The Bitcoin Standard: The Decentralized Alternative to Central Banking

by Saifedean Ammous

In a society in which capital investments are financed from savings, capital is owned by those with a lower time preference, and they allocate it based on their own estimation of the likelihoods of market success, receiving rewards for being correct and losses for being wrong. But with unsound money, savings are destroyed and capital is instead created from inflationary bank credit, and its allocation is decided by the central bank and its member banks. Instead of the allocation being decided by the most prudent members of society with the lowest time preference and best market foresight, it is decided by government bureaucrats whose incentive is to lend as much as possible, not to make profit, as they are significantly protected from the downside.