Dmitriy Petryakov

HOW DACB OUT-AUSTRIANS THE AUSTRIANS AND OUT-KEYNESIANS THE KEYNESIANS, CREATING AN ENTIRELY NEW MACRO PARADIGM. Modern monetary debates have been stuck in a three-way tug-of-war. Austrians want clean intertemporal price signals (the “natural” interest rate) but lack operational tools to preserve those signals once money and complex finance enter the picture. Keynesians claim that aggregate demand must be actively managed to avoid long depressions, but their solutions introduce discretion, lags and distributional capture. Monetarists try to rely on rules, yet they struggle with the practical inability to measure the right aggregates (M and V) in real time. A Decentralized Algorithmic Central Bank (DACB), a protocol-level monetary model built on a custom-tailored blockchain Dynemix with liquid staking and per-capita issuance, can reconcile these aims: it makes the natural rate observable, builds a real-time proxy for MV out of market behavior (the stake pool), and uses simple, public feedback rules to stabilize nominal demand without discretionary seigniorage or privileged first recipients. The result is a plausible architecture that operationalizes what Hayek dreamed of and what Austrians wanted but never could embody, complimented by Keynesian stabilization tools. Let’s explore how DACB achieves such a result. PART I. THE PROBLEM 1. Bohm-Bawerk’s elegant barter picture: roundabout production and the natural rate At the heart of the Austrian capital theory is a simple picture: production is not instantaneous, some projects are “roundabout”. Building a factory or a supply chain takes time, but it yields a greater future output. Individuals have time preferences: they value present consumption relative to future consumption. When people defer present consumption (save), resources become available to be reorganized into longer roundabout processes, and capital formation follows. In an ideal barter world, the decision to save and to invest is conceptually one move: an entrepreneur identifies an opportunity and people defer consumption to free resources for it. That one-move insight yields the notion of a natural interest rate: the intertemporal price that equates the supply of real saving with the demand for real investment. If time preference falls (people prefer the future relatively more), the natural rate falls, projects that were formerly uneconomic become viable, and the production structure lengthens. Entrepreneurs get a clean signal (a lower price of waiting) and reallocate resources accordingly. 2. Introduce money, and the trouble begins But once we introduce money, the tidy picture splinters in two ways: a) Saved purchasing power need not become real investment. Money can be hoarded or parked in near-money vehicles. The simple equivalence “save=invest” no longer holds, monetary balances can rise without any corresponding redeployment into capital goods. The falling time preference no longer automatically produces a shift in the market of loanable funds and subsequent relocation of resources. b) Monetary issuance and control are not neutral. Whoever issues money (the seignior) and whoever receives new money first enjoy a Cantillon advantage: early recipients gain relative purchasing power. Monetary policy thus carries distributional effects and creates incentives to capture issuance. It also distorts relative prices in systematic ways. 3. Hayek’s learning: deflation is worse than he first thought Early Austrians were optimistic about deflation arising from productivity or thrift: falling prices, they thought, could be benign as they expressed rising real wealth. Empirical experience (panics under classical gold regimes, debt deflation episodes, prolonged contractions) forced Hayek to rethink. He moved to a pragmatic target: stabilizing nominal income (MV) rather than holding money rigid. Hayek recognized that money is entangled with velocity and that naive fixes on M can be self-defeating once we admit sticky wages, debt, and other frictions. 4. Heterogeneous, sector-specific capital: the mobility problem Fast-forward to the modern economy: capital inputs have become highly heterogeneous and sector specific. A worker who leaves a chocolate factory cannot be instantaneously remade into an AI engineer; specialized machines and supply lines are not fungible. Lowering time preference in this world does not mechanically reassign identical resources to longer projects, it often creates frictional unemployment in some sectors and bidding for hard-to-move inputs in others, producing both malinvestments (projects propped up by cheap credit but ill-matched to available resources) and simultaneous unemployment elsewhere. This is the Achilles’ heel of the pure Bohm-Bawerk picture once we account for modern capital specificity. 5. Keynes’s corrective: demand matters Keynes’s insight was blunt and practical: even if intertemporal prices matter, aggregate demand can collapse, and the economy can get stuck at high unemployment for long periods. Restoring demand now matters more, and equilibrium-level time preference arguments don’t magically deliver employment or avoid social catastrophe. Thus, monetary and fiscal policy should be designed to close output gaps. Modern New-Keynesian frameworks operationalize that insight: inflation targets, the Taylor rule, NGDP targeting, and discretionary central bank interventions are tools to stabilize the macroeconomy. But they suffer well-known problems: the zero lower bound (ZLB), long and variable lags between action and effect, measurement problems (which inflation measure? which estimate of potential output?), time inconsistency and political capture, and distributional distortions because seigniorage and credit support often flow through privileged channels. 