The Dark Enlightenment (Part 1)

Neo-reactionaries head for the exit

Enlightenment is not only a state, but an event, and a process. As the designation for an historical episode, concentrated in northern Europe during the 18th century, it is a leading candidate for the ‘true name’ of modernity, capturing its origin and essence (‘Renaissance’ and ‘Industrial Revolution’ are others). Between ‘enlightenment’ and ‘progressive enlightenment’ there is only an elusive difference, because illumination takes time – and feeds on itself, because enlightenment is self-confirming, its revelations ‘self-evident’, and because a retrograde, or reactionary, ‘dark enlightenment’ amounts almost to intrinsic contradiction. To become enlightened, in this historical sense, is to recognize, and then to pursue, a guiding light.

There were ages of darkness, and then enlightenment came. Clearly, advance has demonstrated itself, offering not only improvement, but also a model. Furthermore, unlike a renaissance, there is no need for an enlightenment to recall what was lost, or to emphasize the attractions of return. The elementary acknowledgement of enlightenment is already Whig history in miniature.

Once certain enlightened truths have been found self-evident, there can be no turning back, and conservatism is pre-emptively condemned – predestined — to paradox. F. A. Hayek, who refused to describe himself as a conservative, famously settled instead upon the term ‘Old Whig’, which – like ‘classical liberal’ (or the still more melancholy ‘remnant’) – accepts that progress isn’t what it used to be. What could an Old Whig be, if not a reactionary progressive? And what on earth is that?

Of course, plenty of people already think they know what reactionary modernism looks like, and amidst the current collapse back into the 1930s their concerns are only likely to grow. Basically, it’s what the ‘F’ word is for, at least in its progressive usage. A flight from democracy under these circumstances conforms so perfectly to expectations that it eludes specific recognition, appearing merely as an atavism, or confirmation of dire repetition.

Still, something is happening, and it is – at least in part – something else. One milestone was the April 2009 discussion hosted at Cato Unbound among libertarian thinkers (including Patri Friedman and Peter Thiel) in which disillusionment with the direction and possibilities of democratic politics was expressed with unusual forthrightness. Thiel summarized the trend bluntly: “I no longer believe that freedom and democracy are compatible.”

In August 2011, Michael Lind posted a democratic riposte at Salon, digging up some impressively malodorous dirt, and concluding:

The dread of democracy by libertarians and classical liberals is justified. Libertarianism really is incompatible with democracy. Most libertarians have made it clear which of the two they prefer. The only question that remains to be settled is why anyone should pay attention to libertarians.

Lind and the ‘neo-reactionaries’ seem to be in broad agreement that democracy is not only (or even) a system, but rather a vector, with an unmistakable direction. Democracy and ‘progressive democracy’ are synonymous, and indistinguishable from the expansion of the state. Whilst ‘extreme right wing’ governments have, on rare occasions, momentarily arrested this process, its reversal lies beyond the bounds of democratic possibility. Since winning elections is overwhelmingly a matter of vote buying, and society’s informational organs (education and media) are no more resistant to bribery than the electorate, a thrifty politician is simply an incompetent politician, and the democratic variant of Darwinism quickly eliminates such misfits from the gene pool. This is a reality that the left applauds, the establishment right grumpily accepts, and the libertarian right has ineffectively railed against. Increasingly, however, libertarians have ceased to care whether anyone is ‘pay[ing them] attention’ – they have been looking for something else entirely: an exit.

It is a structural inevitability that the libertarian voice is drowned out in democracy, and according to Lind it should be. Ever more libertarians are likely to agree. ‘Voice’ is democracy itself, in its historically dominant, Rousseauistic strain. It models the state as a representation of popular will, and making oneself heard means more politics. If voting as the mass self-expression of politically empowered peoples is a nightmare engulfing the world, adding to the hubbub doesn’t help. Even more than Equality-vs-Liberty, Voice-vs-Exit is the rising alternative, and libertarians are opting for voiceless flight. Patri Friedman remarks: “we think that free exit is so important that we’ve called it the only Universal Human Right.”

For the hardcore neo-reactionaries, democracy is not merely doomed, it is doom itself. Fleeing it approaches an ultimate imperative. The subterranean current that propels such anti-politics is recognizably Hobbesian, a coherent dark enlightenment, devoid from its beginning of any Rousseauistic enthusiasm for popular expression. Predisposed, in any case, to perceive the politically awakened masses as a howling irrational mob, it conceives the dynamics of democratization as fundamentally degenerative: systematically consolidating and exacerbating private vices, resentments, and deficiencies until they reach the level of collective criminality and comprehensive social corruption. The democratic politician and the electorate are bound together by a circuit of reciprocal incitement, in which each side drives the other to ever more shameless extremities of hooting, prancing cannibalism, until the only alternative to shouting is being eaten.

