I have
stepped back from the bitcoin emergence and let it evolve. It is doing very well and it is naturally
constrained in terms of supply. Thus we
have an upward price tendency that keeps speculators happy.
What it
clearly reminds us of is that money is in demand. It is always in demand. Drop a wad of bills on the street and try to
tell me it is not in demand. In fact it
is this demand that allows governments to print tons of the stuff and to engage
in outrageous behavior. We will buy
money anyway we can. It really was the
greatest single invention in history.
The
question is whether government can intervene and drive this private currency
circulation out at all. Thus my
hesitancy to say anything. I was waiting
for the other shoe or boot to drop. I
think they are still thinking about it.
A
progressively rising currency will naturally attract larger and larger sums and
more users. In the process it will tend
to devaluate national currencies. This
is negligible now but do not count on that remaining so.
Fun
and Fascinating Bitcoin
Editor’s Note: FEE is a
proud sponsor of the upcoming Crypto-Currency
Conference on October 5, 2013.
Bitcoin has revealed many astonishing things, but here’s
my top pick: It has taught us that money
itself—not just payment systems and not monetary policy, but the money
itself—can be improved. Maybe that
seems obvious now. But how come few people (if anyone) really thought of it
before a few years ago? Monetary economists, central bankers, and government
officials have obsessed only about better management of a failing anachronism.
Bitcoin has shown us that money can be improved by the
application of the same human energy, creativity, and crowdsourced, real-time
information that has made everything else better. This is an epic insight, one
that fundamentally shakes up monetary economics, payment systems, and even the
involvement of all peoples of the world in the global division of labor.
This phenomenon cries out for explanation, comprehension,
and celebration. When I think about why it’s a great time to be alive, the word
“Bitcoin” comes first to mind. I admit it: I’m nuts for this little
digital good. It has defied every expectation that it would fail and
exposed the limitations of the prevailing theory and practice of monetary
economics.
And this is the reason for the Crypto-Currency Conference in Atlanta, to be held October 5, 2013, at the
post-industrial modernist hotel The Twelve. We are bringing together legal
theorists, monetary economists, code-slinging visionaries, banking pundits,
libertarian radicals, payment-systems analysts, and dorm-room miners, all for
the purpose of making sense of Bitcoin’s rise and foreseeing the next steps.
Bringing together such a diverse group is necessary
because Bitcoin—as a money that can eventually intermediate all economic
exchange—touches so many aspects of our lives. To really understand it
requires knowledge from at least four fields of study, and, even then, aside
from every technicality, there is an aspect of Bitcoin that just inspires us to
stand in awe.
Plus, its continuing progress will make possible new gains
in efficiencies and dramatically extend the reach of global economic
integration. How? Well, think about it. In the last 100 years, nearly
everything in our economic lives has improved in ways no one imagined possible.
Mass distribution of books, medicine, indoor heating, food, cars, flight,
refrigeration, clothing—and that digital technology put progress on fast
forward is by now a cliché.
But there is one good that has not improved but rather has
gotten worse and worse: money itself. It used to be defined by something
real—gold—but governments gradually redefined money as paper, precisely so they
could fund wars and welfare and run up debt without limit. Collaborating with
an industrial cartel called the banking industry, money’s value fell for a
hundred years to carry only 5 percent of the purchasing power it once had.
Also in the course of time, the central management of
money has become ever less transparent, less stable, and riskier. Vast
resources today are expended (and extracted from the people) just to make
sense of the system and keep it from breaking down. This is the underlying
reason for the trillions in bailouts, the manipulations and corruptions, and
the political depredations of the government-financial complex. When the money
goes bad, nothing else in economic life really works the way it should.
It’s true that payment systems today have adapted
brilliantly, given that the unit of account is of such poor quality. But even
so, the credit card system built on top of the government paper-money system is
a patch in the age of the Internet. Every digital transaction with government
money opens up dangers of identity theft, fraud, and resource misallocation.
The costs are egregious and anti-competitive.
Bitcoin takes dramatic steps in two directions. On the one
hand, it restores money as a form of property with the assignment of ownership
titles. What’s being traded is not a trust relationship but an owned resource.
In this respect, Bitcoin recalls the honesty and integrity of the gold-coin
standard.
On the other hand, Bitcoin hurls us forward in time by
making geographically non-contingent monetary exchange possible between any two
individuals on the planet, irrespective of whether they have a bank account or
credit card. This is the feature that makes a crypto-standard much improved
over any proposed gold standard.
The emerging cryptographic monetary standard entirely
bypasses the age of fiat money and the age of central banking. It takes money
out of the realm of public policy and central planning and places it in the
hands of the people actually using it. Of all the features of Bitcoin, this one
is perhaps the most beautiful. It has
emerged from within the social order and was not imposed from above.
How long will it take before the full implications reveal
themselves? It took email some 20 years to go from obscure to common. Digital
phone technology needed about the same swath of time. Bitcoin, however, could
be different. Information travels farther and faster than ever before. Adoption
could be led by peoples who are currently excluded from the existing cartelized
system of privilege. Every currency crisis, whether national or international,
could be a catalyst for advances.
We are privileged to be part of the generation that can
watch this happen. The point of the Crypto-Currency Conference is to celebrate the moment, meet people with specialized
knowledge, arrive at new levels of comprehension, and also to have fun—because,
in the end, disruption of the old and the birth of the new is just a fantastic
thing to behold. We hope you can join us.
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