How the Free Market was Destroyed

This article references “The Bitcoin Standard” by Saifedean Ammous, in his book he discusses the history of money and the shortfalls of government involvement. This is one of my favorite books because it systemically proves to the reader why government involvement should be curtailed if we are to succeed as a society. The free market is only free if it is decided by the people.

The History of Money and a Free Market

If you have not read the Bitcoin Standard, I highly recommend it even if you are not interested in Bitcoin. SA mostly focuses on the history of money and free markets, reviewing the common aspects of the fall of an economy within multiple societies. Here is a link to the book if you are interested [Bitcoin Standard]. This book is a great audiobook for your trip to and from work or during lunch breaks. I would like to also point out that we are not paid to promote any products at this time, we do like to discuss what we vouch for and where we believe quality lies in various aspects of life.

During the book SA discusses an ancient society who uses large stones as a form of currency. These stones have value because the miners had to travel across the sea to manually chip away at these massive spectacles. They then had to move them by boat and hoist them to their desired location within the village. These stones known as “Rai” stones and are made of lime, hand carved by the tribal society [1].

He then goes on to discuss how valuable these are to the society. Owners could declare in a town circle that they are transferring the stone to another holder for a property for example. The owner would simply declare that he/she is carrying out this trade and the society would bare witness. This currency was successful for many hundreds of years within the Miconesian islands (North of Australia). This economic system had its downfall upon the discovery of the limestone value from a single European sailor.

This sailor realized that the stones were lime and knew of a perfect location to easily obtain these at large quantities. Within a few years he was responsible for bringing hundreds of stones to the island. The village elders banned the trade of stones brought in by this sailor. They stated that they would not longer be valuable if they were not obtained and crafted by the tribal society. Within a few weeks village people would begin trading for these discounted stones.

Europeans could trade nearly worthless (globally) limestones for food and other precious trading items. Between this devaluation of the stones and European conflict around the limestone mines, this currency and associated society had its downfall in the early 20th century according to The Bitcoin Standard. Throughout the book there are many examples such as this. One major theme that is repeated, is that societies that use Gold and Silver to value their currencies were more likely to prosper long-term.

free market gold standard bitcoin standard
Free Market-Gold Standard & Purchasing Power

The Gold Standard

Knowing that the most successful long-term societies had pegged their man-made currencies to the value of gold initially seemed peculiar. However after realizing that gold would not rust, required manpower to mine and move, the value proposition became apparent. In the free market things have value if they cost time and money to make or obtain. Gold has the ability to maintain its beautiful luster and shape for potentially millions of years, and without decay. Not everything needs a direct and immediate utility to have derived value. The most important investment was in fact time itself.

In 1971 Richard Nixon took the American economy off of the Gold Standard. Citizens and Institutions alike could no longer convert their gold holdings into US dollars [2]. During this time Richard Nixon and his selected officials were promoting the power and strength of the US dollar. Another way to view gold is as a hedge versus paper money of all types. Promoting the dollar but mass purchasing gold was hypocritical to state the obvious.

Since 1971 the dollar is down nearly 90% in purchasing power. The book goes on to state that central banks have the ability to amass large amounts of gold, they can then sell this gold off to protect dollars at their will. This is government manipulation at its best, they want inflation, because inflation indirectly impacts “growth”, but is it growth for the sake of growth? Growth without purpose is a futile attempt to convince the public that society is booming. But how does this tie into the free market today?

free market gold standard
Free Market Gold Price Per Oz, Trading View

Destroying the Free Market

Yesterday millions of investors awaited the most recent inflation metrics. Those who were betting on a 0.25% rate hike, made substantial amounts of money as the market exploded with excitement. Meta stock surged from 140$ a share to 180$ within 1 hour, this is multiple tens of billions of dollars in market capitalization in the blink of an eye. So, what is going on here?

If you use the same government control we saw above with the removal of the Gold Standard, and the destruction of the Micronesian economy, it is easy to come to conclusions. The Federal Government decides when the market goes up, and when it goes down. Millions of eyes await each rate hike and react emotionally every, single, time. Soon enough the professional fund manager will be come irrelevant, with Artificial Intelligence looming around the corner, and the Fed in control, how does one achieve and edge in the markets?

When inflation is high, holding dollars rapidly loses value. Buying bonds is also a losing game since long-term bonds are currently providing less yield than short term bonds, this is known as the yield curve [3]. Typically longer-term bonds provide a higher yield. Holding stocks has been a losing game for those who bought anywhere near the top as well. This top buying happens automatically in everyone’s 401k retirement accounts. Society has been essentially restricted from successfully participating in the markets since the major assets, including gold are all losing from a macro perspective. While our funds are locked away in our retirement accounts, billionaires are selling the top with our biweekly dollar-cost-averages from our paychecks.

Only through finding value long-term will investors win over the years. This is where Bitcoin arises to free humanity from the chains of poverty, censorship, and oppression.  For an article on the global importance of Bitcoin, check out MoC’s writing [here]. Wherever you are today, we hope you are surviving these difficult times and spending time with family and friends. Remember none of this is financial advice, do your own research and stay safe out there!

Patrick O’Neil

About Patrick O’Neil


Patrick is an avid technology and gaming enthusiast. Patrick taught himself how to assemble computers in 2010 and was always fascinated with the gaming market. In 2019 he decided to sell his grayscale Ethereum funds and dive into the world of crypto firsthand. 

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