Author: Arjun Khemani

Translation: Block unicorn

The core argument of the book "The Sovereign Individual" is not that governments are evil and markets are good, nor that technology itself is liberating. Its claims are more structural and unsettling: the evolution of money depends on the balance between violence and information, and the information age has permanently weakened the state's control over currency.

From this perspective, money is not merely a medium of exchange or a unit of account; it is a technology of power. Whoever controls money controls resource allocation, taxation, and ultimately social coordination. For most of modern history, nation-states have dominated currency because they could dominate violence and surveillance. The book argues that this dominance is coming to an end—not through revolution or collapse, but through obsolescence.

Money as the Logic of Violence

Historically, monetary systems have always aligned with the most effective means of coercion at the time. In feudal societies, wealth was land, and land was defended by force. In industrial societies, wealth shifted to factories and labor, and these assets were geographically fixed, necessitating taxation. Nation-states thrived because capital was less mobile, transactions were clear and transparent, and violence had a scale advantage over individual escape.

Fiat currency emerged naturally in this environment. It allowed states to fund wars, welfare, and bureaucracies through inflation and taxation. What was enforced was not just law, but a reality from which there was practically no escape. If your labor, assets, and transactions are tied to a specific territory, resistance is futile. Money is political because it has no choice.

Information Shock

The information age has disrupted this balance. The key shift is not the digitization itself, but the asymmetry of liquidity. The liquidity of capital exceeds that of labor. The difficulty of censoring information surpasses the difficulty of patrolling territory. Individuals—especially high-skilled, high-value individuals—can leave jurisdictions faster than states can adjust their enforcement mechanisms.

Once capital can flow instantly, be stored digitally, transmitted peer-to-peer, and be protected by encryption, traditional state control measures weaken. Taxation becomes harder to enforce, capital controls become riddled with loopholes, and inflation is no longer a universal phenomenon but can be avoided. The result is not an immediate collapse, but a slow erosion of monetary sovereignty.

This is the core insight of "The Sovereign Individual": the state loses control over money not because of popular resistance, but because people choose to leave.

The Slow Erosion of Fiat Currency

The book predicts that the fiat currency system will not collapse due to severe hyperinflation or political collapse, but will instead collapse asymmetrically. The most productive, liquid, and informed groups will exit first. They will adopt more advanced monetary technologies, reshape their legal and digital lives, and detach from the state's financial foundation.

This will create a feedback loop. As the tax base shrinks, the state will raise taxes and tighten oversight on those who remain. This, in turn, will accelerate the exit of more individuals. The state becomes increasingly predatory, more reliant on surveillance, and more fragile. What seems powerful—more regulation, stricter control—often signals decay.

Fiat currency relies on coercion and opacity. When coercion weakens and opacity collapses, fiat currency becomes a tax on those least able to evade it.

Evolving Money

In the world of the sovereign individual, money is no longer a monopoly. It is no longer a single state currency enforced by law, but a competition among multiple monetary systems. Individuals choose currencies in the same way they choose software: based on reliability, security, portability, and resistance to manipulation.

Successful forms of money share certain common characteristics. They are hard to inflate, difficult to confiscate, borderless, permissionless, and resistant to censorship. Trust no longer relies on political discretion but shifts to cryptography and protocol design. Money becomes increasingly mechanized and less human.

“We refuse: kings, presidents, and voting.

We believe: rough consensus and running code.”

— David Clark, 1992

The authors do not predict specific technologies, but their description of functional needs is remarkably precise. Their argument suggests that the best money, rather than the most radical issuers, will ultimately prevail.

The Sovereign Individual and the Decline of the State

This shift does not bring about equality but creates another form of class differentiation. Those with the knowledge, skills, and liquidity to operate in the post-sovereign monetary system will gain unprecedented autonomy. Those lacking these conditions will remain trapped in the increasingly decaying fiat currency system.

“In the future, a milestone for measuring your financial success will no longer be merely how many zeros you can add to your net worth, but whether you can arrange your finances in a way that achieves complete personal autonomy and independence.”

— James Dale Davidson and Lord William Rees-Mogg, "The Sovereign Individual"

Meanwhile, governments are forced to compete. Citizenship is no longer an identity but a service. Jurisdictions begin to market themselves based on tax efficiency, legal stability, and quality of life. Sovereignty begins to erode. Legitimacy becomes conditional.

Money is no longer merely a means of storing value; it becomes a tool of personal sovereignty.

Violence Loses Its Monopoly

Ultimately, "The Sovereign Individual" argues not for a monetary theory but for a theory of civilization. Violence is losing its monopoly on economic coordination. Information, encryption, and voluntary exchange are increasingly effective as organizing principles, surpassing coercion.

Money is just the first area where this change is inevitably occurring. Once money escapes political control, law, governance, and identity will also change. Nation-states will not disappear, but they will shrink, compete, adapt—or face decline.

Conclusion

The theory of sovereign individual currency can be simply summarized: when the speed of capital flow exceeds the government's deterrent capacity, money ceases to be political and becomes an evolutionary product.

This is not a prophecy of utopia but a prediction of selective pressure. Monetary systems that align with realities such as information, liquidity, and cryptography will survive, while those relying on force, opacity, and inertia will decline.

The future of money is not determined by ideology but by exit mechanisms.

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