Where the progressive enlightenment sees political ideals, the dark enlightenment sees appetites. It accepts that governments are made out of people, and that they will eat well. Setting its expectations as low as reasonably possible, it seeks only to spare civilization from frenzied, ruinous, gluttonous debauch. From Thomas Hobbes to Hans-Hermann Hoppe and beyond, it asks: How can the sovereign power be prevented – or at least dissuaded — from devouring society? It consistently finds democratic ‘solutions’ to this problem risible, at best.

Hoppe advocates an anarcho-capitalist ‘private law society’, but between monarchy and democracy he does not hesitate (and his argument is strictly Hobbesian):

As a hereditary monopolist, a king regards the territory and the people under his rule as his personal property and engages in the monopolistic exploitation of this "property." Under democracy, monopoly and monopolistic exploitation do not disappear. Rather, what happens is this: instead of a king and a nobility who regard the country as their private property, a temporary and interchangeable caretaker is put in monopolistic charge of the country. The caretaker does not own the country, but as long as he is in office he is permitted to use it to his and his protégés’ advantage. He owns its current use – usufruct– but not its capital stock. This does not eliminate exploitation. To the contrary, it makes exploitation less calculating and carried out with little or no regard to the capital stock. Exploitation becomes shortsighted and capital consumption will be systematically promoted.

Political agents invested with transient authority by multi-party democratic systems have an overwhelming (and demonstrably irresistible) incentive to plunder society with the greatest possible rapidity and comprehensiveness. Anything they neglect to steal – or ‘leave on the table’ – is likely to be inherited by political successors who are not only unconnected, but actually opposed, and who can therefore be expected to utilize all available resources to the detriment of their foes. Whatever is left behind becomes a weapon in your enemy’s hand. Best, then, to destroy what cannot be stolen. From the perspective of a democratic politician, any type of social good that is neither directly appropriable nor attributable to (their own) partisan policy is sheer waste, and counts for nothing, whilst even the most grievous social misfortune – so long as it can be assigned to a prior administration or postponed until a subsequent one – figures in rational calculations as an obvious blessing. The long-range techno-economic improvements and associated accumulation of cultural capital that constituted social progress in its old (Whig) sense are in nobody’s political interest. Once democracy flourishes, they face the immediate threat of extinction.

Civilization, as a process, is indistinguishable from diminishing time-preference (or declining concern for the present in comparison to the future). Democracy, which both in theory and evident historical fact accentuates time-preference to the point of convulsive feeding-frenzy, is thus as close to a precise negation of civilization as anything could be, short of instantaneous social collapse into murderous barbarism or zombie apocalypse (which it eventually leads to). As the democratic virus burns through society, painstakingly accumulated habits and attitudes of forward-thinking, prudential, human and industrial investment, are replaced by a sterile, orgiastic consumerism, financial incontinence, and a ‘reality television’ political circus. Tomorrow might belong to the other team, so it’s best to eat it all now.

Winston Churchill, who remarked in neo-reactionary style that “the best argument against democracy is a five-minute conversation with the average voter“ is better known for suggesting “that democracy is the worst form of government except all the others that have been tried.” Whilst never exactly conceding that “OK, democracy sucks (in fact, it really sucks), but what’s the alternative?” the implication is obvious. The general tenor of this sensibility is attractive to modern conservatives, because it resonates with their wry, disillusioned acceptance of relentless civilizational deterioration, and with the associated intellectual apprehension of capitalism as an unappetizing but ineliminable default social arrangement, which remains after all catastrophic or merely impractical alternatives have been discarded. The market economy, on this understanding, is no more than a spontaneous survival strategy that stitches itself together amidst the ruins of a politically devastated world. Things will probably just get worse forever. So it goes.

So, what is the alternative? (There’s certainly no point trawling through the 1930s for one.) “Can you imagine a 21st-century post-demotist society? One that saw itself as recovering from democracy, much as Eastern Europe sees itself as recovering from Communism?” asks supreme Sith Lord of the neo-reactionaries, Mencius Moldbug. “Well, I suppose that makes one of us.”

