or even less. This is a society that will not focus too much energy on understanding who is the enemy or trying to identify the parasites. One of the two classes gets abolished, and the world will only have producers, who will engage in non-zero-sum game trade. People will not all be equal in the Utopian Marxist sense, there will be equal in market opportunities. Natural hierarchies will be established, based on market competence, personal responsibility and hard work performed by the producers.

Special Thanks to my friends Jean Marc & Chantal

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Thomas

Thomas

Hard Money, Bitcoin, Lebanon, Austrian Econ, History, Hodler