How Bitcoin can Render Government Money Obsolete

I think it’s easy for libertarians, voluntaryists, anarcho capitalists, and like-minded individuals to focus on the bad parts of our society. There’s no doubt we can be a bunch of Debby Downers. I’ve noticed this in myself when talking to friends, family, or anyone that is unlucky enough to get me started on politics and society.

Recently I’ve decided to make an effort to take a “glass half-full” point of view. Along those lines, I have come to respect the full power and influence of the internet. Yes, the same Internet that seems to be dominated by pictures of animals with witty sentences written on them. This, you see, is only a facade covering the truth. The Internet has the power to render the government obsolete. That is worth focusing on.

I was talking to a good friend of mine that graciously listens to me talk about crazy libertarian stuff and I decided to bring up this idea about the Internet and government. The idea sounded great in my head, but my mouth wasn’t ready. When he asked me to explain what I meant I realized that I had wadded into the deep end of the kiddie pool without my arm float-ies and large goggles. Needless to say, I was not satisfied with the answer I gave him.

Instead of chewing my tongue off in penance for shooting my mouth off half cocked I’m writing a series of posts about how the Internet can free humanity from the barbaric force of an obsolete relic from our uncivilized past, the state. This first post is about:

Money

Currency is one half of every economic exchange. It is a vital part of the economy. It allows for the division of labor, the price system that helps allocate resources to where they will be most useful, it allows people to save for the future, and for those savings to be invested in businesses and projects that improve our quality of life. If our money is not sound, then the economy is not sound.

Our money is not sound. The Federal Government has had a monopoly on money in the US since 1866. In 1913 the Federal Reserve was created to control the money supply and maintain a healthy economy. One of its missions is to maintain the value of the US dollar. Under the Federal Reserve the dollar has lost more than 95% of its value and counting. In short, this is caused by inflation from too much money printing and government spending. The past couple years have seen an unprecedented amount of money printing and spending. Since the production of goods and services has not kept up to the growth in the money supply the future of the dollar does not look good.

In steps the Internet and digital currencies. It is now possible for individuals to voluntarily organize and create digital crypto-currencies like Bitcoin to compete with the dollar. Simply put, Bitcoin is like Paypal, but using heavily encrypted digital “coins” in stead of dollars. The story of Bitcoin is pretty incredible. In 2008 development of Bitcoin began. In 2010 a pizza was purchased for 10,000 Bitcoins. Today a single Bitcoin is worth about $200. That’s a lot of pizzas.

Most people will react to the idea of competing currencies as they do when they smell a potent fart. Their lip will curl and their eyes will squint, but I assure you, competition is good in all things; including money.

Digital currencies can negate the overwhelming influence that the government has on the economy. First, the Fed sets artificially low interest rates that exacerbated the economic bubbles and recessions we have been living with. Digital currencies like Bitcoin are immune to central planning because they are transparent and decentralized. They can help us achieve a balance in the economy that the government can never give us. Decentralized currencies are subject to market determined interest rates and prices. Not the whims of the political class that fancy themselves our economic overlords.

Digital currencies are immune to taxation. Not only does the state love to steal from its citizens directly, but it also likes to engage in social engineering through the tax code. It taxes cigarettes, alcohol, gas, and other items and industries in order to reduce their usage. It hands out tax breaks to industries that it likes and those that are politically connected. It steals money from your paycheck before it even gets in your hands and that directly affects your wealth and ability to purchase. All this is possible because we all are forced to use their money. If used widely enough competing digital currencies can protect against social engineering, protect the fruit of your labor, and create an even playing field for companies to compete in.

Finally, stable currencies that maintain their value or even gain in value will encourage people to save for the future. Imagine if people could save for retirement and their money had the same value or more when they got to retirement. We wouldn’t need Social Security or anything like that. There would be no need to pillage the young to pay off retirees that have been robbed through inflation or failed to plan. People would be encouraged and empowered to save for the future. We would have a society based on independence and sound personal finances. Perhaps one of the most heinous sins our government has committed is the pillaging of the young and the healthy with debt to pay for an older and much wealthier generation.

The government’s violent control of money has enormous effects on our whole society. Their policies can encourage spending and debt, suppress industries they don’t like, and subsidize those they do like. Perhaps the worst part is that this power is for sale to the highest bidder. Not only can politicians use the hammer of the tax code to attack those they don’t like, but so can any company that can gain enough influence in Washington. Its a perfect storm of owning the printing press and the power of taxation.

The government will never freely return the power over the economy to the people, but with the internet and competing digital currencies they won’t have a choice. The idea of a society with competing currencies might seem like a wild and confusing place. It might be at first, but there is no reason to believe that a free people can’t produce means of exchange that enhance economic exchanges. Bitcoin and other digital currencies are the early proof of this. I look forward to the day when we can shake off the economic hinderances of debt, inflation, and taxation inflicted on us by the government’s fiat currency.

Live Free


Sources:

Private currency: http://en.wikipedia.org/wiki/Private_currency
Bitcoin: http://en.wikipedia.org/wiki/Bitcoin
Digital currency: http://en.wikipedia.org/wiki/Digital_currency

The Origins of the Fed: http://mises.org/daily/5742/

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