Bitcoin in the Ron Paul trade.

I had a nice thought pop in my head that I wanted to share. Bitcoin is the Ron Paul trade.

Remember when Nassim Nicholas Taleb described the Bob Rubin trade? Named after Clinton treasury secretary and Wall Street financier Robert Rubin, the Bob Rubin trade is a trade that externalizes tail risk to a third party while providing “sure”, small payoffs. These payoffs seduce the counterparty into accepting the terms of the trade without fully understanding their exposure. Think the US housing market before the crash and how buying real estate was a “smart” investment.

I also remember congressmen Ron Paul and his courageous defense of the gold standard against fiat. While I sympathize with his cause, there was always one problem: he could never hold anyone’s feet to the fire, as he did not have authority over the central banks and their printing press (another Bob Rubin trade if there ever was one). People listened, they smiled, and nothing was done.

Enter Bitcoin and its ethical counterplay. I’ll say that Bitcoin is the Ron Paul trade, because it’s a trade between people who want sound and people who want an easy way out. The trade is as follows: so long as fiat prints, Bitcoin goes up. The asset is negatively indexed against fiat printing.

The genius of Bitcoin here is that it actively punishes those who used this nasty trick to rip off hard-working, honest people from the sweat of their brow. They want to keep printing because, alas, this is all they know. Bitcoin says “great! Keep printing and helping me deflate faster.”

Instead of trying to advocate for a fairer world, we simply win when the counterparty does what was always morally wrong to begin with.

How cool is that?