6. The trilemma of practice So, we face a trilemma in practice: - Austrians demand process neutrality: clean, undistorted market signals, but lack operational instruments that preserve those signals in a monetary world. - Keynesians demand outcome stability: sustained employment and avoidance of depression, but implement discretionary tools that suffer from capture, lags, and mismeasurement. - Monetarists demand rule-based predictability, but their rules need observables (M, V, NGDP) that are noisy, lagged, and hard to react to in real time. Any monetary architecture that intends to solve the trilemma must - preserve a usable market signal that coordinates capital movement; - stabilize nominal demand to avoid debt-deflation and prolonged underemployment; - do so without discretionary seigniorage and with observables that can be measured and acted on in real time. PART II. DACB: THE GROUNDBREAKING SOLUTION DACB is a novel monetary framework that threads this needle. Its policy instruments are simple in appearance and market-mediated in effect: - a liquid, low risk staking instrument whose yield is publicly visible every block; - a measurement called the stake pool (the share of the coin supply currently staked), which the protocol treats as a live proxy for nominal demand (MV); - two adjustable levers: the split of issuance between per-capita helicopter drops and staking rewards, and a rule that adjusts total issuance, both applied automatically according to deviations of the stake pool from the target. Below is how DACB closes the gaps described above. 1. Making the natural rate observable: staking yield as a market anchor Austrian theory is built on the natural rate as the intertemporal price. In real economies, that rate is obscured by bank spreads, risk premia, and opaque financial intermediation. DACB’s move is to create an on-chain, ultra-transparent instrument — staking, whose nominal reward is public, immediate, and arbitraged. With the help of the novel design of Dynemix (the underlying blockchain of DACB), staking is - near riskless because slashing is only applied to deliberately malicious actions; - liquid because unstaking is near instant. With these properties, staking yield becomes a credible, market-arbitraged safe return. Market participants will compare that yield to off-chain risk-free rates, repos, and short bills and arbitrage will force those yields into a consistent relationship. In effect, staking yield becomes the observable natural rate, the number that entrepreneurs can read when deciding whether to extend investment projects. That fixes the Austrian complaint that the natural rate exists only as a theoretical coordination mechanism. DACB reveals it publicly in real time. 2. The stake pool as a real-time MV gauge Hayek worried we cannot measure MV. Theorists could speak of stabilizing nominal income, but which variable would a policymaker actually target? DACB introduces a tool for measurement: the stake pool (the share of supply locked as staked security) is a compact behavioral statistic that integrates how agents allocate their money between transactional balances and “safe, locked” balances as a function of both the supply of money and velocity. If people hoard (velocity falls) or inflation drops, the stake pool tends to rise. If money supply expansion outpaces demand (MV up), the stake pool tends to fall. In short, M and V leave their imprint jointly on the stake pool in high frequency, on-chain, auditable form. The protocol does not need to decompose M vs V; it reacts to the revealed outcome. That is the Hayekian breakthrough realized: instead of chasing noisy GDP or CPI data, DACB watches a singular market-generated variable and feeds it into a transparent feedback rule. Markets anticipate the rule, arbitrage around it, and thus do much of the coordination work. 3. A closed-loop policy: indicator and target DACB makes the stake pool both an indicator and a policy target. In operation: - If the stake pool is too high (agents are hoarding → MV down), the protocol increases issuance and shifts the split toward helicopter drops to get money back into circulation, reduce the attraction of hoarding and raise inflation expectations. It also can lower the staking yield incentive. - If the stake pool is too low (too much transactional spending → MV up), the protocol tightens issuance and raises staking rewards, encouraging absorption of liquidity into secured stakes and cooling down inflation expectations. Because the rule is known, transparent, and executed on-chain every block, expectations adjust instantly and the market itself performs the redistributional coordination tasks, whereas the algorithm merely changes incentives. Two consequences follow: - seigniorage is not concentrated: per-capita drops flatten the Cantillon advantage because issuance is not given first to a small set of banks or dealers; - the protocol preserves a publicly visible market signal (staking yield) that entrepreneurs can read for intertemporal decisions. 