And what an ignorant little girl she'll think me for asking! No, it'll never do to ask: perhaps I shall see it written up somewhere.
One of the most surprising things, to me, was the amount of finance, economics, and psychology required to get a grasp of what at first glance seems to be a purely technical system — a computer network. To paraphrase a little guy with hairy feet: “It’s a dangerous business, Frodo, stepping into Bitcoin. You read the whitepaper, and if you don’t keep your feet, there’s no knowing where you might be swept off to.”
To understand a new monetary system, you have to get acquainted with the old one. I began to realize very soon that the amount of financial education I enjoyed in the educational system was essentially zero.
Like a five-year-old, I began to ask myself a lot of questions: How does the banking system work? How does the stock market work? What is fiat money? What is regular money? Why is there so much debt? How much money is actually printed, and who decides that?
After a mild panic about the sheer scope of my ignorance, I found reassurance in realizing that I was in good company.
“Isn’t it ironic that Bitcoin has taught me more about money than all these years I’ve spent working for financial institutions? …including starting my career at a central bank” aarontaycc
“I’ve learned more about finance, economics, technology, cryptography, human psychology, politics, game theory, legislation, and myself in the last three months of crypto than the last three and a half years of college” bitcoindunny
These are just two of the many confessions all over twitter. Bitcoin, as was explored in Lesson 1, is a living thing. Mises argued that economics also is a living thing. And as we all know from personal experience, living things are inherently difficult to understand.
“A scientific system is but one station in an endlessly progressing search for knowledge. It is necessarily affected by the insufficiency inherent in every human effort. But to acknowledge these facts does not mean that present-day economics is backward. It merely means that economics is a living thing — and to live implies both imperfection and change.” Ludwig von Mises
We all read about various financial crises in the news, wonder about how these big bailouts work and are puzzled over the fact that no one ever seems to be held accountable for damages which are in the trillions. I am still puzzled, but at least I am starting to get a glimpse of what is going on in the world of finance.
Some people even go as far as to attribute the general ignorance on these topics to systemic, willful ignorance. While history, physics, biology, math, and languages are all part of our education, the world of money and finance surprisingly is only explored superficially, if at all. I wonder if people would still be willing to accrue as much debt as they currently do if everyone would be educated in personal finance and the workings of money and debt. Then I wonder how many layers of aluminum make an effective tinfoil hat. Probably three.
“Those crashes, these bailouts, are not accidents. And neither is it an accident that there is no financial education in school. […] It’s premeditated. Just as prior to the Civil War it was illegal to educate a slave, we are not allowed to learn about money in school.” Robert Kiyosaki
Like in The Wizard of Oz, we are told to pay no attention to the man behind the curtain. Unlike in The Wizard of Oz, we now have real wizardry: a censorship-resistant, open, borderless network of value-transfer. There is no curtain, and the magic is visible to anyone.
Bitcoin taught me to look behind the curtain and face my financial ignorance.