Moldbug’s formative influences are Austro-libertarian, but that’s all over. As he explains:

… libertarians cannot present a realistic picture of a world in which their battle gets won and stays won. They wind up looking for ways to push a world in which the State’s natural downhill path is to grow, back up the hill. This prospect is Sisyphean, and it’s understandable why it attracts so few supporters.

His awakening into neo-reaction comes with the (Hobbesian) recognition that sovereignty cannot be eliminated, caged, or controlled. Anarcho-capitalist utopias can never condense out of science fiction, divided powers flow back together like a shattered Terminator, and constitutions have exactly as much real authority as a sovereign interpretative power allows them to have. The state isn’t going anywhere because — to those who run it — it’s worth far too much to give up, and as the concentrated instantiation of sovereignty in society, nobody can make it do anything. If the state cannot be eliminated, Moldbug argues, at least it can be cured of democracy (or systematic and degenerative bad government), and the way to do that is to formalize it. This is an approach he calls ‘neo-cameralism’.

To a neocameralist, a state is a business which owns a country. A state should be managed, like any other large business, by dividing logical ownership into negotiable shares, each of which yields a precise fraction of the state’s profit. (A well-run state is very profitable.) Each share has one vote, and the shareholders elect a board, which hires and fires managers.

This business’s customers are its residents. A profitably-managed neocameralist state will, like any business, serve its customers efficiently and effectively. Misgovernment equals mismanagement.

Firstly, it is essential to squash the democratic myth that a state ‘belongs’ to the citizenry. The point of neo-cameralism is to buy out the real stakeholders in sovereign power, not to perpetuate sentimental lies about mass enfranchisement. Unless ownership of the state is formally transferred into the hands of its actual rulers, the neo-cameral transition will simply not take place, power will remain in the shadows, and the democratic farce will continue.

So, secondly, the ruling class must be plausibly identified. It should be noted immediately, in contradistinction to Marxist principles of social analysis, that this is not the ‘capitalist bourgeoisie’. Logically, it cannot be. The power of the business class is already clearly formalized, in monetary terms, so the identification of capital with political power is perfectly redundant. It is necessary to ask, rather, who do capitalists pay for political favors, how much these favors are potentially worth, and how the authority to grant them is distributed. This requires, with a minimum of moral irritation, that the entire social landscape of political bribery (‘lobbying’) is exactly mapped, and the administrative, legislative, judicial, media, and academic privileges accessed by such bribes are converted into fungible shares. Insofar as voters are worth bribing, there is no need to entirely exclude them from this calculation, although their portion of sovereignty will be estimated with appropriate derision. The conclusion of this exercise is the mapping of a ruling entity that is the truly dominant instance of the democratic polity. Moldbug calls it the Cathedral.

The formalization of political powers, thirdly, allows for the possibility of effective government. Once the universe of democratic corruption is converted into a (freely transferable) shareholding in gov-corp. the owners of the state can initiate rational corporate governance, beginning with the appointment of a CEO. As with any business, the interests of the state are now precisely formalized as the maximization of long-term shareholder value. There is no longer any need for residents (clients) to take any interest in politics whatsoever. In fact, to do so would be to exhibit semi-criminal proclivities. If gov-corp doesn’t deliver acceptable value for its taxes (sovereign rent), they can notify its customer service function, and if necessary take their custom elsewhere. Gov-corp would concentrate upon running an efficient, attractive, vital, clean, and secure country, of a kind that is able to draw customers. No voice, free exit.

… although the full neocameralist approach has never been tried, its closest historical equivalents to this approach are the 18th-century tradition of enlightened absolutism as represented by Frederick the Great, and the 21st-century nondemocratic tradition as seen in lost fragments of the British Empire such as Hong Kong, Singapore and Dubai. These states appear to provide a very high quality of service to their citizens, with no meaningful democracy at all. They have minimal crime and high levels of personal and economic freedom. They tend to be quite prosperous. They are weak only in political freedom, and political freedom is unimportant by definition when government is stable and effective.

In European classical antiquity, democracy was recognized as a familiar phase of cyclical political development, fundamentally decadent in nature, and preliminary to a slide into tyranny. Today this classical understanding is thoroughly lost, and replaced by a global democratic ideology, entirely lacking in critical self-reflection, that is asserted not as a credible social-scientific thesis, or even as a spontaneous popular aspiration, but rather as a religious creed, of a specific, historically identifiable kind:

