Ideal Money Fallacy

It has been proposed that the existence of an international non-political (i.e. objective) "value index" will result in people compelling states to "value target" their monies against the index. It has also been suggested that Bitcoin is such an index and will precipitate this scenario.

The leverage envisioned is the option to leave certain state monies for others. The capital flight is from monies of higher price inflation to lower, based on comparison with the index. The consequence of flight is that states must increasingly target their individual rates of price inflation to the index. This result is state monies "asymptotically" approaching the condition of Ideal Money represented by the index.

Ideal Money is state money with a zero rate of price inflation:

...there is no ideal rate of inflation that should be selected and chosen as the target but rather that the ideal concept would necessarily be that of a zero rate for what is called inflation.

Expression of the theory is both varied and limited (proof is left to the reader). However the above summary expresses all essential elements. Given these limitations it can be helpful to start with generous assumptions about the theory. Let us assume that a money can express objective value (see subjective theory of value), that Bitcoin is such a money, and that people generally have the ability to compare the value of Bitcoin to other major state monies. Let us also assume that, despite the apparent contradiction, people are both generally using Bitcoin in trade (the source of the index) and will prefer to use state monies (a necessary premise).

As shown in Stability Property, the purpose of state money (fiat) is to collect seigniorage (tax). Therefore if we also assume that people are free from foreign exchange controls, and their capital flight does succeed in compelling states to "value target" Bitcoin, the tax will be eliminated.