True Money is Purchasing Power
Paul Sztorc
September 24, 2017

In my opinion, there is really only ever one “unit” of True Money, which is the unit of “purchasing power”.

In the United States, we express our purchasing power in the unit ‘US Dollars’, in Europe, they express their purchasing power in ‘Euros’, and so forth. Purchasing power can, in principle, be expressed in any number of units, including those of Gold, Fiat, Bitcoin, all Altcoins, collectibles including art, and even the phrase “you owe me a favor”. But these “expressions” are merely artefacts of language…after all, at any and all instances of time, I could visit a shop in Italy and translate the prices into USD or Yen, just as easily as I could translate the labels and descriptions of each of the products for sale from Italian to American English or to Japanese. The prices are readily availiable, widely published and discussed. If it is the case that “You owe me $20.” I am likely to be indifferent to a $20 bill, and you paying for my $20 lunch outing. That is, in some sense, the whole point of having a unit of account.

It is a little bit like how, if you visited different planets, your mass would always be the same but your weight would change. “Your mass” might represent ‘how much money’ you have [of a specific type]; “which planet” might represent ‘other people’s recognizability’ of your money (the more favorable a type of money is viewed, the closer to their planet you are); and finally “your weight” (or, the gravitational force that you can command, expressed in newtons) would represent your “purchasing power”.

Note, however, that the people who invest in USD or Euros are not “investing in purchasing power”. This is clear, because their physical portraits [or their digital counterparts] can, in fact, lose purchasing power very quickly [as in the cases of the Confederate Dollar or Zimbabwean Dollar]). By acquiring a banknote, one has not acquired “force”, nor “gravity”, but instead one has exerted an amount of force, to obtain a given amount of mass. In our analogy, people only care about the “force” (ie, purchasing power), and the distances between objects can change over time, affecting the forces.

I suspect that it will never truly be possible to invest “in” purchasing power. Such investments must always be made indirectly, through other objects (and they will always come ‘entangled’ with other people’s perceptions of those objects). This is again similar to the way that “gravity” cannot be experienced or even measured in the abstract…instead, gravity is measured by comparing different gravitational forces to each other, while controlling for the mass and distance the objects used to measure those forces.

One implication of this perspective, is that Altcoins are indeed, as Gavin Andresen said, a “sneaky way [to increase Bitcoin’s 21 million coin limit]”. Each Altcoin that is created is levying an inflation tax against the holders of Bitcoin. This is because Altcoin-printers allow the printer to produce something that can be used to buy stuff – ie, purchasing power or graviational force. In other words, the Altcoin-printer does the same thing that a Bitcoin-printer would be able to do. In our physics analogy, the laws of conservation of mass/energy would not allow a new ‘gravitational force’ to be created “for free” – it must be coming “from” somewhere.

But it goes further than that, of course. The mere creation of Bitcoin represents an inflation tax on the holders of the USD. And in fact, every monetary unit in existence is in conflict with the others, just by existing at all. Again, gravity is a good metaphor – we can imagine titantic celestial spheres engulfing each other, trying to become the largest black hole, to dominate the public conciousness of a given time and place (apropos, to dominate “a given region of spacetime”). All the units of money are vying with each other for a larger share of the public conciousness …in other words, vying for the monetary property of “recognizability”.

Notice, finally, that this conflict is only about “money” (or what I call “purchasing power”), and it is not about “wealth”. Wealth can grow over time, possibly without limit. Purchasing power merely represents what portion of that wealth you can claim as your own. However, wealth may be growing so quickly, and purchasing power might be changing so slowly, that you may grow wealthier over time, even if your portion of the total wealth decreases.

Update (Nov 12, 2017): It occurred to me that this framework can offer an objective definition of value. We just define “value” as “the persuasive energy contained by a given action”. This action could be a barter (surrendering some of your property), or it could be a statement, (a threat, offer, etc).

If so, “value” will be an objective property of the action. So the act of surrendering $50 will objectively be able to force X number of other people to perform Y actions. Value may be very difficult to measure, and it still resides in other people’s minds, but it is an objective concept. While this doesn’t disprove the “subjective theory of value”, it does prevent tSToV from implying that “all value is subjective”.