This is a collaborative post: Philosophy and Bitcoin: The Danish economic philosopher Ole Bjerg looked at Bitcoin. The result is a clever piece of knowledge about money in general. Bitcoin shows how irrational conventional money is. Paper: “How is Bitcoin Money?”
When something strange enters your own world, you can either evaluate it from your own narrow point of view – or you can use the point of view of the stranger as a mirror and look at yourself from a new perspective.
When asked if bitcoin is money, the procedure for answering is usually based on your own narrow viewpoint: you take some definition of money of store, medium of exchange, unit of account – and then ask if that also applies. to bitcoin, bitcoin revolution writes in more detail. Open the drawer, insert the bitcoin, close the drawer, answer the question. Bitcoin is money or not.
If you approach the question more carefully like Ole Bjerg, economic philosopher at the Copenhagen School of Business, things are less clear. One should not assume that conventional definitions and conventional money are the measure of all things, but, the other way around: assume that money is not a definitive form, but merely convention – and then more about it through the question of whether Bitcon is money to experience conventional money.
Bitcoin is therefore the unheard of, other, foreign; for Bjerg that which cannot be viewed through the glasses of the ordinary, but becomes glasses itself in order to show the ordinary more sharply.
Bjerg cannot do without glasses either. He tries Slavoj Žižek, the Slovenian trend philosopher – perhaps the most famous living philosopher in Europe at the moment – to classify money and the world as such. Just as Žižek differentiates between three different orders – the real, the symbolic, the imaginary – Bjerg differentiates between three dimensions of money – material money (“commodity”), fiat money and credit money. So he discovers that the Bitcoin fits into every category – but at the same time turns each of these categories on its head.
A gold standard without gold
Let’s start with metal money. Bjerg calls this “commodity money”, which is incorrectly translated into German (in this context) as “primitive money”. This does not mean mussels or cows, but money whose value is covered by its material form. For example gold coins, or banknotes in the times of the gold standard, which were covered by the gold deposits of the central banks.
It is clear that there is no gold or any other precious metal in Bitcoin. Bitcoin is not covered by anything, which is why it is absurd to compare it with gold-backed money.
Nevertheless, Bitcoin and the gold standard have something important in common: namely, an almost physical limit on the number of possible monetary units and theirs dwindling generation. The number of bitcoins is limited to a maximum of 21 million. There is no such thing as gold, and yet Bitcoin is based on a kind of digital gold standard.
A contradiction? Bjerg quotes the constructivist Jaque Lacan, a spiritual thought leader from Žižek. Constructivists are people who think that people can never really see the world, but only the images that one has formed in the head under the influence of third parties. The world as we see it is a castle in the air. Constructivists are usually peaceful people because they find it too annoying to bicker about a truth that doesn’t even exist. The only thing that upsets Constructivists are fellow men who insistently insist that they have leased the one and only truth.
So the constructivist Lacan said, “Woman does not exist” to explain that gender differences are just a matter of concepts and stresses. Bjerg now says: “Money does not exist”, and by this means, now with Žižek, that the theory of material money is an attempt to anchor the value of money in the “real” – in the intrinsic value of gold. It’s more complicated than it sounds. Because with Žižek the “real” is not something clear, distinct and tangible. No no. Rather, it is the “negative of the symbolic”, that which eludes the symbolic becoming in the head. The dark, invisible, empty hole around which we have built an image of the world in our brains. The invisible cellar of the cloud castle.
Are you still coming? The gold standard ties the value of money to the real, but the real is empty and the castles in the air through which we perceive everything entwine around something we cannot perceive. Gold is not empty, of course, but a paradox in terms of its value: money is not valuable because gold has an intrinsic value, but gold is valuable because it had a role to support money. The value of gold and thus of the money backed by gold is based on – nothing.
Bitcoin is now, according to Bjerg, similar, but more honest: “Instead of pretending that the monetary system is around a positive entity that guarantees the entire value of the symbolic order, Bitcoin openly admits that it is structured around a pure nothing.“
Bitcoin is as scarce as gold standard money, but obviously not covered by anything.
Fiat money without the state
The second idea, how one can understand money, is the fiat money (Fiat = Latin for “it will”). This theory is based on the fact that money is not matter or value, but politics and law. The state creates money through two acts: First, it produces something, such as printed notes, and says: it is legal tender. Second, he only accepts tax payments with this money. The state creates both supply and demand for money at the same time.
Bitcoin is, as we all know and appreciate, money without a state, which is why it is absurd to compare it with fiat money.
Nevertheless, there are similarities: Both fiat money and bitcoins are not covered by anything except the prospect of being able to pay with them. With fiat money the state supports this prospect, with Bitcoin an association of a voluntary community.
