Datom.World

All Money Is Monopoly Money

Published Nov 19, 2025

People love to argue about what counts as "real money." Bitcoin advocates say government currencies are doomed because they can be printed. Fiat advocates say Bitcoin is a speculative token detached from the real economy.

But both sides miss a fundamental point, one powerfully argued by anthropologist David Graeber in Debt: The First 5,000 Years: money did not emerge from barter. It emerged from debt.

All money (BTC, USD, gold, clam shells) is Monopoly [1] money. It is a social construct, a system of accounting for obligations. Its value comes from trust that these obligations will be honored, not from the material itself.

Without trust that others will accept your tokens, they become worthless, no matter what backs them. To understand why, we must separate two things:

  • Accounting assets (claims, debts, IOUs)
  • Real assets (actual goods and services)

1. Money as Debt: The Accounting Layer

The standard story of money's origin is a myth. Barter, we are told, was too inefficient, so humanity invented coins. As David Graeber meticulously documented, this is backwards. For thousands of years before coins were ever minted, human economies were built on credit in the form of informal IOUs and social obligations.

A village farmer didn't barter for his neighbor's boots; he'd simply say, "I owe you one." These debts were flexible, social, and embedded in a web of mutual aid. This is what Graeber calls "everyday communism," the baseline of human cooperation.

What we call money today (whether it's dollars in a bank, BTC on a ledger, or an entry in an Excel sheet) is just a formal, impersonal system for tracking these claims and debts. They are accounting artifacts, not physical resources.

  • A dollar is an IOU from the US government (the debtor) to the private sector and other governments (the creditors).
  • A Bitcoin is a cryptographically secured entry in a public ledger. This is its technical implementation, but not its economic essence. Fundamentally, like all forms of money, it represents an accounting relationship: one person's credit is another's debit, always balancing to zero.
  • Neither feeds anyone or builds anything on its own.

This reveals the iron law of accounting that governs all money: credit + debit = 0. For every asset in the system, there is a corresponding liability. As the saying goes, one person's debt is another person's asset. Your bank account is your asset, but it is the bank's liability. The entire global financial system is a web of these interlocking IOUs, and the net balance is always, and must always be, zero.

Money turns real only when it flows through people doing work. Until then, it's just a number. This is like entropy: the flow from low to high only generates work when it flows through a turbine. Money's remarkable achievement is that it allows accounting abstractions to be used as if they were real physical commodities. But this transformation requires productive flow. Without flow, money is static potential energy: stored, inert, idle.

2. From Social Debt to State-Enforced Money

If early economies ran on informal, social debt, where did coins and cash come from? Graeber's answer is violence. Impersonal, state-issued money wasn't invented for trade. It was invented to pay soldiers.

Ancient empires created what Graeber calls the "military-coinage-slavery complex." A king needed to provision his army. He would stamp his seal on bits of metal, declare them valuable, and pay his soldiers. To ensure the coins were accepted, he would then demand them back as taxes. Suddenly, everyone in the kingdom needed to get their hands on the king's currency, creating a market.

This is the brutal origin of physical money. It was a tool to rip economies out of their local, trust-based credit systems and reorient them around the state's military needs. This is also the historical root of Modern Monetary Theory (MMT):

All new state money enters the economy through government spending.

  • Taxes destroy money.
  • Borrowing delays destruction.
  • Spending creates money.

The Flow Mechanism

Taxation and spending are the two poles of a battery that powers the economy. Government spending injects potential (money) into the system, and taxation removes it. This differential doesn't just fund services; it creates a fundamental entropy gradient that compels money to flow, enabling economic work to be done, much like a dam creates a pressure gradient for water.

This is why the flow of government money matters most, often more than the initial spending's perceived efficiency. The ultimate effectiveness of that flow reduces to the quality of a human capital it moves through: how educated and knowledgeable are the people who receive and circulate it?

A strong flow through a skilled population creates a recursive feedback loop. An 'inefficiently' spent dollar that enters this cycle can trigger a cascade of transactions and create immense real wealth. This recursive process generates new entropy gradients for further work; every recursion through this process has the potential to create more entropy gradients and amplify real wealth in the form of goods and services. It's analogous to a fractal structure: a flat wall cannot make use of ambient heat, but a fractal membrane with its complex, nested surface creates entropy gradients, pockets of order from chaos, that a Maxwell's demon could use to perform work. Like a fractal biological membrane that maximizes surface area for energy exchange, a well-structured economic system with many interconnected nodes creates more opportunities for productive work.

