The Ever-Important Laws of Money
Greetings from Europe!
I’m currently traveling to find exciting new developments for my loyal readers. But I’ve been busy writing my daily thoughts for you to read here at Gilder’s Daily Prophecy.
I often discuss an important idea in my Prophecies: The Information Theory of Economics.
In the information theory of economics, once you grasp knowledge as wealth and growth as learning, the key theme unifying it all is money as time.
Let me sum it up in fourteen laws:
- Material resources are intrinsically abundant and changeless — the atoms of the universe, which were as available to the caveman as to us.
- In order to guide and gauge the course of economic tradeoffs and transactions, priorities and goals, money must be scarce.
- What remains scarce when all else is abundant is time.
- Time is the fundamental scarce resource pervading, governing, and constraining all economic activity.
- Money is the way this essential scarcity of time is fungibly translated into all the transactions, investments, and valuations of an economy.
- Money is a measure of wealth, not wealth itself; a measuring stick of value, not its vessel; a metric, not a commodity. A measuring stick cannot be part of what it measures.
- The true prices in economics are time-prices: The work time to earn the money to buy a good or service, and the work time to produce a good or service. Both are measured in hours, minutes, and seconds. Across an entire economy both are the same. Supply is demand.
- Time-prices measure in one universal number the effects of economic progress, both the increase in real wages and the drop in real costs. Time-prices obviate the consumer price indices, GDP deflators, and purchasing power parities that muddle all existing economic data.
- Time-prices can be crudely translated into currencies and compared by dividing the gross domestic product or gross output of any economy — whether of the nation or the world — by the total hours of work, yielding the wage of an average worker.
- The difference between the time to earn the money to buy a good or service and the time to produce it registers its profitability in time.
- Money is time, but time is not money. Money must be invented and managed.
- The two ways money is conventionally managed are by quantity and by price. It can be fixed in volume or fixed in value. If it is fixed in supply, as monetarists and central bankers widely recommend, it becomes volatile and unsettled in price and cannot serve as a vessel of information. This is Milton Friedman’s supreme error, for which he won the Nobel Prize and the respect of leftist such as Paul Krugman. Money controlled by volume becomes a vessel of speculation rather than a unit of account and transactions. The only path to stable money is to peg the price to a physical constant — time — and let the volume grow as much as enterprises see profitable ways to use it.
- The most successful form of money invented by humans is gold. The time-price to mine or produce gold has scarcely changed in millennia. The time-price to buy it has dropped as a result of economic progress — the growth of knowledge and learning — or increased as a result of government manipulation.
- The rise of the digital economy and the invention of the blockchain by one Satoshi Nakomoto provide a unique opportunity to reestablish money as a source of information rather than a tool for speculation.
Hundreds of attempts have been made to launch new digital currencies, but none have yet succeeded.
As a result, hundreds of cryptocurrencies now languish in shadows of doubt and incoherence. All have foundered on a failure to grasp the crucial principles and secret laws propounded of money.
When investing in cryptocurrencies, the central rule is to assure that it follows the laws of money as time. Time is not a commodity but a measure of all commodities.
Editor, Gilder’s Daily Prophecy