4. Handling time-preference shocks and sectoral frictions A persistent critique of any rule that targets a nominal anchor is that when time preference falls (the Austrian case), there is no need for extra money: the real problem is to redeploy existing resources. DACB answers with a layered transmission story. If time preference falls and the natural real rate drops, market actors will try to reallocate resources to longer projects. The on-chain signal (staking yield) will reflect the nominal counterpart of that real shift, and the stake pool will respond. The algorithm’s reaction (a calibrated issuance increase) is meant not to create false loanable funds but to stabilize nominal demand while allowing the reallocation to proceed. In practice, much of DACB’s newly issued coins are delivered as helicopter drops (not bank reserves), so they stimulate demand directly: that helps bridge shortfalls in demand that would otherwise cause unemployment while the structural reallocation proceeds. Staking rewards keep the observable yield anchored so that entrepreneurs still have a credible market price of waiting, which is not distorted by algorithm’s monetary measures. This is subtle and one of the key achievements of the model: issuance is used to prevent demand-side collapses that would make even correct reallocations painful and politically explosive, while staking yield retains the intertemporal signal necessary for investment choices. Ideally, new money is absorbed as real GDP rises due to successful investments, but if inflation expectations overshoot, the rule corrects immediately to keep the most optimal balance between demand stimulation and unnecessary inflation. 5. Countercyclicality without discretionary bias DACB’s countercyclical framework is straightforward: automatic rules, public signals and market execution. When the stake pool shows demand is collapsing (people hoard, MV falls), the protocol immediately increases the share of newly issued coins that go into universal helicopter drops and charges the printer. That puts spendable money in people’s hands fast, nudges transactions up and weakens hoarding incentives. When the stake pool signals overheating, the algorithm flips the levers the other way: it tightens issuance and raises staking rewards, so liquidity is pulled out of circulation. The key differences from traditional policy are threefold: - Decisions aren’t made by committees; they’re deterministic code everyone can audit. That removes political favoritism and the “who gets the new money first” problem. - Markets instantly see the policy and arbitrage around it. Staking yields and other rates reflect real-time conditions, so entrepreneurs and savers get truthful, stable signals. - Responses are fast and incremental: no month-long data lags, no FOMC meetings. That reduces the chance the cure becomes worse than the disease. 6. DACB can plausibly aim at 0% inflation Many would argue that zero inflation could be the optimal potential target. Conventional central banks shy away, usually targeting 1–2% to avoid the zero-lower-bound (ZLB) trap and risk of a deflation spiral. ZLB exists because central banks primarily tweak short nominal rates. Once nominal rates approach zero, conventional tools lose potency, and policy can’t deliver real easing if expectations are stuck. This is a structural limit of rate-based monetary regimes and information lags those regimes endure. DACB’s architecture changes the constraint set. It does three things simultaneously: a) It uses issuance composition, not only rates. Instead of relying solely on pushing a short nominal rate into negative territory (which runs into ZLB problems and political limits), DACB can adjust the split between immediate, equal-per-capita helicopter drops and staking rewards while tweaking the overall issuance itself. That means it can push nominal demand up or down directly without having to force nominal short rates through zero. b) It neutralizes the dynamics that make ZLB dangerous. Because DACB’s responses are fast, transparent, and per-block, expectations can be managed with much finer granularity. There is less need to rely on big, delayed interventions that shock markets and outcomes. When hoarding threatens to create a deflationary spiral, the protocol responds immediately, reducing the window during which liquidity preference can build up into a self-fulfilling collapse. c) It decouples the policy objective from physical ZLB constraints. The target is the stake pool share, which is an MV dynamics proxy. If we choose an S* and parameterization consistent with a long-run zero inflation equilibrium, for example, a default issuance rate calibrated to deliver NGDP growth equal to expected long-term real growth, the system can aim at 0% inflation while retaining an automatic backstop against hoarding-driven spirals. In other words, DACB can choose a true zero inflation anchor while still providing the micro-mechanisms necessary to fend off the amplification channels that historically turned innocuous deflation into collapse. CONCLUSION DACB isn’t another theory, it’s a working design that finally stitches two historically opposed ambitions into one practical solution. What most monetary models do is pick one problem and fix it while wrecking another. Gold and Bitcoin preserve signal purity but invite hoarding, cornering and collapse; modern central banks stabilize demand but concentrate discretion, create Cantillon rents and distort intertemporal prices. Free-banking promises market discipline, but suffers from a brutal prisoner’s dilemma of competitive over-issuance. Algorithmic stablecoins trade off credibility for fragility. DACB changes the game. It gives the market a single, public, auditable instrument (staking yield) that functions as a real-time natural rate. It turns aggregate liquidity preferences into a single on-chain statistic (the stake pool) that the protocol observes and targets. And it applies simple, automatic policy levers: per-capita drops and staking incentives, so the system stabilizes MV without secret committees, political favoritism, or first-mover seigniorage. Is it perfect? No system is. But DACB is not a compromise; it’s an upgrade: the practical architecture that lets market prices do the coordinating work Austrians seek, while giving societies the safety valve Keynesians insist is necessary. If you want both honest signals and resilient demand, DACB is the first design that really delivers.