… a received tradition I call Universalism, which is a nontheistic Christian sect. Some other current labels for this same tradition, more or less synonymous, are progressivism, multiculturalism, liberalism, humanism, leftism, political correctness, and the like. … Universalism is the dominant modern branch of Christianity on the Calvinist line, evolving from the English Dissenter or Puritan tradition through the Unitarian, Transcendentalist, and Progressive movements. Its ancestral briar patch also includes a few sideways sprigs that are important enough to name but whose Christian ancestry is slightly better concealed, such as Rousseauvian laicism, Benthamite utilitarianism, Reformed Judaism, Comtean positivism, German Idealism, Marxist scientific socialism, Sartrean existentialism, Heideggerian postmodernism, etc, etc, etc. … Universalism, in my opinion, is best described as a mystery cult of power. … It’s as hard to imagine Universalism without the State as malaria without the mosquito. … The point is that this thing, whatever you care to call it, is at least two hundred years old and probably more like five. It’s basically the Reformation itself. … And just walking up to it and denouncing it as evil is about as likely to work as suing Shub-Niggurath in small-claims court.

To comprehend the emergence of our contemporary predicament, characterized by relentless, totalizing, state expansion, the proliferation of spurious positive ‘human rights’ (claims on the resources of others backed by coercive bureaucracies), politicized money, reckless evangelical ‘wars for democracy’, and comprehensive thought control arrayed in defense of universalistic dogma (accompanied by the degradation of science into a government public relations function), it is necessary to ask how Massachusetts came to conquer the world, as Moldbug does. With every year that passes, the international ideal of sound governance finds itself approximating more closely and rigidly to the standards set by the Grievance Studies departments of New England universities. This is the divine providence of the ranters and levelers, elevated to a planetary teleology, and consolidated as the reign of the Cathedral.

The Cathedral has substituted its gospel for everything we ever knew. Consider just the concerns expressed by America’s founding fathers (compiled by ‘Liberty-clinger’, comment #1, here):

A democracy is nothing more than mob rule, where 51% of the people may take away the rights of the other 49%. — Thomas Jefferson

Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote!— Benjamin Franklin

Democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide. — John Adams

Democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their death. — James Madison

We are a Republican Government, Real liberty is never found in despotism or in the extremes of democracy…it has been observed that a pure democracy if it were practicable would be the most perfect government. Experience has proved that no position is more false than this. The ancient democracies in which the people themselves deliberated never possessed one good feature of government. Their very character was tyranny…— Alexander Hamilton

More on voting with your feet (and the incandescent genius of Moldbug), next …
Added Note (March 7):
Don’t trust the attribution of the ‘Benjamin Franklin’ quote, above. According to Barry Popik, the saying was probably invented by James Bovard, in 1992. (Bovard remarks elsewhere: “There are few more dangerous errors in political thinking than to equate democracy with liberty.”)

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Political Humor

The things that really matter

The prospect of Technological Singularity, by rendering the near future unimaginable, announces “the end of science fiction.” This is not, however, an announcement that everyone is compelled to heed. Among the Odysseans who have deliberately deafened themselves to this Sirens’ call, none have proceeded more boldly than Charles Stross, whose Singularity Sky is not only a science fiction novel, but a space opera, inhabiting a literary universe obsolesced by Einstein long before I.J. Good completed its demolition. Not only recognizable humans, but inter-stellar space-faring humans! Has the man no shame?

Stross relies heavily upon humor to sustain his audacious anachronism, and in Singularity Sky he puts anachronism to explicit work. The most consistently comic element in the novel is a reconstruction of 19th century Russian politics on the planet of Rochard’s World, where the Quasi-Czarist luddism of the New Republic is threatened by a cabal of revolutionaries whose mode of political organization and rhetoric is of a recognizable (and even parodic) Marxist-Leninist type. These rebels, however, are ideologically hard-core libertarian, seeking to overthrow the regime and install a free-market anarchist utopia, an objective that is seamlessly reconciled with materialist dialectics, appeals to revolutionary discipline, and invocations of fraternal comradeship.

It’s a joke that works well, because its transparent absurdity co-exists with a substantial plausibility. Libertarians are indeed (not infrequently) crypto-Abrahamic atheistic materialists, firmly attached to deterministic economism and convictions of historical inevitability, leading to lurid socio-economic prophecies of a distinctively eschatological kind. When libertarianism is married to singularitarian techno-apocalypticism, the comic potential, and Marxist resonances, are re-doubled. Stross hammers home the point by naming his super-intelligent AI ‘Eschaton’.

