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Weathering With You: An Agorist Perspective

If someone asked you what your favorite emotion was, how do you think you’d answer? For many people, I suspect they would answer “Happiness”, “Joy'', or some variant of exclusively positive emotion. Someone may think more meticulously and answer with “Contentment”, which while a positive emotion has a lot of nuance attached to it. However my answer to that question is what I feel others would consider more orthodox: Bittersweet. Pleasure accompanied by suffering, not exactly most people’s first pick but from my perspective pain is necessary in order to enjoy the pleasure that life gives you. Perhaps I'm over-romanticizing but there’s something to desire from looking back fondly at times where you were hurting and seeing yourself in a better place in the present. Perhaps you finally have moved on from “The one who got away” and can look back on those times with fondness. Perhaps you are sharing stories of a friend or family member at their funeral and though they may never w

The Economy Needs A Difficulty Adjustment

The world economy is experiencing what one might argue, is a death spiral. Investors are liquidating assets they once deemed valuable, only to be fooled by falsely over-valued stock prices. Such mal-investment was a result of corporate buy-backs, fudging the true valuation of companies, and attracted the attention of deep-pocket investors. Yet, the investors sold their shares, and now the corporations are expecting bailouts from the Federal Reserve. The Fed will once again try to cover up the economic wound with a greenback bandage, and blame the market crisis solely on COVID-19 rather than take responsibility for manipulating market signals.

The game theory and technology of the Bitcoin network is the most beautiful environment for a healthy, prosperous economy. This “cleansing” of inefficient miners is what’s missing in the macro world today. Taking a good, hard look at the self-healing organism that is Bitcoin, reveals how its characteristics mirror that of markets. When left unhampered by government intervention, markets find a way to self correct back to prosperity once again.

Miner Capitulation

As the third Bitcoin block reward halving approaches, there are fearful rumors that it will cause miners to drop off the network, creating a hash-rate death spiral. The misconception is that the miners will pack up shop, and call it quits because their mining rewards will be cut in half once the Halving arrives. In Bitcoin, Miners play an important role. Without miners, no new bitcoin will be minted, and transactions won’t be recorded on the block chain. The inflation schedule of mining all 21 million bitcoin world come to a roaring halt, and the Bitcoin Network would be forever doomed (quantum computing be damned). These fears a rooted in a fundamental misunderstanding of the powerful incentives that the Bitcoin network leverages.

Bitcoin mining is one of the most brutally competitive industries in the world. In order to run a mining operation, miners must make long term investments in energy contracts, warehouse builds, and ASICs (specialized computers built specifically to mine bitcoin). In order to even compete, miners are forced to think long term.

It is very similar to how businesses are incentivized to provide the highest of quality to their customers at the lowest price possible to gain maximum profits. AKA: efficiency and quality based on supply and demand. Everybody wants bitcoin, bitcoin needs to be mined, ergo the miners need to have the best quality rig possible. Therefore, the miners who aren’t up to snuff on their gear and operations will simply be cleansed and replaced by more efficient and productive mining pools. With so many eyes on the prize, it’s inevitable that Bitcoin will see another day (or rather 10ish minutes). Tick tock, next block.

Miner Capitulation is also inevitable. The miners with outdated/inferior equipment (Bitmain S9’s) preventing them from mining enough bitcoin to pay for operational expenses will be flushed out. Even if some mining pools continue work because they have the fortune of being geographically placed where electricity costs are low, a vast majority of their competitors will fold. The remaining mining operations with superior equipment (Bitmain S17’s) will continue mining because they’re able to be more efficient with their energy output. So not only will their operation carry on and prosper, these miners will be rewarded with more bitcoin (temporarily that is. More on this in a sec).

Like unplugging a hole in a hose, once the inefficient miners pack up shop, the bitcoin they would have mined has to go somewhere. That somewhere, (or someone, rather), are the top-dog efficient miners. They will be the ones carrying the Bitcoin network on its back, issuing freshly minted bitcoin and recording transactions on the ledger. Without a doubt, the more miners there are, the stronger bitcoin’s assurance and security of the network becomes, leaving no room for a death spiral. In fact, the inherent self-correcting nature programmed into Bitcoin’s code ensures a stable and secure homeostasis, should fewer miner participation occur.

The Difficulty Adjustment

Another common fud topic regarding the mining death-spiral, is that with fewer miners, it will be easy to attack the bitcoin network by validating blocks in far less than 10 minutes (the average time it takes for a block to be entirely mined and filled with transactions, and recorded on the Bitcoin Blockchain). Touters of such fud fail to recognize the difficulty adjustment, a crucial characteristic of the Bitcoin protocol which prevents this very issue. The difficulty adjustment (as self explanatory as it may sound) adjusts the level of difficulty to mine a block. This is why a block is mined on average every 10-ish minutes.

The difficulty adjustment of the Bitcoin Network is simply revealing valuable information. It’s a signal that the inefficient miners need to close up shop, and reallocate their earnings to the efficient miners. This will temporarily make mining less difficult and increase the mining rewards of the efficient miners. However, like prices in the market economy, the decrease in difficulty will be a calling to new, opportunistic miners to take part in the mining ecosystem. Then the difficulty adjustment will increase, leveling out the playing field for all mining participants. This equilibrium of ebbing and flowing should model how an untouched economy should operate.

Market Capitulation

America experienced a short lived economic depression between 1920 - 1921. Unlike the infamous Great Depression, which lasted from 1929 - 1941, the economy during the 1920 depression quickly rebounded. Why?