AI will equivalently retire capitalism and communism as concepts because the ownership of means of production, raw inputs and distribution of their fruits needs a completely new approach when means of production start reproducing themselves.

I really think Mises is not a good candidate to be the vanguard of free-market economics. Ironically, I still perceive him as a mirror reflection of Marx: the same desire to bend reality to his ideology instead of searching the truth, just in the opposite direction. Both build a whole system on one foundational category: a commodity and its value form for one, purposeful action for the other. Both claim laws of scientific necessity, and both preferred to attack motives of their opponents instead of answering arguments.

Furthermore, Lenin & Co had an amazing solution: no voting at all, unlimited power and a lifetime office for a single dictator, purely nepotistic system of "party nomenclature" to get all the freebies, GULAGs and poverty for everybody else. Worked wonderfully.

These loons really think that billionaires possess actual money. Like each one has a huge vault of cash and gold coins and dives into it every morning like Scrooge McDuck.

Deflation is not natural. Any price level is a discrete policy choice that depends on the adopted monetary framework. Deflation creates its own distributional and structural bias and is not inherently better or worse than inflation, just a different set of tradeoffs. Why do policy makers fear deflation? Because under the currently available operational framework, there is no reliable back-stop for a potential downward spiral.

The only thing that the regression theorem has demonstrated is its worthlessness (apart from maybe a retrospective lens). Crypto and especially ICOs clearly showed superiority on the social consensus approach. PS I read the attempts of Rothbardians to justify the theorem in relation to crypto, and the amount of mental gymnastics they apply is enough to make Bitcoin maxis jealous.

Food conspiracy is a popular topic in the crypto community. Some people even use extensive amounts of mental gymnastics to push Bitcoin as a solution. So why exactly TVs are better and cheaper than 10 years ago, while groceries are worse and more expensive than 10 years ago? Let’s break it down. No great conspiracy here, it’s an implication of the simplest and most fundamental force: market competition. Although it’s supposed to make everything better and cheaper, it works with TVs and doesn’t work with food for a simple reason: qualitative improvements in TVs can be expressed in understandable and traceable quantitative metrics, whereas qualitative improvements in food cannot. Speaking in economic terms, TVs are search goods, whereas food is a credence good. TVs: a search good. What do we mean by better TVs? TVs with better resolution, refresh rate, brightness, contrast, dynamic range, screen size, case thinness etc. Each improvement is reflected in the spec sheet that every buyer sees, each is comparable to that of the previous model, so you can trace the progress, even if marginal. It’s hard to visually distinguish the difference between 120 and 140 hertz refresh rates, but the buyer sees the spec and can easily justify the premium. It turns constant improvements into the optimal strategy in a competitive market. In the tech space, such marginal improvements compound over time and lead to significant progress, but this progress is fueled by consumer demand that rewards each minor step. Food: a credence good. With food, this works differently: we don’t have specific units which we can measure qualitative improvements in. Say we make an apple 5% more tasty and put 5% premium on it. How is the buyer supposed to see the difference? The improvement is marginal and barely detectable. The buyer bites both apples and doesn’t see any difference, so he commits to the cheaper one. Ask yourself, would you pick a notably more expensive 140 hertz TV over a 120 hertz one without being able to know the specs and judging purely from experience? Probably not. If we could convince the buyer to buy a better but more expensive apple and compound improvements, we could get a 50% tastier apple with time, but without a traceable improvement scale, the demand shuts the progress on the first step and shifts the competition in another direction: what if we make the apple 5% less tasty and 5% cheaper? A buyer, being unable to tell the difference, will buy our cheaper apples, which makes the move optimal. As a result, we have backward trends of shrinkflation and skimpflation. The race to the bottom is the Nash equilibrium of credence good competition, not a market failure caused by external forces. Regulations: mitigating the issue. Regulatory measures are applied to mitigate it, but conspiracy-theorists inverse the cause-consequence and state that they are the reason. In reality, regulations are mostly a response to this information asymmetry (labeling rules, minimum standards, organic certification), not the root cause. Certifications are exactly how markets try to turn credence goods into something closer to search goods: buyers can now see the USDA Organic seal or "non-GMO" badge and pay the premium. Premium segments (grass-fed beef, heirloom varieties, artisanal everything) prove the mechanism works when quality becomes credibly signalable. But for mass-market staples? The race stays downward. Can Bitcoin help? Finally, hard money (Bitcoin standard or whatever) won’t help. Sound money doesn't magically make credence goods into search goods. As for macro effects, on one hand, it can mitigate inflationary pressure on agriculture, but on the other hand it makes credit scarcer, risk premia higher and most importantly, can lead to destructive deflation spirals, which are especially fatal to agriculture, as it features arguably the most perishable capital goods out of all industries, which is further aggravated by fixed planting/harvesting cycles. Where governments actually throw a wrench in the works To be fair, there is a vector of governmental interference that consistently deteriorates the market outcome: strategic subsidies. Government policies actively reward high-yield, low-nutrient commodity crops, which looks like a strategically optimal precautionary option. This, however, cheapens ultra-processed calories while making real food relatively scarcer and pricier for the people who need it most. A negative macro feedback loop emerges: 1) Cheap low-nutrient food becomes abundant. 2) Low-end wage earners switch to cheaper low-quality food. 3) Minimal wages recalibrate to lower food prices. 4) Recalibration makes better-quality food less affordable. 5) Demand shifts toward cheap food further, widening the gap. The result is a cost gap: subsidized commodities keep ultra-processed food artificially affordable, while fruits and vegetables face higher relative prices and thinner margins, building a structural disincentive for healthy eating. Low-income households, who already spend 30%+ of income on food, end up switching to the cheap stuff because that's what the market (distorted by policy) supplies in volume. Aggregate food CPI might grow slower than average wages in the long run, but for the bottom end it's a rationing mechanism: you can afford volume, not quality. Hence the nutrition gap widens even as the baseline stats look fine. This is again a structural problem that cannot be solved by switching to Bitcoin or any other monetary regime.