Most hilarious of all (in a People’s Front of Judea versus Judean People’s Front kind of way) is the internecine factionalism besetting a fringe political movement whose utter marginality nevertheless leaves room for bitter mutual recrimination, supported by baroque conspiracy-mongering. This isn’t really a Stross theme, but it’s an American libertarian specialty, exhibited in the ceaseless agitprop conducted by the Rothbardian ultras of LewRockwell.com and the Mises Institute against the compromised ‘Kochtopus’ (Reason and Cato) — the animating Stalin-Trotsky split of the free-market ‘right’. Anyone looking for a ringside seat at a recent bout can head to the comment threads here and here.

More seriously, Stross’ libertarian revolutionaries are committed whole-heartedly to the Marxian assertion, once considered foundational, that productivity is drastically inhibited by the persistence of antiquated social arrangements. The true historical right of the revolution, indistinguishable from its practical inevitability and irreversibility, is its alignment with the liberation of the forces of production from sclerotic institutional limitations. Production of the future, or futuristic production, demands the burial of traditional society. That which exists – the status quo – is a systematic suppression, rigorously measurable or at least determinable in economic terms, of what might be, and wants to be. Revolution would sever the shackles of ossified authority, setting the engines of creation howling. It would unleash a techno-economic explosion to shake the world, still more profoundly than the ‘bourgeois’ industrial revolution did before (and continues to do). Something immense would escape, never to be caged again.

That is the Old Faith, the Paleo-Marxist creed, with its snake-handling intensity and intoxicating materialist promise. It’s a faith the libertarian comrades of Rochard’s World still profess, with reason, and ultimate vindication, because the historical potential of the forces of production has been updated.

What could matter do, that it is not presently permitted to do? This is a question that Marxists (of the ‘Old Religion’) once asked. Their answer was: to enter into processes of production that are freed from the constraining requirements of private profitability. Once ‘freed’ in this way, however, productivity staggered about aimlessly, fell asleep, or starved. Libertarians laughed, and argued for a reversal of the formula: free production to enter into self-escalating circuits of private profitability, without political restraint. They were mostly ignored (and always will be).

If neither faction of the terrestrial Marxo-Libertarian revolutionary faith have been able to re-ignite the old fire, it is because they have drifted out of the depths of the question (‘what could matter do?’). It is matter that makes a revolution. The heroes of the industrial revolution were not Jacobins, but boiler makers.

“Communism is Soviet power plus the electrification of the whole country,” Lenin proclaimed, but electrification was permitted before the Bolsheviks took its side, and it has persisted since the Soviets’ departure. Unless political transformation coincides with the release of a previously suppressed productive potential, it remains essentially random, and reversible. Mere regime change means nothing, unless something happens that was not allowed to happen before. (Social re-shufflings do not amount to happenings except in the minds of ideologues, and ideologues die.)

Libertarians are like Leninists in this way too: anything they ever manage to gain can (and will) be taken away from them. They already had a constitutional republic in America once (and what happened to that?). Britain had a rough approximation of laissez-faire capitalism, before losing it. Does anybody really think liberalism is going to get more ‘classical’ than that anytime soon? Trusting mass democracy to preserve liberty is like hiring Hannibal Lecter as a baby sitter. Social freedoms might as well be designed to die. There’s not the slightest reason to believe that history is on their side. Industrial revolution, in contrast, is forever.

On Rochard’s World they know exactly what matter could do that is forbidden: nano-scale mechanical self-replication and intelligent self-modification. That’s what the ‘material base’ of a revolution looks like, even if it’s sub-microscopic (or especially because it is), and when it reaches the limits of social tolerance it describes precisely what is necessary, automatically. Once it gets out of the box, it stays out.

Stross is sufficiently amused by the unleashed technosphere to call its space-faring avatar ‘the Festival’. It contacts the libertarian revolutionaries of Rochard’s World by bombarding the planet with telephones, and anyone who picks one up hears the initial bargaining position: ‘Entertain us.’ Funniest of all, when the neo-Czarist authorities try to stop it, they’re eaten.

[Tomb]

Bits and Pieces

P2P or not 2P, that is the question

As the US dollar reaches depths of debasement that would have stretched the imagination of Caligula, people have been searching for alternative candidates for a global reserve currency. The problem is formidable. The Euro and Japanese Yen face comparable calamities of their own (mixing debt crisis and demographic collapse), the Chinese Yuan is non-convertible, and the IMF’s hybrid Special Drawing Rights (SDRs) merely bundle together a group of troubled fiat currencies under a technocratic acronym.

