The Bitcoin Standard

Ammous begins by taking us on a journey through monetary history. He explains that money wasn't invented—it emerged naturally as humans sought better ways to trade. Before money, people relied on barter, which was incredibly inefficient. Imagine a fisherman who wants bread—he needs to find a baker who wants fish. This is called the "coincidence of wants" problem.

Throughout history, various items served as money: cattle, shells, beads, salt, and eventually metals. The crucial point Ammous makes is that the market naturally selects the best form of money—the one that best serves as a medium of exchange, store of value, and unit of account.

He introduces the concept of "salability"—how easily something can be sold across time, space, and scale. Gold eventually won the monetary competition because it had superior salability: it didn't corrode, was easily divisible, and most importantly, was very difficult to produce more of (high stock-to-flow ratio).

This is perhaps the most important concept in the entire book. Ammous introduces the stock-to-flow ratio: the relationship between existing supply (stock) and new production (flow). A high ratio means new supply is small relative to existing supply—making the money "hard" and resistant to debasement.

Ammous argues that gold became money precisely because of its hardness. When people used easier monies (like copper or silver), anyone who accumulated wealth in those assets saw their savings devalued as more supply was produced. Only gold holders maintained their purchasing power across generations.

Ammous paints a compelling picture of the classical gold standard era (roughly 1871-1914) as a period of unprecedented prosperity, peace, and progress. Under the gold standard, currencies were directly convertible to gold, which limited government spending and money creation.

The gold standard didn't die a natural death—it was murdered. Ammous explains how governments, needing to finance World War I, suspended gold convertibility and began printing money. What was supposed to be temporary became permanent. In 1971, Nixon completely severed the dollar's link to gold, ushering in the pure fiat era.

Ammous introduces the Cantillon Effect: when new money is created, it doesn't enter the economy evenly. Those closest to the money spigot (banks, government contractors, large corporations) benefit first, while ordinary people only feel the rising prices later. This is a hidden mechanism of wealth inequality.

One of the book's most profound concepts is time preference—the degree to which people value present consumption over future consumption. Ammous argues that the type of money a society uses fundamentally shapes its collective time preference.

Ammous points to the decline of architecture, music, and art in the fiat era as evidence of rising time preference. Why build a cathedral that takes generations when you can throw up a glass box? Why compose symphonies when you can produce disposable pop songs? Sound money encourages building things that last.

Before Bitcoin, digital scarcity was considered impossible. Digital files can be copied infinitely at zero cost—so how could anything digital be scarce? Ammous explains how Satoshi Nakamoto solved this seemingly unsolvable problem.

Ammous makes the case that Bitcoin isn't just digital gold—it's better than gold in almost every monetary dimension. He systematically compares Bitcoin to gold across the key properties of money.

Ammous argues that Bitcoin could do for money what the internet did for information—remove gatekeepers and enable peer-to-peer exchange. Just as email disrupted postal services, Bitcoin could disrupt central banking.

In the final sections, Ammous speculates about what a world on a Bitcoin standard might look like. He's careful to note that Bitcoin's adoption path is uncertain, but he outlines several possible scenarios and their implications.

Ammous acknowledges Bitcoin's challenges: volatility, scalability, regulatory hostility, and competition from other cryptocurrencies. However, he argues that Bitcoin's core value proposition—incorruptible scarcity—cannot be replicated and gives it an insurmountable advantage.