Real resources are mostly perishable, so ironically negative interest rates simulate Bohm-Bawerk's capital structure more precisely than the gold standard or anything else Austrians support.

If value can be extracted, it will be extracted. It's not a problem of users, it's a problem of poor design.

Dynemix is the first blockchain protocol immune to MEV attacks. Its novel consensus algorithm ("Guess My Block" game) doesn't allow for discretionary transaction selection by minters. The MEV opportunity is disabled at its root.

WITH DACB WE CAN TARGET 0% INFLATION. What if the entire array of problems that force central banks to target 2% inflation is only a limitation of outdated tools and not an inherent economic fundamental? That’s precisely the case. The Decentralized Algorithmic Central Bank (DACB), embedded in Dynemix, overcomes every structural weakness that forced central banks into this uneasy compromise. By design, DACB makes 0% inflation not only possible but sustainable without risking deflationary spirals, liquidity traps, or employment shocks. 1. No Zero Lower Bound (ZLB). Traditional monetary policy relies on nominal interest rates. Once they hit zero, stimulus stalls. DACB bypasses this entirely. Its lever is not rate cuts but direct issuance (“helicopter drops”) and staking incentives. If demand surges, DACB expands money supply algorithmically, distributing new dynes per capita instantly: no committee votes, no delays. Conversely, collapsing demand automatically tightens liquidity through higher staking rewards. The mechanism never “runs out of ammo”, so there’s no need for a positive inflation buffer as insurance. 2. Perfect real-time velocity proxy. Central banks struggle because money velocity is unobservable and unstable. DACB solves this elegantly: the staking pool directly reflects the effective circulation of dynes. If coins are withheld or velocity drops, staking rates shift instantly, providing both a signal and a corrective mechanism. Expansion or contraction happens automatically. The system doesn’t chase lagging CPI; it reacts to live on-chain signals. 3. Wage stickiness neutralized. In fiat systems, downward nominal wage rigidity requires a cushion of inflation to allow real wage cuts. But in DACB, recessions don’t grind into deflation in the first place. Liquidity is injected algorithmically before wages need to adjust. Business isn’t trapped in the vicious cycle of falling demand → layoffs → deeper demand collapse. The wage stickiness problem is disarmed at its root. 4. No Cantillon effect. In fiat systems, new money always enters through privileged channels (banks, asset markets), distorting distribution and rewarding insiders. DACB destroys this asymmetry. Helicopter drops are equal per capita, ensuring every participant receives new dynes simultaneously, while staking rewards are a transparent market return for providing security, indistinguishable from earning yield on existing coins. There’s no systemic first-mover advantage. Zero inflation under DACB is not only possible but fair. 5. Output-gap alignment, not blunt inflation chasing. Whereas traditional central banks use CPI as a crude proxy, DACB directly aligns money supply with real economic activity. If hoarding widens the output gap, DACB counteracts instantly by incentivizing liquidity release. If growth runs too hot, staking absorbs excess coins. This dynamic stabilizes nominal income (MV) at equilibrium while holding the long-run price level constant. It achieves what Hayek dreamed of (neutral money) and what Keynes demanded (output-gap closure), simultaneously. THE AUSTRIAN DREAM, THE KEYNESIAN SAFETY NET. For Austrians, DACB provides the purest possible market signal: the natural rate, revealed in real time by staking returns, untainted by bureaucratic discretion and undistorted by economic frictions. For Keynesians, DACB guarantees that the natural rate is not “suboptimal” in times of hoarding or shock: it is algorithmically pressured back to the output-gap-closing level. And for monetarists, DACB ensures stable MV without clumsy lags or discretionary tinkering. With Dynemix and DACB, zero inflation is no longer a utopian dream. It’s a practical, algorithmically enforced equilibrium, delivering stable prices, fair money creation, and recession-proof demand stabilization in one coherent system.

