Author and historian Yuval Noah Harari recently commented that Bitcoin is a currency of “distrust,” emphasizing that “the preference for Bitcoin is based on distrust of human institutions.” He argues that “the whole purpose of money is to create trust between strangers,” enabling large-scale economic cooperation.
These musings may seem insightful, but they are completely incorrect.
This perspective misunderstands the function and history of money. Money’s whole purpose is to facilitate transactions between parties without requiring trust.
Before money, there was barter. In this system, multiple parties must have exactly what the other wants, at the same time, and in the right amount in order to transact. A small island economy could function this way: a couple of coconuts traded for fishing line, or a bushel of bananas in exchange for bamboo with which to build a shelter.
The effectiveness of the barter system breaks down as economies become more complex. Imagine that a farmer wants to buy a pair of boots, so he visits the town cobbler and tries to trade a dozen eggs in exchange. However, the cobbler doesn’t want eggs. The cobbler might want beef, but the farmer isn’t willing to slaughter his cow for boots.
The infeasibility of a moneyless society becomes evident as an economy grows. This issue, referred to as the “double coincidence of wants,” limits the scope of direct barter and highlights the importance and value of money.
One does not have to like, respect, or agree with a vendor to participate in economic transactions. One simply has to trust the money. Historically, gold and silver emerged not through government proclamation but by millions of market actors across the globe acting in their own best interests.
The global scarcity of gold, or silver, (or Bitcoin, to Harari’s point) makes it difficult to manipulate money buttressed by these assets. This difficulty in increasing the supply of money (in both human effort and dollar terms) is a necessary condition for sound money.
Holders of sound money can be confident that politicians won’t weaponize their money, and that central banks won’t debase, dilute, or inflate it into oblivion — not because government actors are known to be honest and truthful at all times, but because they can’t manipulate sound money, by design.
Inflation, an abnormal increase in the volume of money and credit resulting in a substantial and continuing rise in the general price level, undermines money's role as a store of value and disrupts economic stability.
According to Austrian economists like Ludwig von Mises, Nobel-laureate Friedrich Hayek, and Murray Rothbard, money’s essential role is to facilitate trade independent of the need for “trust.”
This understanding stems from the inherent properties of money—durability, divisibility, stability of value, and fungibility—which ensure its acceptance and value without relying on trust in the other party. These characteristics allow for economic transactions between strangers, making money a cornerstone of a market economy.
Harari’s critique fails to acknowledge the problems inherent in central banking and fiat money, which do require trust in the exact same institutions that have frequently proven to be unreliable caretakers of America’s money.
For example, the Federal Reserve's inflationist policies, particularly following the 2008 financial crisis and then set on hyperdrive during the COVID years, involved creating massive amounts of money out of thin air. This led to a massively devalued dollar, economy-wide distortions, and an increase in poverty, homelessness, food insecurity, and more.
Mises recognized the folly of central bank money creation, writing in Human Action, “There is no means of avoiding the final collapse of a boom brought about by credit expansion.” Monetary manipulation is the drug; recessions, depressions, and economic downturns are the economy trying to sober up.
Money in the U.S.
America’s founders understood the risks of a money backed by edict rather than sound money. That’s why the U.S. Constitution, in Article 1, Section 10, prescribes the use of gold and silver coins as money. These commodities have historically served as stable stores of value and mediums of exchange because of their resistance to arbitrary expansion by central authorities, thus maintaining their value over time.
Unsurprisingly, once the federal government eliminated the U.S. Dollar’s final tether to gold in 1971, deficit spending increased exponentially, and the purchasing power of the money fell dramatically.
Fortunately, state and federal lawmakers are working to fix this error.
In 2024 so far, more than 60 pro-sound money bills have been introduced across more than half of all states in the U.S.
In D.C., we’ve seen Rep. Mooney’s bill to exempt gold and silver from federal capital gains, Rep. Massie’s bill to End the Federal Reserve, and the most significant digital asset law in history in the Financial Innovation and Technology for the 21st Century Act.
These initiatives all point to a growing dissatisfaction with the actions of central monetary planners at the Federal Reserve and within the federal government. People want money that is stable, retains its purchasing power, and isn’t weaponized as a cudgel for political purposes.
Despite Harari’s pleas, the various government institutions and the sapiens who run them have shown that they can’t be trusted as stewards of America’s money.
Government institutions have no God-given claim to the trust of the people they represent, and these institutions themselves are solely responsible for the precipitous decline in the trust granted to them by citizens.
By restoring sound money principles, we eliminate the need for trust in central banks, ensuring more stable and predictable economic interactions over the long term.
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