Reading bitcoin’s original code has helped me to think about the larger qualities of money and economics. As a former bookkeeper I already had a solid grasp on the vectors of creating and increasing value in an ordinary business, operating inside a functional economy. From this foundation, plus 40 years of real programming, I could see instantly that bitcoin is NOT money in any sense. I didn’t realize how large the NOT is until I looked at the code.
Bitcoin isn’t anything at all. It’s just a list, not even a ledger. Anyone can write a list on paper or in a computer. Making a list has ZERO CONNECTION with money or value.
A small business can be conducted quite well without any lists at all. A peddler pushes his cart to the wholesaler and buys a day’s load of hot dogs and buns. He then assembles them per customer requests and sells the assembled result for more than he paid. If he doesn’t need to worry about taxes or regulations, he can function without paperwork. He just needs to know his territory and his customers and his techniques, and above all he needs to build a trust relationship with the customers and the wholesaler.
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I’ve never been able to grasp the idea of creating money. Textbook economics is completely useless. “Banks create money by making loans, up to the specified multiple of their reserves.” This tells us the legal limits but it doesn’t go anywhere near telling us WHAT HAPPENS.
When I start from a foundation of TRUST, the answer gets a bit clearer.
The CR side of a ledger means creditur, it is believed or it is trusted.
To pull out of the steady-state loop, let’s consider a general store that opens just after a new town is established. Everyone in town is also starting fresh. The store owner wants to have farmers selling him wheat and hogs and tomatoes, but the farmers are just now plowing and building barns. They won’t have a crop until next August. He needs to contribute to their success by selling them plows and harnesses and hog feed. He has brought several loads of supplies down from his previous store in Kansas.
What happens when the storeowner LENDS supplies to a farmer, running a TAB to record the loan? He isn’t creating money at all. He’s TRUSTING that the farmer will be able to pay for the supplies with wheat and pork next year. What moves in this transaction is an enforceable BELIEF or TRUST.
The same thing happens when the new bank lends silver circles to the storeowner to keep his operation running until the first harvest. In this case the object that moves is silver circles, not steel plows. The silver circles are SUPPLIES for the storeowner in the same way that the hog feed is SUPPLIES for the farmer.
Both moving objects, the steel plow and the silver coin, are physical tokens exchanged for TRUST. In each case the TRUST SIGNAL ultimately disappears, because it was not material in the first place.
No money has been created yet. Money is not value. Money is an INCREASE OF VALUE. Value increases when the pigs eat the feed and grow fat, and the planted wheat turns into bread. This INCREASE is the same type of measurement whether it happens at the start of the community or after the economy is running in a loop.
After the local economy gets up and running, there’s much less need for creating trust. Negative feedback will operate in an infinite number of ways, via interest rates and prices and refusals, to keep the existing tokens moving around cleanly and TRUSTably.
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Conclusion: My earlier rendition of CR and DR is the whole story. Value is increased by nature and by labor. In the rare situation where a system needs to be started fresh, the loops are cranked up by TRUST, not by money.
You can’t have an economy without trust. Bitcoin claims to operate without trust. An economy without trust is NULL. Nothing. Can’t start, can’t happen. No value, no system, no business.
After the cranking, each token’s size changes constantly to reflect the present condition of the loops. Adding more tokens is one way of altering the measure of each token, but it’s not the primary way.
When bitcoin “mines” another page for the list, nothing at all changes in the system of value. It’s completely irrelevant.
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Polistra's Mill 