Dynemix can be a base monetary layer, but Bitcoin cannot. Bitcoin as “partisan money” Bitcoin’s design encodes a permanent incentive: hoard me. With supply capped and issuance approaching zero, the rational strategy for anyone holding bitcoin is to sit on it and wait. In Bitcoin’s culture this has become the ultimate goal: HODL, washing away everything else from its original ethos. But in economic terms it is a structural bias. That bias makes Bitcoin partisan: it privileges one kind of behavior (self-custodial hoarding) over all others. This puts Bitcoin in direct competition with any financial superstructure that tries to build on top of it. A banking or credit system depends on intermediation: savers lending to investors, the latter fund long-term projects. Liquidity is moving where it is needed. But if the base layer itself rewards not lending, not spending, not investing, then every higher layer is fighting against the gravity of the base. The result is a system that cannot achieve Austrian neutrality. Austrians wanted money to transmit time preferences without distortion. Bitcoin transmits something else: an engineered scarcity signal that crowds out other signals. Dynemix as “neutral money” Dynemix and its Decentralized Algorithmic Central Bank (DACB) are designed to do the opposite. They embed no preference of their own. Instead, the base layer passively measures what people are already doing: hoarding, spending, staking, investing; and stabilizes the system around it. The stake pool plays this role. It reflects real-time liquidity preferences of the economy: if people transact less, the pool rises; if they transact more, the pool falls. The DACB algorithm responds mechanically to keep the pool near target, adjusting issuance and staking yields. Crucially, this does not tell people what to do. It does not embed “hoard” or “spend” into the base layer. It simply retranslates behavior into a neutral adjustment that preserves stability. That makes Dynemix neutral money: it carries no built-in thesis about the future, no partisan incentive to hold versus lend. It simply sustains an environment where market signals are clean, and coordination is possible. Why only neutral money can serve as a true base The base layer is supposed to support everything else: contracts, credit, banking, long-term investments. If the base layer itself is a speculative asset, then instead of supporting higher layers it competes with them. Why lend if the base appreciates faster than any loan yield? Why run an intermediation business if every saver is told to HODL? Dynemix avoids this trap. It makes the unit of account stable enough to denominate contracts and predictable enough to calculate with, while remaining neutral with respect to individual strategies. Banks, funds, and innovators can still build on top, but they build on a foundation that is not itself trying to be the main investment.

