1/Today I wrote a newsletter about why cities, as opposed to rural areas, will suffer the harshest effects of money printing.

A thread

2/I recently drove across the United States. On the trip, I saw how much cities have recently degraded, but rural areas seemed about the same. This city-rural pattern is bigger than a coronavirus-induced lockdown, and is instead, in my view, a symptom of unsound money.

3/Unsound money breaks down cities more than rural areas for two reasons:

A) Cities have more capital goods misallocated due to money printing
B) More city exchanges depend on money rather than on barter or unpriced debts.

4/

A) Cities allow for greater specialization of labor and the creation of more capital goods. (Capital goods aren't consumed directly but instead are used to make consumer goods. Bulldozers and hammers are capital goods. Parking lots and houses are consumer goods.)

5/ During credit expansion capital goods are overproduced relative to consumer goods. Then during the inevitable contraction, it is revealed that many capital goods were poor investments.

6/ Cities have more capital, and more misallocated capital goods built up, so they suffer more when their investments are revealed to be sour. Essentially, the complex economic pyramid built in a city has farther to fall when the foundation is weak.

7/

B) The second reason cities suffer more from degrading fiat is that more exchanges in cities are consummated by money rather than by barter or unpriced debts.

8/ Because you can only reasonably know and trust about 150 people. In cities, surrounded by masses, and with access to specialist laborers, you consummate most exchanges with money. In the country, however, you can meaningfully keep track of unpriced debts.

9/ So if a tree falls on your house in a city, you call a tree specialist and pay them money. If a tree falls on your house in the country, you call your neighbors and pay them with pies or a promise to give them a cord of wood next spring.

10/ So more financial exchanges in cities necessitate money. And if the money is corrupted, then the more city exchanges (labor for money) are corrupted, whereas fewer country exchanges (labor for labor) are corrupted.

11/ Corrupted interpersonal exchanges in cities build into an increasing distrust of one’s neighbors and eventually, into social unrest that I suspect will only get worse. This social unrest is mistakenly blamed on politics, wealth, or skin color rather than on its true cause.

12/ Fortunately, rural areas are comparatively protected from corrupted money (and the resulting social unrest) because they have fewer capital goods to over-invest in, and more trust is maintained by debts not priced in a corrupted currency.

13/ So go forth and enjoy rural life! If you've ever considered moving to the countryside, now may be the opportune time.

13/This thread is a summary of my weekly Bitcoin-focused newsletter. If you liked what you read, sign up here: http://eepurl.com/gMePyT