By Nathan Barton
MIT just published a story about Communist China’s central bank testing a digital currency to use instead of (in competition with) Bitcoin and all the rest.
“Speeches and research papers from officials at the People’s Bank of China show that the bank’s strategy is to introduce the digital currency alongside China’s renminbi. But there is currently no timetable for this, and the bank seems to be proceeding cautiously.
“Nonetheless the test is a significant step. It shows that China is seriously exploring the technical, logistical, and economic challenges involved in deploying digital money, something that could ultimately have broad implications for its economy and for the global financial system.
“A digital fiat currency—one backed by the central bank and with the same legal status as a banknote—would lower the cost of financial transactions, thereby helping to make financial services more widely available.
Notice – this digital currency will be a FIAT currency, just as every piece of paper currency in the world is, with its value a chimera which can vanish at any time.
Several people have written about this. One of the most pessimistic is Jim Richards 0f Agora and Laissez Faire, stating that Bitcoin’s days are numbered, and writing that “Bitcoin fans like to say cryptocurrencies are “not backed by any government” and are “beyond government control.” They go on and on about how digital cryptocurrencies are a form of liberation from state power and government control. The libertarians and anarcho-capitalists join the chorus … There’s only one problem with this viewpoint. It completely ignores the reality of state power. You don’t actually believe governments will allow an attack on their money monopoly without pushback, do you? Cryptocurrencies may have encryption, but states have guns, jails, detention centers, firing squads, confiscatory power and, in some cases, torture chambers. Who do you think wins that fight when push comes to shove? Governments are also good at lying in wait, letting the crypto fanboys and -girls get full of themselves and then pouncing like a hidden tiger or snake in the grass.”
Of course, just because government has the advantage and is favored to win, doesn’t mean that the governments will win. And even Rickards’ publishers don’t necessarily agree with him. Despite all these resources, governments at all levels are incredibly stupid and often fail to achieve their objectives. That could be the case here.
But he is dead right that governments will NOT give up an effort to either (a) demolish these cryptocurrencies or (b) co-opt them into the central-banking, debt-based fiat “money” system. Clearly, the cryptocurrency system (“properly managed” by the bureaucrats and financial institutions) is perfectly in line with eliminating cash (and coin – including ownership of gold (and silver) except for industrial and maybe jewelry use).
So what do we do? Refuse to play their game, whenever possible. As businesses, consider strongly going to as much cash as possible (many fuel companies and even locally-owned motels are already doing so, to save on credit-card charges and hassles). Encouraging others to do this. NOT depending too much on Bitcoin and the like, and being prepared for what likely will continue to be numerous government-triggered collapses and runs. Making sure that you are able to survive for days or even weeks without the advantages of credit cards and ATMs and easy bank withdrawals – but not totally depending on fiat paper money (or debased coinage) which can become worthless overnight. (And when that crash can be triggered by dozens of different sources.)
And in the meantime, work more and more toward living our private and business lives with as little governmental contact (and bank contact) as possible.
It is not, and will not, be easy. It may be impossible for many of us to do so. And I am open to alternatives – please, folks, share ideas. I’ve seen many, many proposals and schemes in the past few decades: every one has failed, either because of its own shortcomings (anyone remember “Silver Dollar City,” a kind of Galt’s Gulch plan), or because government hit it with a sledgehammer (Liberty dollars, for example). But we are inventive, creative, and so much in need of solutions. Maybe Bitcoin and other cryptocurrencies ARE that solution, or someone will invent something else next week.
Mama’s Note: Very true, and all efforts to avoid entanglement with fiat “money” is wise. That cannot, however, work alone. Everyone who wants individual liberty and freedom from the controllers – both government and other individuals – will do well to constantly question the legitimacy of the “authority” these folks presume to control our lives and property.
By what legitimate authority? Ask that question every chance you get, and be prepared to back it up with facts.