Bitcoin foundation cease and desist dying
Physical commodity money may not be able to serve such a role because of small quantities, indivisibility, and other inherent restraints. Because of the massive seigniorage available for those that do so, governments have routinely created fiat money in excess.
Such action undercuts the value of currency in circulation, causing serious economic dislocation. More money chasing other valued goods and services causes prices to rise.
This means that stored money—savings—loses its value, unjustly depriving savers and people on fixed incomes of wealth while unjustly enriching debtors including governments. By one measure, the U. Unsophisticated savers and investors who have held U. Government management of money has significant costs because of its effect on investment and the economy as a whole. The possibility that monetary policy may change makes it harder to make long-term calculations about investment and debt.
Accordingly, investments are more modest and debt obligations taken on more reluctantly. Uncertainty about government monetary policy confounds planning and causes prudent investors and business people to be more conservative, restraining economic growth.
Throughout history, governments have financed profligacy with fiat paper money, doing so until confidence in their currency wanes and the currency collapses. Steve Hanke counts 56 such episodes in the 20 th and early 21 st centuries in his paper with Nicholas Krus, World Hyperinflations.
On the other side of inflation is the possibility of deflation. But deflation goes bad when people anticipating its rise in value hold money to the point where economic activity significantly slows. Held money, of course, is often put to productive use, re-circulated as loans, for example, thanks to fractional reserve banking. It is hard to conceive of an economy being harmed over the long term by an excess of savings.
It was a historical accident that governments took over the provision of money. They were often the organizations with the wherewithal to produce money that was reliable and thus acceptable to traders—and they have had plenty of power to push aside competing money.
They do not require governments to standardize them or ensure against counterfeiting—private administrative systems including open source code can handle these tasks. But this is not the only way that digital currencies threaten the status quo. Governments exercise close control over financial services providers for a variety of reasons. Banking emerged to serve a market demand for storage of physical commodity money and later paper money, both of which are hard to store securely in large quantities.
A related service, payments, emerged to meet the challenge of transporting coin and paper money as markets grew to span broad territories. The payments industry uses a variety of methods to transmit money, including checks, credit cards, debit cards, and wire transfers. There are many more, and more complex, financial services than only these, of course. Financial services generally have large economies of scale because of efficiencies that larger institutions can generate.
Governments have become deeply involved in banking, payments, and other financial services, and not only because of their role in providing money.
Spending reveals the priorities and preferences of people and the choices they make across every domain of living. Subject to consumer protection regulations that determine whether they live or die, U.
Banks are obliged to report suspicious activity that might indicate money laundering, tax evasion, or other criminal activities. As a result, financial services providers are a conscript regiment in the U. The natural scale of financial services providers and the keen interest of governments in money make for quite a public-private partnership. Large financial services providers reap super-normal profits while they nestle in government protection. Government money arose historically because governments and rulers beat out private institutions at producing sufficiently reliable money.
Digital currencies weaken that rationale because private institutions—in the case of bitcoin, code—can provide most qualities that traders look for in money.
The banking and payments industries likewise arose because physical money, whether coin or paper, was hard to store and transport securely in large quantities.
Digital money is very lightweight. It is possible to secure, even in vast amounts, without a vault. And it is instantly transportable anywhere the Internet goes. Early signs of rage against the dying of the status quo are all around. In May, the U.
Earlier in June, the International Center for Missing and Exploited Children hosted a conference premised on the use of digital currencies for funding child pornography, human trafficking, and child exploitation without evidence that bitcoin has ever been used for these purposes. Digital currencies may be used, like cash, to fund illegal transactions, though early the rumors of bitcoin being fully anonymous are untrue. And it has given Kenyans access to financial services that they otherwise lacked.
In some places, mobile phone users began to transfer value using pre-paid mobile phone credits sent via Short Message Service SMS. By the end of , M-PESA had reached 65 percent of Kenyan households, and the Economist reported that Kenyan households using M-PESA saw their incomes increase from 5 percent to as much as 30 percent after beginning to use mobile banking. Worldwide, only about one billion have bank accounts, but three billion—nearly half—have mobile phones. Just think of the reductions in crime, human trafficking, and child exploitation that might occur as societies grew wealthy enough to empower both parents and local law enforcement with tools to protect the innocent.
If digital currencies are suppressed in western markets because powerful government and business interests ally against them, their adoption path will travel through the global south. While they uplift societies badly in need by giving people access to wealth accumulation tools, digital currencies like bitcoin will be impossible to exclude from the rest of the world because they literally can travel unseen wherever the Internet goes.
In the early s, as the Internet rose to prominence, the Clinton administration tried to get industry to adopt the Clipper chip, an encryption chip to which the government would have back-door access. The government rightly lost the crypto wars because the benefits of having strong encryption in the hands of good actors—for privacy, commerce, free speech, and so on—exceeded the costs of trying and failing to keep strong encryption out of the hands of bad actors.
This history illustrates the choice before policymakers and financial business strategists with regard to digital currencies. The choice is not whether to have digital currencies. Thomas Piketty's Capital in the 21st Century - A short guide to the economics phenomenon by Cory Doctorow Oops, You Just Hired the Wrong Hitman - That moment when your hitman turns sides and then you realize that you were his target all along.
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