The great Libertarian historian and Austrian school aficionado, Tom Woods, argues that President Harding’s laissez-faire economic policies, combined with a rapid downsizing of the government, was paramount to the rapid and widespread recovery of the private-sector. Rather than have a ‘fiscal stimulus,’from the Fed, the government’s budget was nearly cut in half between 1920 and 1922. Tax rates were slashed for all income groups, and the national debt was reduced by one-third.

"Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supply around and fight the contraction.” By the late summer of 1921, signs of recovery were already visible. The following year, unemployment was back down to 6.7 percent and was only 2.4 percent by 1923.”

- Kenneth E. Weiher, Economist

Due to the Fed’s massive distortions in private markets from the demands of World War I, Woods proclaimed an equally massive correction to the distortions needed to occur as quickly as possible to realign investment and consumption with the new peacetime economic environment.

“The experience of 1920–21 reinforces the contention of genuine free-market economists that government intervention is a hindrance to economic recovery. It is not in spite of the absence of fiscal and monetary stimulus that the economy recovered…It is because those things were avoided that recovery came.”

- Thomas E. Woods Jr.

 The difficulty adjustment of markets and the economy were aloud to heal by reallocating resources and capital from failed businesses, to healthy and successful businesses.

With The Great Depression on the other hand, the government could not resist trying to fix the crisis. Under president Franklin D. Roosevelt, the economic difficulty adjustment under his administration consisted of implementing large stimulus programs and Fed bailouts of the failed, unproductive businesses. In a free-market approach, the failures would have been replaced by responsible and healthy businesses. However, the Fed bailouts further promoted bad behavior and poor economic decision making that favored heads of state-tied corporations, rather than their customers and the economy as a whole. Such statist intervention is not the the type of difficulty adjustment and correction the economy needs. Such intervention is equivalent to Satoshi coming out of hiding and moving his 1.1M BTC to bail out inefficient miners. God only knows what that would do to the bitcoin markets.

In September of 2019, before the repo market bailout, the banks tried to responsibly self-correct with their own difficulty adjustment. The banks increased their loaning rates to each other as high as 12%, because they did not want to extend any more credit (because not even the banks trust each other). Think of the scenario like this:

“Hey other banks and customers trying to take out a loan you can’t actually afford, these borrowing prices are actually this many. Yeah, that’s right. Now’s probably not the time to take out a loan. We don’t have the cash balance to cover it and don’t wanna risk trusting you on your word. Credit scores be damned.”

Once the real price of lending was revealed, the Fed stepped in to lower them back down to near 0%, and flooded the markets with liquidity. The fed’s difficulty adjustment has only one MO: print more money (or lower rates, extended credit, etc. All the same really. Raise inflation and destroy the little guy’s purchasing power).
Fed printing just encourages bad fiscal and monetary policy. When the going gets tough for corporations like Boeing who are closest to the government and the money printing spigot of the Fed, they are the ones who undeservedly get the bailout. These corporations get rewarded for wrecking their business by over leveraging their company. They are simply too big to fail, while private sector competitors don’t have a chance, even if their services are superior to state-tied corporations.
The world economy needs more than a cleanse.

The Need For An Economic Difficulty Adjustment

After the Great Financial Crisis of 2008 (GFC), nothing actually got fixed. Instead, there was a global effort to financialize everything, leverage everything, and inflate giant asset bubbles with stimulus packages, or encourage companies to buy back their stock shares. This kleptocracy in a broken system didn’t go away after the GFC. Instead, it got inflated to an even greater extent by the previous bailout.

In a free-market system, the way you deal with failed companies and sectors of an economy is to let them go bankrupt, and eat their losses. The companies will restructure under a bankruptcy plan, or get liquidated and all the equipment and employees get picked up by a more healthy and stable company that is more responsible, plans for the future, and therefore is in a stronger financial position. A more eager, less indebted younger company that has newer investors and better operating practices will build a better system out of these new parts.


If you do the opposite and prop up the broken business, you further encourage unhealthy economic behavior. Any possibility of the newer, younger business from entering the playing field with a superior product and/or solution that the market truly needs is obsolete. The newer, better business can’t compete because backing these large, proven to be failed, zombie companies with bailouts, creates barriers to entry. Instead, you get Boeing and American Airlines with all their subsidies and tax breaks. Their regulatory, cushy positions, (and all the established control they), have keep them in power.

Mining bitcoin can teach us about macroeconomics. The mining process is a fabulous model for how markets should work. Corporations will compete against one another, resulting in winners and losers. The businesses that fail will consequently reward the successful business with more customers, but will also allow more new market competition and opportunity for a new company the enter the playing field.
Zombie corporations are literally cancer to an economy, but the corporate welfare state carries on via fed bailouts through incessant money printing and inflation. And who’s there to cover the tab? The productive private sector. Us. The lower, middle, & even upper class, take the hit while crapitalist cronies at the front of the lunch line in the Cantillon cafeteria, reap from the benefits of newly printed money that has yet to circulate into the economy and inflate the price of essential goods/ services every-day people need to survive. What’s left for us? Crumbs. Lots and lots of crumbs. The distortion of information by the Fed is literally a master-slave relationship, that’s blinding markets and keeping the world economy on hospice.

When left untampered, a sick economy reveals true prices and the psychological state of the market. The mining ecosystem of the Bitcoin Network is an embodiment of this very state. Bitcoin is honest. It’s volatile market reveals truth, healthy speculation, HODLing, and provides a safe haven for liquidity.

Bitcoin fixes economies.

We need a difficulty adjustment. Now.

Follow Phil @MrPseu on Twitter & Follow his work at

Check out this episode o f "A Boy Named Pseu"   #138 The Economy Needs A Difficulty Adjustment, on all Pod-Catchers.

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Own Your Failure.


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