Money, Bitcoin, and AI

Money, Bitcoin, and AI

Rocks → Gold → Paper → Fiat → ∞ Print → Bitcoin → AI?

By Federico Ulfo

Origins

Before money, every transaction was a negotiation. Humanity spent millennia searching for something — anything — that could reliably store value. Most attempts failed.

~9000 BC—Barter & Commodity Money

Every transaction was a negotiation, and most of them failed. You had grain; I had cattle. Unless I wanted grain and you wanted cattle at the exact same moment, no deal. Economists call this the double coincidence of wants. Everyone else just called it life. There was no unit of account, no way to save for the future, no way to trade with a stranger two valleys over. This single friction — the absence of money — capped the complexity of human civilization for thousands of years. We could build villages but not cities. We could feed families but not armies. Money wasn't invented because someone had a clever idea. It was invented because without it, we were stuck.

~5M humans. No civilizations yet — scattered proto-settlements.

Source: History of Money – Wikipedia

~3000 BC—Rai Stones of Yap

Here is the most underrated monetary innovation in history, and it happened on a tiny island in Micronesia. The people of Yap used massive limestone discs — some over 12 feet across — as money. Each stone was quarried 250 miles away in Palau and hauled back by canoe. Men died making the trip. That was the point: the value of each stone was the labor and risk embedded in it. A proof-of-work token, thousands of years before Satoshi. But the truly radical part wasn't the stones — it was the ledger. Most were too heavy to move, so ownership was tracked by oral consensus. Everyone simply knew who owned which stone. One famous disc sank to the ocean floor during transport and kept circulating as currency, because the community still agreed on who owned it. Money that doesn't need to move. A shared record maintained by social consensus rather than a central authority. Sound familiar?

Source: Rai Stones – Wikipedia

~600 BC—First Coins Minted

This is where money becomes money. In the Kingdom of Lydia — modern-day western Turkey — King Alyattes stamps a lion's head onto small discs of electrum, a natural gold-silver alloy from the Pactolus River. The royal seal guarantees weight and purity. For the first time in human history, you can hand a stranger a piece of metal and both of you know exactly what it's worth. No weighing. No haggling over quality. No trust required. The idea is so obviously superior that it spreads like a virus. Within a generation, Greek city-states, Persia, and India are all minting their own coins. Commerce explodes. Markets emerge. Trade routes stretch across continents. Standardized coinage doesn't just simplify trade — it makes civilization at scale possible. Every empire that follows will be built on coins. And every empire that falls will fall, in part, by debasing them.

Source: Lydia (coin) – Wikipedia

~300 AD—Rome Debases Its Currency

The Roman denarius started at 98% pure silver. It ended as a bronze slug with a silver wash. The decline took centuries, but the playbook was established in the first act. When Rome's military ambitions outgrew its treasury, emperors discovered the oldest trick in monetary history: stamp the same face value on a coin with less metal in it. Under Nero, silver content dropped to 94%. Under Septimius Severus, 50%. By Diocletian, less than 5%. Prices rose 1,000% in a century. Soldiers refused to accept the coins and demanded gold or goods. Trade in the provinces collapsed back to barter. The barbarians didn't destroy Rome. Rome destroyed Rome — one diluted coin at a time. Every empire since has repeated this exact pattern. Not one has learned from it.

Source: Debasement – Wikipedia

~1000 AD—China Invents Paper Money

The printing press is easy to start and impossible to stop. China proved it first. The Song Dynasty invents jiaozi — the world's first government-issued paper currency. Merchants in Sichuan, sick of hauling heavy iron coins, begin using paper certificates backed by deposits at trustworthy shops. The government takes over issuance, backs each note with iron and silver reserves, and for a while it works brilliantly. Paper money lubricates the most advanced economy on Earth. Then the temptation sets in. Successive dynasties print more notes than reserves can back. The Yuan Dynasty floods the economy with unbacked paper to fund wars and public works. Hyperinflation follows. By the Ming Dynasty, paper money is abandoned entirely, and China returns to silver and copper coins for three hundred years. The whole arc — innovation, adoption, abuse, collapse — plays out a millennium before the Federal Reserve exists. The lesson couldn't be clearer. Nobody learns it.

Source: Jiaozi (currency) – Wikipedia)

~9000 BC

World Population

5.0M

Major Civilizations

Forms of Money

BarterGift exchange

Gold mined0 t

~5M humans. No civilizations yet — scattered proto-settlements.

~9000 BC

World Population

5.0M

Gold$0

BTC—

Gold

Gold mined0 tGold mkt cap—

BTC reward—BTC supply—

BTC mined—

GDP—Debt—Debt/GDP—

M2—CPI—

Income—Home—Gas—

The Gold Standard

Gold imposed discipline. Nations tied their currencies to a metal they couldn't print, and for a while the system held. The constraint was the point.

1694—Bank of England Founded

The Bank of England was not founded to serve the public. It was founded to fund a war. King William III needs money to fight France. A group of wealthy merchants offers a deal: lend the government £1.2 million at 8% interest, and in return receive a royal charter to operate as a bank that can issue notes against that debt. Done. The innovation buried inside this arrangement is radical: government debt as the foundation of money creation. The bank's notes circulate as currency, backed not by gold in a vault but by the government's promise to repay. Other nations watch, take notes, and copy the model. Within two centuries, every major economy has a central bank. What was once a wartime expedient — the marriage of sovereign debt and money creation — becomes the permanent architecture of global finance. Nobody ever votes on this. It just becomes the way things work.

