Ideology, religion, belief are the new terms for economic growth. As if those who praise her formed a sect. Long considered untouchable and mother of virtue, she would no longer be an irrefutable sacrosanct model. The beginnings of a movement calling it into question appeared in 1968, with the Club of Rome. And we will see a number of theories emerge including zero growth (D. Meadows), eco-development (J. Sachs) or even sustainable degrowth (N. Georgescu-Rogen).
Today, this paradigm shift is accentuated all the more because of the unbearable environmental emergency , where the delicate link between growth and the environment exacerbates the harmfulness of the former for the latter. This is why new alternative models must be thought of, just like our conception of money . So, let's consider the place of Bitcoin within the various models of "growth" .
This article will then highlight the reasons why Bitcoin is not intended to be a currency in the common sense of the term, and this, in relation to the principle of growth , and even, to a greater extent, of capitalism .
Bitcoin, an integrated monetary system
First of all, let's revisit how Bitcoin works, what we call “digital gold” , like the book written by Jacques Favier, Benoit Huguet and Adli Takkal Bataille. This determinant is not attributed to it by chance. Let's see for what reasons!
Bitcoin is a currency with its own “monetary policy” . Coded, the issuance of BTC units is fixed and limited to 21 million . This is where the comparison with gold makes sense since Bitcoin remains a rare asset . Plus, each mine this amount over time until all ounces or bitcoins are in circulation - even if, in the case of gold, the number of deposits to be discovered is not set in stone. .
Now, let's briefly recap how this finite number issue is done when it comes to Bitcoin. To begin with, it is a model of disinflationary money creation . An ex nihilo creation is carried out each time a block is validated by a minor. The tokens issued reward the effort it has made to validate the transactions in said block as well as to secure the network. A block being validated every 10 minutes on average, 6.25 BTC are today distributed at this frequency. Then, to ensure disinflation, the reward is divided by 2 every 4 years - specifically every 210,000 blocks. In fine, this results in this fixed and limited supply, the scarcity of which is increasing over time. A characteristic at odds with the current functioning of our economies; and we'll see why.
Artificial growth?
From now on, it will be necessary to describe how growth is "fed" today and to observe the link between growth and money supply through the intermediary of GDP. It is only after that that we will draw conclusions about the place of Bitcoin in the current economic system.
A clear correlation between GDP and the amount of money in circulation has been observed. For example, in 2009, in the euro area, the money supply under the M3 aggregate (a commonly used measure) was 9.5 trillion euros, with a GDP of 9.3 trillion. Similarly, in France, the GDP amounted to 2,291 billion in 2018, for an M3 of 2,190 billion euros. Other comparisons are notable and confirm this close relationship, where the 2 indicators almost always evolve in the same direction . Thus, we can deduce that the growth of the money supply is a parameter favoringEconomic Growth. Conversely, the decline in credit slashing the quantity of money has a negative impact on economic activity. The subprime crisis - defined as a demand shock by some economists - was a perfect illustration.
After the bursting of the housing bubble in 2007, the financial crisis caused the credit crunch by commercial banks. This then triggered a sharp decline in demand, thus neutralizing growth. As for the gap that can be noticed between money supply and GDP, there are 2 major reasons. On the one hand, this lag results from savings , which means that the money supply is not reintegrated into the production of wealth. On the other hand, in the opposite case, the same monetary unit can be the object of several transactions .
But paradoxically, the growth of the money supply also raises the level of debt which, in the end, can dangerously cripple economic activity. As described by Hyman Minsky , the more growth is based on a high level of indebtedness, the more quickly and frequently peaks of debt distress that generate crises are reached.
Another disadvantage specific to the expansion of the money supply, well described by the monetarist Milton Friedman : inflation . Of course, this currency is generated to meet the needs of fueling economic activity, but it can also lead to the formation of asset bubbles, not without consequences.
Bitcoin a growth atheist
Given all the explanations given, you will understand how Bitcoin is hardly compatible with the religion of growth.
Its fixed money supply does not allow it to fuel speculative bubbles indefinitely, as the policies of the main central banks allow today, and more seriously to meet the needs of economic players (households, companies). Therefore, in the absence of a "fluctuating" money supply , growth can not be assured. The "expansive" capitalist system leaves no room for a currency, such as Bitcoin, to "regulate" the economy. Max Weber illustrated this very well when he said that"The very essence of capitalism is the incentive never to settle, to embark on an infinite expansion" .
Could we then see a prominent place for Bitcoin if capitalism collapsed?
Before defending the creation of Satoshi, let us take up the suggestion made by Marion King Hubbert . It testifies to the failure of the system and the form that a new alternative could take:
“This disparity between a monetary system, which continues to grow exponentially, and a physical system, which cannot do the same, leads to an increase over time in the relationship between the money supply and the production of the physical system. This manifests itself in inflation. A monetary alternative corresponding to zero physical growth would be a zero interest rate. "
Behind the notion of zero interest rate, there is the overhaul towards a more ancient system . Let's look further back to see how the latter materialized. At the time when usury in the Near East had been banned by Islam, some economies had even decreed the prohibition of lending at interest, stressing that it was illegitimate, because it amounted to using currency as a end in itself. A noteworthy quote from Ghazali was “Money was not created to earn money” . That turns out well. Bitcoin would meet this requirement for a zero interest rate currency.
Likewise, a floor interest rate is not just an instrument, because it also demonstrates a philosophy where the money supply is not growing, but stable. An opportunity for the king crypto-asset, where its money supply would theoretically be in line with the steady state (zero growth). In addition, it would consist in using a currency whose supply is fixed and the need cannot be met with monetary creation. Such a philosophy would mean that there is sufficient amount of money in circulation.
Obstacles to Bitcoin as a Currency
Nevertheless, there are counter arguments against such a conception.
First, the nature of the endogenous currency . That is to say, it depends essentially on the demand for credit from economic actors, rather than exogenous, external to human activity, as is, for example, the volume of gold or silver . In what framework could we then solve this need for money creation?
In addition, we must not overlook the fact that commercial banks , which allow economic agents to meet their needs, create money when they grant credit.. Should we then limit credits to deposits? This situation has existed before. Other means of payment would be superimposed, such as letters of credit, in order to fill a potential lack of money. The risk that a currency is insufficient in an economy can have a certain severity. Indeed, it is the possibility that disposable income will become insufficient. So, some economic agents will have difficulty meeting their needs, thus leading to a weakness in aggregate demand and investment. A problem described by Alain Grandjean and Nicolas Dufrêne in “An ecological currency” .
Unfortunately, it is practically utopian to see such a system emerge and just as hypothetical to ensure the capacity of its functioning in accordance with the needs of economic agents.
These factors are only the pure variation of the phenomenon of growth described above. Concretely, they illustrate how our monetary system could not be governed by a limited quantity currency. This shows that Bitcoin's place is not as a currency, but elsewhere, in a position that it is all the more verified: that of store of value.
I would like to emphasize that this article is above all intended to question the place that Bitcoin can occupy today. It is in no way intended to assert a thesis, but to pave the way for the reflections raised by the libertarian opportunity.