Precious metals enthusiasts have an obvious option, and one that is already being spontaneously exercised. Yet whilst growing numbers will no doubt cling to gold and silver as financial lifeboats, their wider use as currency (as opposed to stores of value) is obstructed by an intimidating range of technical and political problems. They are not digitally transferable without complicated mediating instruments, and they remain exposed to extreme political risk – financial crises have been regularly accompanied by seizures and controls directed at private precious metals holdings and transactions.

To overcome such problems, a currency would need to be structurally immunized against the depredations of central bankers, to share the deflationary bias of precious metals, and to participate fully in the technical trend towards mathematical abstraction and electronic communicability, whilst also enjoying strong cryptographic protection against surveillance, expropriation, and fraud. Astonishingly, such a currency seems already to exist. Its name is ‘Bitcoin’.

The twin, interactive drivers of modernity – commerce and technology – come together in Bitcoin with unprecedented fusional intensity. This is a currency that is simultaneously an open source computer program, entirely native to cyberspace, and a financial innovation, conducting a real-time experiment that is at once social, technical, and economic. Built on the foundations of public key encryption (PKE), it creates a peer-to-peer open network – without any controlling node or discretionary human management – to sustain a radically decentralized monetary system.

Originally devised by Satoshi Nakamoto (whose outline paper can be found here), Bitcoin disconnects trust from authority. In particular, it is designed to overcome the problem of double spending.

Because digital ‘goods’ can be replicated at near-zero cost, they are economically defined as ‘non-rivalrous’. If you sell me a computer, I now own it, and you do not. As with all rivalrous goods, ownership implies exclusion. If you sell me a computer program, on the other hand, there is no reason to assume that you have not kept a copy for yourself, or that the ‘same’ program could not be sold to multiple purchasers. Such non-rivalrous goods pose numerous intriguing economic questions, but one thing is entirely clear: non-rivalrous money is an impossibility. Without scarcity, or exclusive exchange, the very idea of monetary quantity loses all sense, as does monetary value, spending and investment, and consumer choice.

The Bitcoin algorithm makes a digital currency rivalrous, and thus effective as money, without recourse to any administrative authority. It does so by initiating an automatic or spontaneous ecology, in which computers on the network authenticate Bitcoin exchanges as a side-effect of ‘mining’ for new coins. Nodes earn new coins, at a diminishing rate, by solving a difficult digital puzzle – accessible only to a brute force, computationally-intensive approach – and thus exhibiting proof-of-work. This test screens the system from malicious interventions, by establishing a practically insurmountable barrier to any user who seeks to falsify the record of exchanges. Competent discussions can be found here, here, and (most diversely) here.

This problem, and solution, is very far from arbitrary. It is precisely because existing fiat currencies have taken on disturbingly non-rivalrous characteristics that alarm about currency debasement has reached such a pitch of exasperation. When a central bank, in the course of running a typically loose monetary policy, can simply speed up the printing presses or (still worse) the electronic equivalent, the integrity of the money supply is devastated at the root. Bitcoin rigorously extirpates such ruinous discretion from its system, by instantiating a theory of sound money as a precisely and publicly defined electronic experiment.

Unsurprisingly, the Bitcoin monetary aggregate is modeled on precious metal, generated by miners from a finite global reserve, with rising extraction costs. The reward for coin mining falls over time at a logarithmic (Zenonian) rate, towards a limit of fractionally under 21,000,000 BTC. Each Bitcoin can be subdivided to eight decimal places, to a total of over two quadrillion (2,100,000,000,000,000) fragments, equivalent to 210,000 Bitcoin ‘quanta’ for each of the 10 billion people making up the earth’s anticipated climax human population. A Bitcoin quantum (0.00000001 BTC) is named a ‘Satoshi’ (after Satoshi Nakamoto), although amendment to the system allowing for further sub-division at some future stage is not foreclosed. (For the total size of the Bitcoin economy look here.)

Bitcoin is programmed for deflation (of a sort). This is a source of delight to hard money types, and of outrage to those in the loose money (inflationary) camp. As an experiment, the great merit of Bitcoin is to raise this antagonism beyond the level of reciprocal polemics, to that of potential historical evidence — and real choice. Austrolibertarians have long claimed that free money systems are biased to deflation, and that central banking encourages inflation as a surreptitious mechanism of economic expropriation, to ultimately disastrous effect. Keynesians, in contrast, deplore deflation as an economic disease that suppresses productive investment and employment. Empirical testing could soon be possible.