Source: Bank of England – Wikipedia

1913—Federal Reserve Created

They passed it the week before Christmas, in a late-night session, after a series of banking panics scared Congress into action. The Federal Reserve Act of 1913 creates America's central bank — a lender of last resort, designed to smooth out bank runs and stabilize the currency. The dollar stays gold-backed at $20.67 per ounce. On paper, nothing changes. In practice, everything does. The Fed can now expand credit, set interest rates, and buy government bonds. These powers seem modest in 1913. They will reshape the entire global economy over the next century. A dollar in 1913 buys what $32 buys in 2024. The erosion starts slow. It never stops.

CPI baseline: 1982-84 = 100. A dollar in 1913 = ~$32 in 2024. ~80% of all gold would be mined after this date.

Source: Federal Reserve – Wikipedia

1933—FDR Confiscates Gold

Read this twice: the President of the United States makes it illegal for Americans to own gold. Executive Order 6102, signed in the depths of the Great Depression, requires every citizen to surrender their gold to the Federal Reserve at $20.67 per ounce. The penalty for keeping it: a $10,000 fine and up to ten years in prison. Once the government has the gold, it passes the Gold Reserve Act of 1934, revaluing gold to $35 per ounce — a 69% overnight increase. The government profits. Every dollar in circulation is instantly devalued by 41%. It is the largest wealth transfer in American history to that point, executed by executive decree. No vote. No debate. Just a signature. When governments control money, they will change the rules to suit themselves. Especially in a crisis. Especially when no one can stop them.

Gold Reserve Act of 1934 formalized the $35 price. US holds ~20,000 tonnes of gold reserves.

Source: Executive Order 6102 – Wikipedia

1944—Bretton Woods Agreement

Forty-four nations gather at a hotel in New Hampshire to decide how money will work after the war. The deal they strike is breathtakingly simple: every currency pegs to the dollar. The dollar pegs to gold at $35 per ounce. America, holding two-thirds of the world's monetary gold, becomes the anchor of global finance. It's an elegant system with one fatal assumption baked in — that the United States will maintain fiscal discipline. That every future president and every future Congress will resist the temptation to spend more than the gold reserves can back. Every country on Earth is now betting on American restraint. The bet will last exactly 27 years.

WWII peak spending. Debt/GDP would hit 113% by 1945. World monetary gold stocks ~22,000 tonnes.

Source: Bretton Woods System – Wikipedia

1944

World Population

2.3B

Major Civilizations

Forms of Money

Gold mined60K t

WWII peak spending. Debt/GDP would hit 113% by 1945. World monetary gold stocks ~22,000 tonnes.

1944

World Population

2.3B

Gold$35

Oil$1

Gold

Oil

Gold mined60K tGold mkt cap$0.1T

GDP$0.22TDebt$0.20TDebt/GDP91%

The Fiat Era

Then they cut the cord. Once money was no longer tethered to anything real, the printing never stopped — and neither did the erosion of everything priced in it.

1971-08-15—Nixon Closes the Gold Window

Sunday evening. Live television. The President of the United States tells the world that the dollar will no longer be convertible to gold. He calls it temporary. It's been 55 years. The backstory is straightforward: France, under de Gaulle, had been calling America's bluff — exchanging dollars for gold at an accelerating rate, draining Fort Knox. Rather than stop spending, Nixon simply changes the rules. Overnight, the dollar — and by extension every currency pegged to it — becomes pure fiat. Backed by nothing but trust in the U.S. government and its willingness to tax, borrow, and if necessary, compel. There is no longer any physical constraint on how much money can be created. None. This is the most consequential monetary decision of the 20th century, and it was made by one man on a Sunday. Everything that follows — the inflation, the debt, the bubbles, the inequality — traces back to this moment.

The starting line. Everything after this is measured against 1971 purchasing power.

Source: Nixon Shock – Wikipedia

1975—Post-Oil Shock Inflation

Four years. That's how long the fiat experiment lasts before the cracks show. OPEC imposes an oil embargo in retaliation for U.S. support of Israel in the Yom Kippur War, quadrupling oil prices overnight. But oil is the trigger, not the cause. The deeper problem is that the dollar, now untethered from gold, has no defense against inflation. What follows baffles the economics profession: prices soar while growth stalls and unemployment rises. Stagflation. Their models said it couldn't happen. It's happening. On January 1, 1975, Americans are allowed to own gold again for the first time since FDR confiscated it. The price has already risen 220% since the Nixon Shock. People aren't buying gold because they love the metal. They're buying it because they no longer trust the paper.

Americans allowed to own gold again (Jan 1975). Gold up 220% since Nixon shock.

Source: 1973 Oil Crisis – Wikipedia

1980—Inflation Crisis Peak

Gold at $850. Inflation at 14.8%. The dollar in free fall. Nine years after Nixon cut the gold cord, the consequences are undeniable. Enter Paul Volcker, the new Fed Chairman, who makes the most painful bet in monetary history: he jacks the federal funds rate to 20%. Twenty percent. Mortgages become unaffordable overnight. Businesses fail. Unemployment hits 10.8% — the worst since the Depression. Volcker doesn't blink. And it works. Inflation breaks. The lesson is brutal and simple: once you unleash inf

[truncated for AI cost control]