Because of this recursive, fractal effect, the initial spending's efficiency matters far less than the quality of the human network that propagates the flow. The human capital is the critical factor. A 'well-spent' dollar that flows to unskilled and unknowledgable human capital creates nothing, as the productive cycle cannot begin.

This leads to a counterintuitive but unavoidable conclusion: wasteful or even corrupt government spending can be economically beneficial if the money flows into a skilled, productive population. A dollar embezzled by a corrupt official that ends up spent at local businesses, which then pay skilled workers who launch startups and create innovations, generates more real wealth than a 'perfectly allocated' dollar that hits a dead end in an unproductive system. The corruption is still morally wrong and should be prosecuted, but from a pure flow-dynamics perspective, the economic damage depends entirely on where that money ends up circulating. If it enters a recursive productive cycle within a high-human-capital network, it creates cascading value despite its corrupt origin.

Of course, corruption in practice often reinforces the Cantillon effect (discussed in Section 4), concentrating wealth among those with access rather than those creating productive value. Corrupt flows typically benefit the connected, not necessarily the skilled. But the theoretical point stands: it's the quality of the destination network that determines value creation, not the purity of the spending mechanism. This reveals why efficiency-obsessed frameworks miss the target.

This is not an argument for corruption, but an argument about what actually creates economic value. The initial efficiency or even the legality of spending matters far less than whether the flow reaches productive human capital. A system obsessed with preventing every dollar of waste while starving productive networks of liquidity is choosing symbolic purity over actual wealth creation.

This principle mirrors a deep insight from physics: gauge invariance. In gauge theory, the specific choice of gauge (reference frame or unit of measurement) is arbitrary. What matters are the relationships and transformations that remain constant across different gauges. Consider the economy itself: whether transactions occur in dollars, euros, or Bitcoin, the actual economic output of goods and services remains the same. A skilled engineer builds the same bridge, a farmer grows the same crops, a teacher educates the same students. The real productive work is gauge-invariant. What changes across monetary gauges is merely the accounting representation of that work, not the work itself. Similarly, how money enters the system is just a choice of gauge. Whether a dollar flows in through 'efficient' government allocation or 'wasteful' spending or even corruption, the economic reality that matters is where that dollar flows afterward: the transformation through productive human capital. The gauge (spending mechanism) is arbitrary; the transformation (flow through skilled networks) is what generates measurable wealth.

The Paradox of Efficiency: Elon Musk, DOGE, and Flow

This brings us to a contemporary example of this clash in thinking: the push for a 'Department of Government Efficiency,' an idea championed by figures like Elon Musk. It is intuitively appealing because it stems from a household or business-centric view of finance where waste is bad and cutting it is always good. This perspective sees government spending as a cost to be minimized.

However, this view misses the macroeconomic function of that spending. It's not just about funding projects; it's about injecting the very medium of exchange (USD) into the economy. This initial injection creates the primary entropy gradient that allows the entire system to do work.

The debate over government efficiency, therefore, represents a fundamental clash of monetary paradigms:

  • Money as a Scarce Commodity: In this model, every dollar the government 'wastes' is a dollar lost forever. Efficiency is the highest virtue.
  • Money as a Flow System: In this model, the primary goal is to maintain a healthy, circulating flow. An 'inefficiently' spent dollar that enters a recursive cycle within a productive economy can create far more wealth than a 'perfectly' allocated dollar that flows to unproductive, unskilled human capital.

Focusing exclusively on micro-level efficiency is like trying to optimize the placement of every single water molecule in a river while ignoring the fact that the river needs to flow to irrigate the valley. Cutting spending in the name of efficiency risks constricting the flow itself, potentially starving the productive human capital downstream that creates real wealth.

The paradox deepens when you consider the simultaneous championing of currencies like Dogecoin. DOGE has no army, no state, and no tax authority to compel its use. Its value is a function of network effects, memes, and speculative belief. It is a passenger, a memetic layer riding on top of the vast economic operating system that fiat currencies, particularly the US dollar, provide. For DOGE to be traded, it must plug into the exchanges and markets created by the very government-sponsored money flows that a 'Department of Government Efficiency' would seek to reduce.

