Ammous, Saifedean

Austrian-school economist; author of The Bitcoin Standard and The Fiat Standard

Saifedean Ammous: Bitcoin, Anarchy, and Austrian Economics

Lex Fridman Podcast · May 11, 2022

• Saifedean Ammous
• Bitcoin standard and fiat standard
• Austrian economics vs Keynesianism
• hard money and stock-to-flow
• gold standard history
• World War I and the birth of fiat money
• anarchism and monarchy
• proof-of-work vs proof-of-stake
• central bank digital currencies
• Israeli-Palestinian conflict (personal account)
• low time preference

Core ideas

Ammous defines money as a good acquired purely for later exchange rather than consumption, arguing it solves the "coincidence of wants" problem and enables the division of labor at civilizational scale. He argues that "hard money" — money that is difficult to produce more of — naturally outcompetes "easy money" over time, tracing this through historical examples (cigarettes in prisons, limestone on Yap, glass beads in West Africa) culminating in gold's dominance by the late 19th century due to its near-unmatched scarcity and durability (a stock-to-flow ratio he cites as roughly 60, versus much lower ratios for industrial metals like copper). He rejects the idea that money is a "collective hallucination" or arbitrary social construct, arguing that groups who choose a poor monetary good (like copper) are simply flooded with new supply and impoverished, regardless of collective belief.

He describes his own Austrian-school framework as tracing from Carl Menger's 1871 development of marginal analysis (illustrated via the water-diamond paradox) through Eugen von Böhm-Bawerk and Ludwig von Mises, arguing this was simply "economics" until Keynesianism emerged after World War I as what he calls a post-hoc "propaganda" justification for the British and other governments' wartime departure from the gold standard. He argues Keynesian macroeconomic models (aggregate expenditure versus output) are empirically falsified by the co-occurrence of high inflation and high unemployment (stagflation) in the 1970s, and characterizes mainstream academic economics as structurally biased toward pro-inflation conclusions because funding, publication, and media access depend on supporting central-bank policy.

On politics, Ammous describes himself as a committed anarchist who views all taxation and regulation as coercion backed by the threat of violence, and argues no government function (infrastructure, natural monopolies, education) escapes this objection since free-market alternatives are always foreclosed by law. Provocatively, he states he has become "sympathetic to monarchy" as a practical (if not moral) second-best to anarchism, reasoning that hereditary rulers have longer time horizons and stronger incentives to preserve a prosperous realm for their descendants than term-limited democratic politicians who he says are incentivized to maximize short-term extraction.

Ammous recounts the history detailed in The Fiat Standard: that Britain funded World War I by having Bank of England officials secretly purchase unsold war bonds using central-bank credit (a scheme Keynes himself called "masterly manipulation" in a since-uncovered 1917 letter), forcing citizens off gold and onto paper promises that were never honored — a process he argues was replicated globally and is the true origin of fiat currency. He argues, citing historian Alan Milward-style "goods don't cross borders, bombs will" logic, that fiat financing enabled total, prolonged 20th-century warfare in a way the gold standard's hard budget constraints had previously limited, and states plainly "you can't have permanent war without fiat," extending this into a claim that avoiding British involvement in World War I (financed this way) would likely have prevented the conditions for Hitler's rise — a counterfactual he acknowledges is speculative.

He describes Bitcoin as the culmination of hard-money history: a fixed 21 million supply with a currently ~1.8% and falling inflation rate, operating without any central authority able to alter its rules (illustrated by miners' failed attempt to unilaterally change block size in the 2017 "block size war," which he argues shows that network nodes, not miners, hold ultimate sovereignty). He argues Bitcoin combines gold's durability across time with fiat's transferability across space, dismisses proof-of-stake cryptocurrencies (including Ethereum) as unauditable, effectively centralized "securities" masquerading as decentralized systems, and defends Bitcoin's energy usage as a rational cost-benefit tradeoff comparable to any other energy-intensive technology (cars, airplanes, washing machines) that improves human welfare. He predicts a gradual, non-apocalyptic transition in which individuals adopt Bitcoin for self-interested reasons (protection from currency devaluation) faster than governments can suppress it, potentially resulting in a "financial apartheid" of parallel monetary systems, and separately criticizes proposed central bank digital currencies (CBDCs) as a potentially dystopian return to Soviet-style single-bank control over individual spending.

Ammous closes with a personal account of growing up Palestinian in Ramallah, describing what he characterizes as an ongoing forced displacement of non-Jewish residents from the region beginning with the British government's 1917 Balfour Declaration (which he links to Rothschild banking support for Britain's departure from the gold standard) through to present-day settlement expansion, and states his interest in Bitcoin partly stems from viewing it (via a friend's theory that "land is a coin") as a potential long-term alternative to land-based nationalist conflict, alongside his broader argument that fiat financing allows distant political and financial elites ("chicken hawks") to treat war as a low-cost "spectator sport" funded by inflation rather than by those who fight it.

Excerpts