Numerous other questions, theoretical and practical, present themselves. At the practical level, such questions work themselves out through speculative volatility, institutional adaptations, and technical challenges. Since the entire Bitcoin economy remains very small, relatively modest shifts in economic behavior yield wild swings in BTC value, including bubble-like surges, precipitous collapses, incontinent hype, and extravagant accusations. Despite the resilience of the core algorithm, the peripheral institutions supporting the Bitcoin economy remain vulnerable to theft, fraud, and malicious interventions. As with any revolutionary experiment, the developmental trajectory of Bitcoin is likely to be tumultuous and highly unpredictable.

The theoretical questions can be entertained more calmly. The most important of these concern the essential nature of money, and its future. Does Bitcoin successfully simulate the significant features of precious metals, such that their substance can be discarded from the monetary equation as irrelevant dross? How powerful are the forces leading to monetary convergence? Will first-mover advantage ‘lock-in’ Bitcoin at the expense of later alternatives? Or will multiple money systems – perhaps ever more heterogeneous ones – continue to co-exist? Is Bitcoin merely one stage in an open-ended sequence of innovative money systems, or does it capture the essential features of money quite definitively (leaving room only for incremental improvements, or tinkering)?

Supporters of the monetary status quo might insist on a further, more derisive line of questioning: is Bitcoin a dead end, an irrelevance, or a deluding libertarian cipherpunk fantasy, to be judged eventually as something akin to a hoax? Which is to note that, ultimately, the largest questions will be political, and the most heated discussions already are.

Can governments afford to tolerate unmanaged, autonomous currencies? We’ll see.

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Nemesis

Betting everything that the casino will burn down

Harold Camping’s Family Radio warned its listeners to expect some unusually dramatic spring events:

By God’s grace and tremendous mercy, He is giving us advanced warning as to what He is about to do. On Judgment Day, May 21st, 2011, this 5-month period of horrible torment will begin for all the inhabitants of the earth. It will be on May 21st that God will raise up all the dead that have ever died from their graves. Earthquakes will ravage the whole world as the earth will no longer conceal its dead (Isaiah 26:21). People who died as saved individuals will experience the resurrection of their bodies and immediately leave this world to forever be with the Lord. Those who died unsaved will be raised up as well, but only to have their lifeless bodies scattered about the face of all the earth. Death will be everywhere.

Clearly, prediction can be a perilous business.

Yet, as Karl Popper noted with respect to scientific theories, falsifiable predictions also serve a valuable – even indispensable – purpose. Any model of reality that is able to make specific forecasts earns a credibility that vaguer ‘world-views’ are not entitled to, although at the price of radical vulnerability to devaluation, should its anticipations prove unfounded.

Much like Marxism, the Libertarianism of Austrian School economic theory combines historical expectations (of greater or lesser exactitude) with a core of philosophical, political, and even emotional commitment that is comparatively immunized against empirical refutation. Both Marxism and Austrolibertarianism are large, highly variegated ideologies, with complicated histories, expressing profound discontent with the dominant order of the modern world, and prone to utopian temptations. Both are (often indignant) moral-political doctrines extrapolated in very different ways from Lockean natural-law property rights (to one’s own body and its productive activity). Both attract a wide spectrum of followers, from sober scholars to wild-eyed revolutionary advocates, who see in the unfolding drama of history the possibility of definitive vindication (much as the faithful of millenarian theologies have always done, and – as the Camping case demonstrates – continue to do).

The Western roots of both Marxism and Austrolibertarianism reach down into Jewish redemptive eschatology and Greek tragedy (it is perhaps noteworthy that Karl Marx and Ludwig von Mises shared intriguing biographical features, including highly-assimilated German-Jewish backgrounds, steeped in European high-culture). Statist-Capitalism is portrayed as the Satanic-Promethean antihero of an epic narrative, describing a sustained violation of justice that finds itself held accountable in a final apocalyptic moment giving meaning to history, and a seemingly unconstrained hubris that meets its eventual nemesis. The high is brought low, through a crisis whose mere prospect offers overwhelming psychological satisfaction, and thus extraordinary emotional attachment.

Since the 1980s, Marxism has tended to retreat from the predictive mode. Its enthusiasts no doubt remain committed to the prospect of a terminal crisis of capitalism, perhaps even an imminent one, but Marxist prophecy seems timorous and uncertain today, even under conditions of unusual global economic dislocation. The Austrolibertarians, on the other hand, are being drawn out onto a prophetic branch – possibly despite themselves – with incalculable consequences for their future credibility. Their fundamental assumption, that governments are by essence incompetent and unqualified to run the monetary systems required by advanced economies, leads them to an almost inescapable conclusion: hyperinflation.