This is the core contradiction: it's an attempt to cut the power to the grid while promoting an appliance that runs on it. It highlights the error of viewing money as a thing to be optimized, rather than a current to be circulated through a productive network.

The National Debt Paradox

This understanding of how fiat money creates structural entropy gradients through spending and taxation reveals something surprising about the U.S. national debt, something that the Bitcoin vs. fiat debate often obscures.

This framework flips the script on the U.S. national debt. The media often portrays it as a scary, household-style debt that must be repaid. But this is a fundamental misunderstanding. If government spending creates money and taxation destroys it, what does 'paying off the debt' actually mean?

It means destroying U.S. dollars. The national debt is simply the total sum of dollars the government has spent into the economy that it has not yet taxed back. These dollars are held as assets (savings) by the private sector and other countries. For the U.S. to 'pay down its debt,' it would have to tax more dollars out of the economy than it spends in. This would effectively burn USD. Since the dollar is the world's reserve currency, this would drain global liquidity and could cause world trade to crash.

This global reliance creates a powerful feedback loop. The more the world builds and trades using the dollar, the more dollars it needs to finance that activity, which puts pressure on the U.S. to supply more liquidity by running ever-larger deficits. This is the heart of the Triffin Paradox: the inherent conflict between a country's domestic economic interests and its role as the world's central banker. To fuel global growth, the U.S. must supply dollars, but by doing so, it risks undermining the long-term confidence upon which the entire system rests.

This reveals a deeper truth: some debts are not meant to be repaid. Their purpose is to define and sustain a relationship, not to be settled. Think of the 'debt' a child owes their parents. It represents a lifelong bond of gratitude and obligation. You don't repay it to your parents. You pay it forward to your own children, sustaining the relationship across generations. This is precisely how the dollar system works: when you use USD, you're not settling an old debt, you're participating in an ongoing network of obligations that keeps the economic community alive. The U.S. national debt functions in precisely the same way on a global scale. It is not a household debt to be eliminated, but a permanent, relational bond. It is the foundational IOU that underpins the entire world's financial system. To 'repay' it would mean destroying the very economic relationships that enable global trade, causing the world economy to collapse. Instead, the debt keeps flowing forward, sustaining the network.

The size of the U.S. debt is scary theater for people who think money is a scarce commodity. For people who understand flow, network position, and global dollar demand, the debt is the scorecard of how much real productivity the world has voluntarily routed through the U.S. monetary system.

This resolves the apparent paradox of the Triffin dilemma. Yes, the system could undermine confidence if mismanaged, but as long as the structural foundations stay strong (military reach, institutional trust, no viable competitor, commodity pricing in USD, deepest capital markets), the debt can keep growing without crisis. Why? Because it is the mirror image of the rest of the planet's desired dollar savings. The U.S. is running the world's most successful negative-entropy pump, and the national debt is just the heat gauge showing how hard the pump is working.

When Debt Becomes Destructive

But this doesn't mean all debt is good. Debt becomes destructive when the flow it creates doesn't generate new entropy gradients. Remember from Section 2: money flowing through skilled people creates real wealth. But if government spending flows to consumption without production, or to unskilled networks that can't create new goods and services, the money circulates without generating real value. This causes inflation without growth: more money chasing the same (or fewer) goods and services.

The key difference is whether flow creates productive capacity. Spending that builds infrastructure, educates people, funds research, or enables businesses to scale creates new entropy gradients. Money flows through these investments and triggers cascading productive activity.

Not every investment succeeds, of course. Innovation is unpredictable and risky. Investment in new ventures can fail, destroying value rather than creating it. But this is different from systematically financing consumption without production. Failed innovation at least attempts to build productive capacity. When you make enough attempts across a skilled population, the successes compound and generate explosive returns that far outweigh the failures. This is how venture capital works, and why R&D spending can justify itself even with high failure rates. The key is maintaining a portfolio of attempts flowing through skilled networks.

What destroys value is spending that never even tries to build capacity: bailouts that don't restructure, subsidies that prop up zombie companies, endless consumption without investment. The money flows, but it doesn't create the productive work that generates real goods and services. Prices rise while productive capacity stagnates or shrinks.