Is inflation good, and do we need inflation? There’s a common misconception in the community about Keynesian partisanship toward inflation as if inflationism is the core foundation of Keynesian monetary policy. ACTUAL KEYNES. In reality, Keynes did not advocate inflation as a primary goal or desirable outcome. He did view moderate inflation as an acceptable side effect of policies aimed at achieving the primary goal of full employment and, critically, as a necessary safeguard against the far greater economic evil of deflationary spirals. The common crypto (and broader libertarian) portrayal of Keynes as an inflationist is a significant oversimplification and misrepresentation of his nuanced and context-dependent economic philosophy. His core concern was always stabilizing economies at full employment, using inflation only as a pragmatic tool to avoid deflation, not as an end in itself. NEW KEYNESIAN SHIFT. What about modern macro? Central banks seem to target inflation primarily, so isn’t it a direct pursuit of inflation? While Keynes tolerated moderate inflation as a byproduct of full employment, the economic landscape shifted dramatically after the 1970s stagflation. This era exposed a critical flaw in earlier Keynesian models: the assumption that inflation and unemployment could be traded off indefinitely (the “Phillips curve”). When both soared simultaneously, policymakers realized that persistently high inflation could become entrenched through expectations, destabilizing the entire economy. This led to the New Keynesian consensus, which flipped the script: inflation targeting became the primary goal, not employment. Why? Not because mainstream economists suddenly fell in love with inflation, but because: 1) Anchoring expectations: low, stable inflation prevents businesses/workers from baking ever-higher price rises into contracts and decisions. This predictability facilitates long-term investment. 2) Time inconsistency problem: central banks face pressure to surprise the economy with stimulus (boosting short-term jobs but fueling inflation). A public inflation target acts as a commitment device against this temptation. 3) Stagflation’s lesson: letting inflation run loose to chase full employment risks a vicious cycle of rising prices and joblessness simultaneously. This pivot wasn’t an endorsement of inflationism, it was a defensive maneuver to preserve the central bank’s ability to sustainably support employment later. THE TEMPTATION AND IMPOSSIBILITY OF ZERO INFLATION. Intuitively, 0% inflation seems perfect: no erosion of savings, no menu costs, wage/price stickiness becomes irrelevant, no Cantillon effect (where new money benefits banks/asset-holders first, worsening inequality)! Why tolerate any inflation? The brutal reality: We lack the tools to reliably maintain zero inflation without risking catastrophic deflation. Here’s why: 1) Zero lower bound (ZLB). When inflation hits zero, interest rates follow. At near-zero rates, central banks lose their primary tool (rate cuts) to fight recessions. Deflation becomes self-reinforcing: consumers delay spending (goods get cheaper tomorrow), debt burdens rise in real terms, and investment collapses. Escaping this “liquidity trap” is incredibly hard (see Japan’s “Lost Decades”). 2) Measurement imperfections. Inflation measures (like CPI) are lagging and imperfect. Structural factors (e.g., technology-driven price drops in some sectors) can hide underlying inflationary/deflationary pressures. 3) Wages are sticky downward. Workers resist pay cuts. Moderate inflation allows real wages to adjust (staying steady in nominal but dropping in real terms) without painful pay reductions during downturns. 0% inflation removes this buffer, risking higher unemployment. 4) Policy lags and misfires. Monetary policy operates with long, variable delays. By the time deflation is detected, it might be too late to stop the spiral. A positive inflation buffer gives policymakers time and space to react. So why 2%? It’s just a lesser evil, a pragmatic sweet spot balancing competing risks: on one hand we get a deflation safety buffer, real wage adjustments to prevent layoffs and investment stimulus, but on the other hand, we pay with the Cantillon effect and inflation tax. It’s not that inflation is “good”, it’s that the risks of targeting zero are unacceptably high for a complex modern economy. CONCLUSION: A PRAGMATIC CHOICE. The road from Keynes’s tolerance of inflation as a side effect of employment policy to today’s 2% inflation targeting regime, reflects a developed understanding of macroeconomic trade-offs. Central banks aren’t pro-inflation, they are pro-stability. The 2% target is a hedge against our inability to perfectly control prices or reliably escape deflation once it takes hold. It accepts manageable costs (like the Cantillon effect) to avert the catastrophic costs of depression. In a world of sticky wages, zero-bound interest rates, and imperfect information, it remains the least bad option we have.

