The Bitcoin Standard: The Decentralized Alternative to Central Banking

by Saifedean Ammous

This also helps explain one of the key Keynesian misunderstandings of economics, which considers that delaying current consumption by saving will put workers out of work and cause economic production to stall. Keynes viewed the level of spending at any point in time as being the most important determinant of the state of the economy because, having studied no economics, he had no understanding of capital theory and how employment does not only have to be in final goods, but can also be in the production of capital goods which will only produce final goods in the future. And having lived off of his family's considerable fortune without having to work real jobs, Keynes had no appreciation of saving or capital accumulation and their essential role in economic growth. Hence, Keynes would observe a recession concurrently with a fall in consumer spending and increase in saving, and assume the causality runs from increased savings to decreased consumption to recession. Had he had the temperament to study capital theory, he would have understood that the decreased consumption was a natural reaction to the business cycle, which was in turn caused by the expansion of the money supply, as will be discussed in Chapter 6. He would also have understood that the only cause of economic growth in the first place is delayed gratification, saving, and investment, which extend the length of the production cycle and increase the productivity of the methods of production, leading to better stan...