This is why the quality of human capital matters more than the efficiency of initial spending. National debt should grow to reflect productivity. When productive capacity expands, the economy needs more money to finance that activity. Debt becomes destructive only when it finances pure consumption in an economy that can't produce.

3. Why Bitcoin Supporters Distrust Fiat

Bitcoin advocates have legitimate critiques of fiat currency:

  • Governments can print money at will
  • This dilutes the value of existing holdings
  • Political decisions, not economic logic, drive monetary policy
  • Inflation acts as a hidden tax on savers
  • The system privileges those closest to the money printer

These concerns are real. But they mistake the abuse of a system for a fundamental flaw in how value coordination works.

Where Does Bitcoin's Flow Come From?

Before examining Bitcoin's proposed solution, let's first understand where Bitcoin's economic flow actually comes from. Unlike fiat currencies that create structural entropy gradients through the cycle of government spending and taxation, Bitcoin has no such native mechanism. It is not spent into existence to build infrastructure or fund services.

So where does Bitcoin's flow come from?

Not from a productive cycle, but from a psychological one: speculation. The primary force moving Bitcoin is the collective belief that its price will rise or fall. This creates a gradient, but it is a gradient of market sentiment, not of underlying economic work.

This speculative gradient is not just noise. It serves a specific function: Bitcoin operates as a fiat money transfer protocol. While technologically subpar for this task compared to other blockchains (like Algorand, on which ShiBi is built), Bitcoin's massive speculative gradient gives it a power and reach that technically superior systems lack. This usefulness as a money transfer vehicle, driven by speculation, generates its own native demand, producing a distinct entropy gradient, though this gradient remains fragile, dependent on continued belief and vulnerable to displacement if technically superior blockchains gain comparable momentum.

However, this transfer protocol function requires actual circulation. As wealth concentration increases among Bitcoin holders (explored in Section 4), even this speculative utility diminishes. The system requires flow to function, but Bitcoin's fixed supply creates structural incentives for hoarding that undermine that very flow.

Even with this native demand, Bitcoin remains a derivative system. It must piggyback on the very fiat systems it purports to replace. To be converted into real goods and services, Bitcoin must tap into the economic flows and trust networks that fiat systems, powered by taxation and public spending, have already built. It relies on fiat's river to have any current at all, even as it creates its own channel alongside it.

The Bitcoin Alternative: Fixed Supply

Bitcoin treats money like a commodity with fixed supply. But money isn't wealth; it's a coordination tool to mobilize human skill and creativity.

A fixed monetary supply assumes:

  • resources are fixed
  • opportunities are fixed
  • innovation doesn't require new liquidity
  • economies grow linearly

This worldview is pre-industrial, pre-knowledge, and fundamentally mismatched with modern innovation economies.

A fixed supply of BTC is like a CPU locked to one thread even though the hardware can run 32 threads in parallel. Scarcity doesn't create stability; it throttles the ability of a society to scale.

BTC does not solve scarcity. It simply enforces artificial scarcity.

The Real Issue: Flow, Not Supply

Bitcoin maximalists think scarcity equals value, but this is a profound misunderstanding. Scarcity without productive flow is just hoarding. Money isn't valuable because it's scarce; it's valuable because it moves. It is the very motion of money through an economy of skilled people that causes real goods and services to be created.

The problem with fiat isn't that governments can create it. The problem is where that money enters the economy and how it flows afterward.

4. Savings, Investment, and the Problem of Concentration

All saving is delayed consumption. You set aside today's purchasing power believing others will transform it into real productive value tomorrow. This belief is what makes investment possible: you channel your claim on present resources into productive enterprise, betting that the flow through skilled hands will generate more goods and services than exist today. Your delayed consumption becomes a claim on that future abundance.

In an efficient economy, every dollar saved becomes a dollar invested. All stored potential gets channeled into productive flow. Hoarding prevents productive flow, which is why slight inflation is necessary to prevent hoarding.

How Concentration Kills Flow

When wealth concentrates at the top, the economic engine sputters. Not for moral reasons, but for structural ones. The problem is simple: the rich are too few to generate the demand needed to sustain broad-based production.

