PROLOGUE

Dr. Saifedean Ammous

As a publisher at The Saif House, it is a true pleasure and privilege to be publishingThe Bitcoin Enlightenment, a fantastic book that distills the wisdom of centuries of hard money civilization into terms that are easily understandable for the modern reader. Mr. Ricardo Salinas Pliego comes from a long line of successful businessmen and entrepreneurs who have developed and communicated this wisdom over generations, and we are lucky that he has taken time from his very busy schedule to produce this book, thanks to the great efforts of his co-authors Daniel and Pascal.

In 2011 and 2012, while studying the works of the late Hungarian economist Antal Fekete, I came across several articles by Hugo Salinas Price, a Mexican businessman who presented a keen understanding of the monetary problems of his country, and how hard money could have prevented them. Mr. Salinas Price and others in the circle of Fekete were always fascinating to me, like a really interesting uncle who possessed some deep insights into economics, which are not easy for our generation to grasp. It was Fekete who first pointed me to the concept of stock-to-flow, and its critical role in determining what the market chooses as money. Fekete argued that gold’s monetary role is a function of the large size of its existing liquid stockpiles in comparison to its annual production. Because of the incorruptibility of gold, humanity does not really consume gold, we just accumulate it. As we accumulate larger quantities of it, new production of gold becomes an insignificant fraction of the total liquid stockpiles available in the market. Based on the data of the last century, the ratio of gold’s liquid stockpiles to its annual production, has historically been in the range of 50 to 70. In other words, the global liquid stockpiles of gold grow at only around 1.5-2% per year. This low supply growth rate is unique to gold, and it means that at any point in time, gold miners are an insignificant player in the overall gold market. Even if the demand for gold rises and its market value increases, miners cannot meaningfully increase liquid stockpiles, since their entire production is a tiny fraction of these stockpiles. For metals with a lower stock-to-flow, mining output increases result in substantial increase in liquid stockpiles, thus bringing the price down.

It was always quite remarkable to me that such an obviously critical concept was so alien to a majority of modern readers, whose understanding of economic issues had been so thoroughly shaped by Keynesian and statist propaganda, that the matter of the increase in the supply of various monetary assets was almost entirely overlooked. Yet even more remarkable was that nowhere else in the writings of the Austrian School economists had I come across a proper elucidation of this particular point. As far as I can tell to this day, nowhere does Menger, Mises, Rothbard, or Hayek discuss this particular concept, and I would love to be corrected if I am wrong on this. Even to the Austrians who understood fully well the importance of gold in the monetary order, this particular point seems to have been taken for granted and overlooked. For economists reared in the gold standard, there was an almost unquestioning and blind belief in the inevitable monetary role of gold, that it did not need to be justified or explained. Far more pressingly, it needed to be advocated for. The market had clearly chosen gold as money, and there seems to be little interest in arguing why. Whether they were ignorant of this point, or thought of it as being trivial and inconsequential, is not entirely clear.

I remained always fascinated by how such a profound point remained largely ignored. Understanding how the low stockpi