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Bitcoin’s Decentralized Reserves
How THE HODL Will Lead To Sound Commercial Banking
In the wake of the Crypto World exchange/banking debacle, it is time to revisit two old sages and personal mentors, Edward C. Harwood and Richard Timberlake.
A generation ago E. C. Harwood described in layman's terms The Lost Art of Commercial Banking.
Just before his passing Richard Timberlake concluded his epic work Gold, The Real Bills Doctrine, and The Fed with Thomas M. Humphrey explaining how fixed gold reserves led to the deepening of The Great Depression.
My goal here is to briefly describe to the average layman how decentralized personal HODLS will develop sound commercial banking in local market communities from the bottom up rather than the top down, for it is through the non-banking laymen that sound banking will be relearned one exchange at a time.
The significance of these combined works by Harwood and Timberlake is neither a commodity standard (physical gold or digital bitcoin) nor the Real Bills Doctrine function as stand-alone sound money banking.
Self-liquidating commercial paper is sound only when the creation of non-inflationary purchasing media is subordinated to base money like gold or bitcoin.
Once the tie is broken the fiduciary money on the Real Bills Doctrine alone is subject to a self-feeding inflation or deflation loop while the commodity standard base money becomes a simple warehouse operation unable to meet the needs of a modern productive society.
The important principle here is that no matter how invalid the real bills doctrine is in its role as a basis for creating the “right” quantity of money, the system’s higher-ranking commitment to an operational gold standard completely overrides any weaknesses in that doctrine.(Timberlake Gold Standards and the Real Bills Doctrine in U.S. Monetary Policy, page 334, citations omitted)
As Ááron Sepúlveda-Cué emphasizes, “𝐌𝐨𝐧𝐞𝐲 𝐢𝐬 𝐭𝐡𝐞 𝐦𝐨𝐬𝐭 𝐭𝐫𝐚𝐝𝐚𝐛𝐥𝐞 𝐠𝐨𝐨𝐝, 𝐧𝐨𝐭 𝐭𝐡𝐞 𝐦𝐨𝐬𝐭 𝐯𝐚𝐥𝐮𝐚𝐛𝐥𝐞 𝐠𝐨𝐨𝐝.”