To explain the role of the state in the acceptance of money or to give the state out of this role operate, Bjerg brings Žižek back into play. The Slovenian philosopher explained human desire in a constructivist way: You don’t ask for something real, you ask for what the “great other” demands. The great other sits in all of us, he is our example and our master; what we mean, what the great other wants, we want too. If our role model is the richest dentist in town, we too want a villa in the Kornviertel and a jaguar; if our role model is Hunter S. Thompson, then we want a psychedelic high that expands our consciousness.And so on.
When we talk about fiat money, the “big other” is the state. He demands fiat money, so people in the economy demand fiat money too, and when the big bosses become “big others” themselves, the little bosses emulate them, and bang: society demands fiat money .
All you need is an initial kick starter that ignites the desire for money and sustains it until it becomes independent. This process is called “bootstrap” by software developers. Unfortunately, the word is not really translatable without knotting sentences.
What is this initial element in Bitcoin if there is no state that imposes a requirement? The Silk Road is most likely to come into question. Because while “legal” traders “also” accept bitcoins in the best case, you can pay “exclusively” with bitcoins on Silk Road and similar markets. Silk Road can thus be seen as the initial trigger of the desire for Bitcoin as money. This is not a problem, as many innovations have eaten their way from the shady fringes of society into the middle. You could say that Wallenstein, an angry, gouty, superstitious warlord in the 17th century, invented general taxation.
To sum it up: Bitcoin spreads like fiat money, but without a state .
Loan money without debt
Now to the third and most worrying dimension of money: debt. Alfred Mitchell Innes said: “Credit, and credit only, is money.” So money is what a creditor claims to receive for the repayment of a debt.
The value of money however, as debt depends on a debtor’s creditworthiness. A $ 1,000 loan to a beggar is worth less than a $ 1,000 loan to a billionaire. As you can currently see, a EUR 105 loan to Greece is also worth less than a EUR 99 loan to Germany. Debt money should always be worth less than real money, as there is some risk of default, even in the case of the billionaire.
However, this is not the case with banks. Your debts are accepted as a means of payment without any loss of value and are even the most important means of payment in the economic cycle. Banks create money by lending. These loans do not have to be converted into cash or central bank reserves to function as a means of payment.
Our current system is, according to Bjerg, a paradoxical combination of fiat money and credit money, bills and credit Bank accounts. Although the bills are not backed by anything, they cover the banks’ loans, which we know as balances. Debt money – although it is risky – circulates with the same value as the banknotes, although the sum of the credit money far exceeds the balance of the fiat money.
Žižek said of the ideology that it translates the impossible into a historical blockade .Bjerg says the reserve system “translates” the structural “impossibility” of all customers converting their loan money into fiat money into a special and practical form of convenience. It’s simple: any of us could go to the bank and have our money withdrawn. By giving the bank the illusion that we can change the credit money into fiat money, they convince us to leave the money with them, since electronic credit money is more convenient than paper fiat money.
And the bitcoin? It is similar to credit money in one important property: The materiality of the money does not play a role in either. After all, it is “only” a claim in an accounting system. With Bitcoin, this accounting system is the blockchain, which relentlessly and transparently and infallibly documents who has how many Bitcoins. Bitcoin has the practical property of being as flexible as credit money – and getting by without debt.
Bitcoin creates new, innocent money in its own currency – while banks make money in the currency of a state create. Bitcoin is “not a parasite of the national currency of any sovereign state. If Bitcoin should collapse in a spiral of hyperinflation, it will only hit the money of those who have voluntarily invested in Bitcoin. ”It is different when large banks collapse …
Bitcoin is as flexible as that Loan money without being in debt.
The Worst Kind of Money
So what is Bitcoin? The currency of the future or a ponzi of the digital age? The question, my Bjerg, is wrong. There is no gold, no state or debt, but this alone does not make Bitcoin a fake. At least not more than conventional types of money.
All money has its weaknesses and flaws. If money is integrated into society, these mistakes are accepted as inevitable or even natural. We accept that the government holds the monopoly on the creation of (fiat) money and demands it back in the form of taxes – and that commercial banks have the privilege of circumventing this monopoly. Taxes and interest seem to be an inevitable part of economic health.
Bitcoin’s future is uncertain. If history is on the side of Bitcoin, it will be considered an “ingenious, efficient, cheap, democratic and extremely stable system of money”, the role of the Silk Road will go down in history as a curiosity and the wealth of the early adopters as fair Reward for economic foresight. If Bitcoin fails, however, the currency will be remembered as a digital Ponzi scheme.
Bjerg’s conclusion is a paraphrase of Winston Churchill’s famous sentence: “Bitcoin is the worst form of money, apart from all others. ”We’re happy to be part of that.