Hyperinflation might be the sole economic example of a true singularity: a hyperbolic approach to infinity (in finite time), producing a punctual discontinuity. When hyperinflation strikes, it escalates rapidly towards a hard limit, where money dies. In the economic sphere, it is the unsurpassable example of regime incompetence. How could Austrolibertarians – whose apocalyptic inclinations are matched only by their disdain for political authority – not be irresistibly attracted to it?

John Williams’ Shadow Government Statistics blog is not easily characterized as hardcore Austrolibertarian site (Williams describes himself as a “conservative Republican with a libertarian bent”), but the prognosis outlined carefully in its Hyperinflation Special Report (2011) exemplifies the tendency to predict imminent nemesis for command-control monetary policy. Williams subscribes wholeheartedly to the Austrian certitude that ‘kicking the can’ (up the road) – the central feature of Keynesian macroeconomic policy – guarantees eventual catastrophe, and ‘eventual’ just got a whole lot closer. Nemesis is coming due.

Both the federal government and the Federal Reserve have demonstrated that they will not tolerate a systemic collapse and a great deflation, as seen during the Great Depression. … those risks are being fought, and will be fought, at any cost that can be covered by the unlimited creation of new money. It was a devil’s choice, but the choice has been made. Extreme systemic interventions, and formal measures to debase the U.S. dollar through the effective unlimited creation of money to cover systemic needs and the government’s obligations, pushed the timing of a systemic collapse — threatened in September 2008 — several years into the future. The cost of instant salvation, though, was inflation. Eventual systemic collapse is unavoidable at this point, but it will be in a hyperinflationary great depression, instead of a deflationary one.

Williams isn’t afraid to lock down some dates, with 2014 proposed as the outer limit of possibility – and sooner is likelier:

At present, it is the Obama Administration that has to look at abandoning the debt standard (hyperinflation) and starting fresh. Yet, the Administration and many in Congress have taken recent actions suggestive of hoping only to push off the day of reckoning for the economic and systemic solvency crises until after the 2012 presidential election. They do not have that time.

As he elaborates:

Actions already taken to contain the systemic solvency crisis and to stimulate the economy (which have not worked), plus what should be renewed devastating impact of unexpected ongoing economic contraction on tax revenues, have set the stage for a much earlier crisis. Risks are high for the hyperinflation beginning to break in the months ahead; it likely cannot be avoided beyond 2014; it already may be beginning to unfold.

It is in this environment of rapid fiscal deterioration and related massive funding needs that the U.S. dollar remains open to a rapid and massive decline, along with a dumping of domestic- and foreign-held U.S. Treasuries. The Federal Reserve would be forced to monetize further significant sums of Treasury debt, triggering the early phases of a monetary inflation.

Under such circumstances, current multi-trillion dollar deficits would feed rapidly into a vicious, self-feeding cycle of currency debasement and hyperinflation. With the economy already in depression, hyperinflation kicking in quickly would push the economy into a great depression, since disruptions from uncontained inflation are likely to bring normal commercial activity to a halt.

What happens next is anyone’s speculation.

The hyperinflationary destruction of the world’s reserve currency would be a decisive event. The mere possibility of such an occurrence divides the set of potential futures between two tracks. On one, in which the US Dollar (FRN) survives, Austrolibertarian alarmism is humiliated, the economic competence of the US government is – broadly speaking – confirmed, and the principles of fiat currency production and central banking are reinforced, along with their natural supporters among neo-Keynesian anti-deflationary macroeconomists. On the other, the Austrolibertarians dance in the ashes of the dollar, precious metals replace fiat paper, central banks come under withering political attack, and the economic role of government in general is subjected to a major onslaught by energized free-marketeers. At least, that’s what a just universe, or a fair bet, would look like.

Betting on a just universe could be the big mistake, however – and that’s a temptation the morally-charged Austrolibertarian grand narrative finds hard to avoid. In a morally indifferent universe, Nemesis is non-redemptive, and the entire bet is an inverse Pascal’s wager, with downside on every side. Make a brave prediction of hyperinflation, and you either lose, or you lose – gloating neo-Keynesians, greater indebtedness, and fatter government on the one hand, or some yet unconsolidated species of neo-totalitarian horror on the other. (It’s noteworthy that a tour through the history of post-hyperinflationary regimes doesn’t pass through many examples of laissez-faire commercial republics.)

So is the dollar going to die? — Quite possibly. Then things could really turn nasty – more Harold Camping than Ludwig von Mises: “lifeless bodies scattered about the face of all the earth. Death will be everywhere.”

[Tomb]