A billionaire can only eat so many meals, wear so many clothes, or live in so many houses. Their consumption patterns differ fundamentally from the mass market:

  • They spend on luxury goods: yachts, private jets, rare art, custom supercars
  • These purchases employ relatively few people (specialized craftspeople, luxury service workers)
  • They don't drive demand for the everyday goods and services that 80% of the population needs: affordable housing, education, healthcare, mass-market consumer goods
  • Most of their wealth sits in financial assets, circulating through investment markets rather than the productive economy

When purchasing power concentrates in the few, several things happen simultaneously:

  • Money velocity slows: The rich save/invest a much higher percentage of income than the middle class
  • Demand for mass production weakens: Without broad purchasing power, businesses can't justify scaling production
  • Innovation stagnates: Companies optimize for luxury niches instead of solving problems for the many
  • Flow gradients disappear: Money stops circulating through the productive economy

This is not a moral argument. It's physics. High concentration creates a stagnant pool instead of the distributed flow gradients that drive economic activity. A thousand middle-class families spending $50,000 each generates vastly more economic flow (more transactions, more jobs, more innovation) than one billionaire spending $50 million on a yacht. When spending power concentrates on luxury goods, it starves the industries that serve the 80%. The yacht builders thrive while affordable housing, education, and healthcare sectors can't attract capital or justify expansion. The economy optimizes for the few, not the many.

The rich don't hoard cash under mattresses, of course. They invest. This is why it's so hard to tax the rich: taxation happens when wealth converts to cash, but as long as wealth stays locked in appreciating assets, it remains untaxed. But if those investments flow into nonproductive assets (real estate speculation, stock buybacks, luxury collectibles), all they do is bid up prices without creating new goods or services. Capital chases returns, not productivity.

The concentration problem is compounded by where new money enters the system. This is the Cantillon effect: those closest to the money spigot benefit first and most. When central banks inject liquidity (as discussed in Section 2), they typically do so through financial markets: buying bonds, lowering interest rates for banks, backstopping asset prices. Asset owners (the wealthy) see their portfolios inflate before the new money reaches wages and consumer prices. By the time it trickles down to workers and the middle class, prices have already risen. The result is a systematic transfer of purchasing power from those furthest from the entry point to those nearest it.

The Cantillon effect has a paradoxical quality. In theory, it could concentrate capital in the most productive hands if those closest to new money are also the most productive. And sometimes it does: entrepreneurs with access to cheap credit can build genuinely productive businesses. But the mechanism itself doesn't distinguish between productive and unproductive uses. Capital flows to those with access, not necessarily those creating real value. Combined with wealth concentration, this creates a self-reinforcing cycle: the rich capture both existing wealth and new money creation, regardless of productivity.

Worse, this cycle kills the very ecosystem that supports productivity. When capital flows to those who don't generate broad demand, the businesses that serve mass markets can't grow. Workers get paid less, spend less, demand weakens further, and the productive base atrophies. The economy becomes a financial casino disconnected from the real work of producing goods and services that people actually need. Even the initially productive capital holders find their productivity undermined as the broader economic ecosystem that enabled their success degrades.

This is why market crashes can be healthy. When speculative bubbles inflate asset prices far beyond productive value, prices stop carrying useful information. A stock trading at 100x earnings doesn't signal genuine productivity; it signals herd behavior and easy money. The crash restores the information value of price signals by forcing prices back toward fundamentals. It's a brutal correction mechanism, but it reallocates capital away from speculation and back toward actual production. The pain comes not from the crash itself, but from how long the distortion was allowed to build and who bears the cost of the correction.

Bitcoin faces the same structural problem. Early adopters and whales hold vast amounts of BTC, waiting for price appreciation. But if most BTC remains concentrated in cold wallets rather than circulating through transactions, it cannot function as a medium of exchange. Only as a speculative asset. The concentration creates the same stagnant pool: high potential value locked up, but insufficient flow to power an actual payment economy. Bitcoin's fixed supply amplifies this problem. With only 21 million coins ever to exist, deflation is baked into the system. If you believe BTC will be worth more tomorrow, why spend it today? Without velocity, the system behaves like a lake with no outflow, not a river. This connects to Bitcoin's deeper flaw: treating money as a commodity rather than a coordination tool (explored further in Section 6).

