The Lost Secret of Copernicus: The Quantity Theory of Money

This is an opinion editorial by Bitcoin Graffiti, a software developer and graffiti artist.

“The things I am saying now may be obscure, yet they will become clear in their proper place.”

,Nicolaus Copernicus

in the pages of history, Nicolaus Copernicus He is celebrated as the groundbreaking astronomer who overturned the geocentric approach and unveiled the heliocentric model, placing the Sun at the center of our solar system. However, there is a lesser-known aspect of Copernicus’ genius that remains hidden in obscurity: his profound contribution to monetary thought.

While his astronomical achievements have enthralled generations, his insights regarding the nature of money and its effects on economies have been largely ignored.

With transformative inventions such as the Gutenberg printing press and the disruptive power of gunpowder, as the medieval age came to an end, Copernicus’ groundbreaking work challenged not only prevailing astronomical beliefs but also accepted notions of money.

The advent of the printing press ushered in an era of unprecedented knowledge dissemination, which gradually led to the end of the Catholic Church’s information monopoly. Concurrently, the widespread use of gunpowder rendered knights and their armor powerless, marking the decline of the feudal system. Amidst this backdrop of change, Copernicus emerged as a visionary, his mathematical calculations ultimately proving that the Earth was not the center of the universe.

While we may look back at our geocentric ancestors and marvel at their supposed ignorance, we must admit that most of us are quite incapable of proving heliocentrism ourselves. We generally accept the current belief. If this is true, then shouldn’t there be obvious things we are missing today? What if our assumptions about money, the lifeblood of the economy, are also flawed and the study of economics is still in its infancy? Perhaps, as Copernicus shattered the prevailing astronomical narrative, we are on the cusp of an intellectual revolution that will expose the shortcomings of the contemporary monetary belief.

It is here, in the midst of these deep musings, that Copernicus’ hidden expertise in monetary matters comes to the fore again. Unbeknownst to many, this visionary mind not only revolutionized our understanding of the heavens, but also made lasting contributions to the field of monetary thought.

monetary scientist copernicus

Born in 1473, Copernicus was a citizen of Prussia (now part of modern Poland) and spent most of his life in Frombork, where the polymath was appointed to the royal court as an accountant and advisor on monetary reform after King Sigismund I . Requested him to look into the falling currency of the country,

His first monetary contribution was reinforce a theory now we know as Gresham’s law, The law states that when there are two currencies in circulation and the government sets a fixed exchange rate, the worse currency drives out the more expensive currency. In such a scenario, it is beneficial to replace the damaged coin and hoard the hard coin. In 1526, his findings were bundled into a booklet titled “”.monet cudende ratio“-“monetary money ratio.” Copernicus opens his treatise haiqian The style emphasizes the covert nature of monetary decline:

“Though there are innumerable plagues which cause the downfall of kingdoms, principalities, and republics, yet these four are (in my judgment) the most potent: discord, mortality, barrenness of the land, and cheapness of money. The first three are so obvious that no one knows they are so, but the fourth, as far as money is concerned, is thought seriously by few and only by most, because it did not happen all at once, but gradually. – It happened slowly, in a kind of mystery. Way. It overthrew republics by reason… Therefore, money is like a measure of some general estimate. However, it is necessary that the measure that should be taken is always firm and maintains a state of order. Otherwise, it is necessary to confuse the organization of the republic, and deceive buyers and sellers in many ways, just as the cubit has no definite weight.”

In a forceful tone, he argued for reforming the currency, destroying the old currency, and reintroducing full-weight silver coins. Prussia had recently suffered from war and subsequent currency devaluation. The amount of copper in the coinage increased at the expense of the precious metal and in the end the money became pitifully short. Since a fixed exchange rate was in force, it became more profitable to extract the silver by melting down the coins.

Eventually, Prussia’s currency became worthless, leaving residents unable to trade abroad as no one would accept the minted money. A lot of money is over. Deposited, melted and exported – eg Gresham’s law. Although this mechanic was already known to other civilizations, Copernicus was the first European to write it down correctly. Unfortunately the King of Prussia did not heed his advice.

quantity theory of money

Murray RothbardAmerican economists of the Austrian school even claimed that the Polish polymath theorized an early version of it. quantity theory of money (QTM). Rothbard summarized the ideas of Copernicus “Economic Thought Before Adam Smith Vol. 1,

“The causal chain started with devaluation, which increased the amount of money supply, which in turn raised prices. The supply of money is the major determinant of prices. We in our sloth don’t realize that inflation of everything is the result of money.” To be cheap. Prices rise and fall according to the state of the money.”

While contemporary man is still economically illiterate, Copernius theorized half a millennium ago that there was a linear relationship between the money supply and market prices. Somehow we take our unit of account to be fixed in supply, and never conclude that higher prices are the result of currency devaluation. Like the geocentric paradigm, it is hard to break away from this intense and skewed approach.

Today, QTM is defined quantitatively as Fischer’s formula, Here, the money supply (M) is equal to the sum (Q) of all transactions in the economy times their respective prices (P) multiplied by the average velocity (V). Given that spending behavior remains constant (V) and production of goods and services remains level, we conclude that an increase in the money supply varies directly with all prices in the economy.

Next, let’s highlight that price (P) is a vector of all prices that react differently to inflation individually, but increase linearly with the money supply on average. For example, a digital service may decline during monetary expansion through technological deflation, while scarce real estate appreciates. For Michael Saylor, CEO of MicroStrategy and the largest corporate holder of bitcoin, this is one thing that is not lost on him, as he showed replied in a tweet To Keynesian Paul Krugman in May 2021 on monetary expansion:

“Inflation is a vector. A scalar index can be biased by selecting certain items. Your index assumes that human beings do not need food, energy or home ownership, nor assets such as property, equity, bonds or commodities. It is clear that most of the inflation has been in assets.”

the end of an era

Copernicus Originally ending “De revolutionibus orbium coelestium”. in 1532but only published his heliocentric thesis On his death bed in 1543 for fear of the reproach of the Church. The seed was sown, but the theory took off a century later after the advent of the spyglass, Galileo Galilei was an early adopter of the telescope who made the first anomalous astronomical observations that can only be explained by adopting the Copernican paradigm,

Rejection is easy in the absence of tools that falsify current models. Before telescope heliocentrism remained only an abstract idea. But then, what about the monetary findings of Copernicus? Were we lacking the tools to turn this vision into reality?

While bitcoin is still in its early days, it appears that Copernicus is still far ahead of Keynesian economists and can be considered a bitcoiner avant la lettre. Bitcoin, with a fixed supply of 21 million coins, is a digital telescope for anyone interested in taking a deeper look into the economic machine. We can all now see what the wise men of yesteryear have been saying – that a strong economy revolves around good money. And although it may have been designed by humans, bitcoin shines as the natural hub we’ve all been searching for. Because this time may be the right place where simple monetary laws will no longer refuse to remain vague.

“However, at rest, at the center of everything is the Sun.”

,Copernicus“De revolutionibus orbium coelestium”

This is a guest post by Bitcoin Graffiti. The opinions expressed are solely his own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.