Is there good deflation? Absolutely not. Deflation is inherently harmful and destructive despite the assertions of those who proclaim to support Austrian economics. The delusion of “good” deflation was promoted by Austrians at the time of Austrian Business Cycles Theory (ABCT), which was developed in the early XX century. However, after addressing criticism of this idea during the debates with Keynes and analyzing empirical evidence, Hayek (one of the authors of ABCT) changed his stance and later recognized that deflation is as harmful as inflation. “Today I believe that deflation has no recognizable function whatever, and that there is no justification for supporting or permitting a process of deflation.” (A Discussion With FRIEDRICH A. VON HAYEK Held at the American Enterprise Institute on April 9, 1975). Let’s break it down in detail. 1) Deflation as correction of prior malinvestment. ABCT explains business cycles as a consequence of undue credit expansion facilitated by central banks (CB) and fractional reserve banking (FRB). When a CB lowers the interest rate below the natural rate, it creates investment opportunities not backed by real resources. Since the quantity of the money created during the boom exceeds the quantity of available resources, it pushes prices up (first sectoral, then broad scale) and escalates inflation. To tame inflation, the CB raises interest rates, which contracts credit and pushes prices down. Malinvestments are revealed as unsustainable under the risen interest rates, and a recession commences followed by deflation. Mises and Hayek saw liquidation and accompanying deflation as a crucial mechanism for equilibration of the economy after the preceding boom. Mises maintained his liquidationist stance and argued that the damage that comes from the deflationary phase is painful but necessary correction, whereas Hayek, who at first went even further and saw positive features in deflation, believing that it can help to overcome wage rigidity, later changed his stance. Empirical evidence of the Great Depression revealed that deflation can be extremely harmful, and the potential damage of deflationary corrections was heavily underestimated. Hayek observed that although deflation can serve as a balancing factor for a boom, the initial corrective deflation can transition into a deadly spiral of secondary deflation. 2) Demand-side deflation. Demand-side deflation, as follows from the term, stems from a decline in aggregate demand relative to aggregate supply. Key drivers can be: - Sharp contraction in money supply. - Collapse in consumer confidence/spending. - Sudden drop in investment spending. - Shocks causing wealth destruction and panic. Demand-side deflation is characterized by a feedback scheme of its escalation: a drop in demand and hoarding (or credit contraction) amplifies expectations of further deflation and stimulates a further drop in demand. As demand drops, businesses lay off employees, banks elevate risk premia, which, together with debt deflation, raises the debt burden significantly, thus pouring more fuel into the spiral. More panic leads to more hoarding and credit contraction, which continues to further feed the cycle and leads to a catastrophic collapse. Hayek’s secondary deflation is a specific case of the demand-side deflation, which is caused by the momentum gained by the primary (corrective deflation), which clears the consequences of the preceding boom and is necessary (as per ABCT) to redistribute misallocated resources. After recognizing the dangers of demand-side deflation and realizing that a prolonged deflation of any source can transition into it, Hayek to a large degree abandoned his earlier deflation dichotomy and eventually came to support nominal stability – preventing both inflation and deflation (see The Denationalisation of Money, 1976) although still by market-mediated means. 3) Supply-side deflation. There’s also a widespread claim that supply-side deflation (driven by productivity growth) is benign. This claim, however, mostly confuses sectoral price declines with actual deflation (aggregate price declines). - Sectoral “deflation” – falling prices in specific industries due to productivity gains. - Aggregate deflation – a sustained, economy‑wide decline in the general price level. The question of sectoral price declines is very complicated and debatable. Hedonic adjustments, which are used to assess the increase in quality, are heavily criticized (especially by Austrians) for creating virtual output growth from issues like artificial obsolescence, subjective value shifts, status bias etc. Nevertheless, for the sake of simplicity we can agree that there’s nothing bad when your TVs get cheaper. This only holds, however, if disinflationary pressure created by such productivity growth doesn’t lead to actual broad scale deflation (a continuous aggregate price decline). This productivity driven deflation, holding long enough, can eventually transition into demand-side deflation followed by a downward spiral described above. We can avoid this only by building a monetary policy framework that can reliably keep deflationary expectations from rising, which at the current stage is barely achievable in practice. 4) The example of 1870-1890 Deflation proponents often cite the period of 1870-1890 characterized by simultaneous deflation and output growth. However, GDP is just one of many economic indicators, and this case shows why we shouldn’t ignore the elephant in the room. Despite the general increase in aggregate output, deflation also brought: - Wealth inequality: gains from technological progress enriched a few while leaving workers and farmers behind, deepening social divides. From 1870 to 1890, the share of U.S. wealth belonging to top 1% surged from 20% to nearly 50%, while falling prices squeezed farmers and workers, whose real incomes barely budged. - Financial crises: deflation, combined with weak banking regulations and the gold standard’s constraints, fueled instability and frequent panics, such as 1873, 1884 and 1893, often triggered by speculative bubbles and worsened by deflationary pressure on debtors. Socially, the extreme wealth inequality and financial turmoil sparked significant unrest. Violent strikes, the growth of anarchist and socialist ideologies, and political movements like the Populist Party reflected widespread dissatisfaction. The aggregate growth under deflation can be easily explained by immense sectoral growth potential: while many businesses struggled, certain sectors (e.g. rail roads, oil drilling) signaled unmatched investment opportunities. Under deflation, the real return on cash rises (it’s effectively a risk‑free asset whose real value grows), which raises the requirements to justify investment, and only a handful of most high-yielding projects get an investment inflow, but the amount of investments into such can be unreasonably high due to scarcity and irrational exuberance. As a result, we get an investment boom and rapid growth of a bubble in certain sectors, which contribute to the aggregate output growth, and the subsequent bust, which triggers a recession: once the malinvestment is revealed, it causes panic, and investors liquidate en masse, draining capital out of the economy as occurred in 1893. Conclusion. Despite some historic attempts to justify deflation of different kinds, modern economics drifted away from that dichotomy of good and bad deflation, and any sort of prolonged aggregate price decline is considered dangerous due to the threat of a deflationary spiral and general instability and is avoided by monetary authorities.

Lol, this coward posted his petty reply and instantly blocked me 😂 He understands neither Austrian economics nor Bitcoin. All his books are a bunch of illiterate nonsense to brainwash unqualified readers. Austrian capital theory relies on banking to channel savings into loans. Bitcoin is an inherently self-custodial anti-bank system. That's the whole idea: to substitute banks with a decentralized ledger and keep your coins cold. But if you do that, you get stuck with a ton of unproductive savings, which Austrians never advocated for. Time preference shifts stop converting into the natural rate adjustments. Dead end.

“Stacking Sats” is a self-defeating advice from you, which shows exactly why the “Bitcoin standard” is destined to fail. You try to adapt Bitcoin as sound money into the Austrian framework, but you don’t realize that the fundamental assumption of the Austrian capital theory is persistent intermediation between savings and loans/investments. Stacking Sats breaks the core concept of Austrian economics: the natural rate. Unlike Bitcoin, which doesn’t even fit the Austrian framework, my model is an actual implementation of late Hayek’s ideas in a better way than he could imagine himself. You would be much happier leaving Bitcoin delusions and studying something productive.