5. Comparing Flow Systems: USD vs. BTC

Both USD and BTC are coordination games backed by collective belief. But their flow mechanisms differ fundamentally, and flow is what creates economic value.

USD: Built-in Flow Gradients

The dollar has structural mechanisms that force money to circulate:

  • Taxation creates pull: Everyone needs dollars to pay taxes, creating demand
  • Inflation creates push: Holding cash loses value over time, encouraging spending or productive investment
  • Government spending creates injection points: New money enters through infrastructure, services, payroll
  • Legal tender laws create network effects: Debts, contracts, and wages are denominated in dollars
  • Banking system creates credit expansion: Loans create new money that flows into productive activity

These mechanisms create a structural entropy gradient that keeps money moving through the productive economy. The system is designed for flow, not storage.

BTC: Flow Through Speculation Alone

Bitcoin has no equivalent structural mechanisms. Its flow comes entirely from speculative belief:

  • No taxation requirement: Nobody needs BTC for any sovereign obligation
  • Deflationary by design: Fixed supply encourages hoarding, not spending
  • No spending injection points: BTC enters only through mining, not productive government activity
  • Limited network effects: Few debts or wages denominated in BTC
  • No credit expansion: Cannot create credit multiplier effects like fractional reserve banking

Bitcoin's only flow gradient is price volatility driven by speculation. When people believe the price will rise, they hoard. When they believe it will fall, they sell. This creates movement, but it's the movement of a pendulum, not a river. The speculation gradient can drive tremendous capital flows, which is why BTC works as a fiat money transfer protocol (as discussed earlier in this section). But without connection to productive economic activity or structural demand, it cannot function as the primary medium of exchange for an economy.

Neither Is "More Real"

One is a political coordination game. The other is a computational coordination game. Neither is "more real" than the other. Both depend entirely on collective belief and trust.

The critical difference is how they create flow. This reveals what money actually is:

  • a coordination protocol (not a store of value)
  • a signal (information about where resources should flow)
  • a claim on future production (not wealth itself)
  • a measurement tool (for tracking obligations and exchange)

USD has multiple structural mechanisms that push money through productive activity. BTC relies on speculative psychology. The question isn't which token is "better," but which system creates better flow for human economic activity.

Different Philosophies of Value

  • BTC tries to freeze value (fixed supply of 21 million coins)
  • USD tries to adapt value (flexible supply, interest rate controls, responsive to economic activity)
  • ShiBi tries to expose value (local subjective pricing, no global supply constraints)

But in all three, money is still symbolic: a shared hallucination fueled by collective interpretation. What matters is not the philosophy, but the flow it generates.

6. The Only Real Economy Is Human Work

Strip everything away (BTC, USD, DeFi, central banks, miners, wallets) and what's left?

  • people growing food
  • people building houses
  • people writing code
  • people designing chips
  • people providing care

That is the real economy.

Everything else is bookkeeping.

The mistake BTC makes is treating money as a commodity, confusing the bookkeeping layer with the production layer. Money's remarkable achievement is that it allows accounting abstractions to be used as if they were real commodities. But BTC takes this metaphor literally, treating the token itself as treasure rather than as what it actually is: a routing protocol for human effort.

Money is not treasure. Money is not energy. Money is not wealth. It is a tool for coordinating who does what work and who gets what output.

Conclusion: The Real Debate

Once you see this, BTC vs. USD stops being a moral battle. It becomes an engineering question: Which monetary system creates the best flow of human activity? That's the real debate: not ideology, not maximalism, not memes.

Money's value doesn't come from scarcity, government backing, or cryptographic proof. It comes from the trust that our collective debts and obligations will be honored.

The best monetary system is the one that maximizes productive flow while minimizing friction, hoarding, and destructive forms of debt. As Graeber reminds us, our current system is not the only possible one. History shows that when debt becomes too burdensome, societies have often resorted to mass forgiveness, a Jubilee, to restore balance.

The real question is not what money is, but what we want it to be.

Everything else is just accounting.

  1. The term 'Monopoly money' is a direct reference to the colorful, valueless currency used in the Parker Brothers board game Monopoly. Its worth is confined entirely to the social construct of the game, making it a perfect metaphor for real-world money.

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