By Jon Matonis
Thursday, April 18, 2013
The New York Times
this week criticizes bitcoin for being antisocial and for not having a
State-controlled supply while secretly admiring its powerful
As a complicit minion in the State’s appropriation of the monetary unit, Krugman perpetuates ‘The State Theory of Money’ myth that the sovereign’s power to collect taxes and declare legal tender imbues a currency with ultimate value.
While that may be a reason to acquire a certain amount of government
fiat currency, it is a transitory value because in the end it is still
based on a State-sanctioned illusion. Anyone who has visited a weekend
flea market has noticed the old coin and currency collector displays
filled with past experiments in national fiat money. Those paper notes
were at one time valued for something too.
We don’t want a pristine monetary standard untouched by human frailty
as Krugman claims. We want freedom in the monetary standard untouched by the politicizing process.
In a Krugman world, centralized management of the money
supply is preferable to a market-based outcome because the
academically-informed economists will serve the best interests of the
economy at large. However, our monetary overlords possess no special
knowledge or secret sauce that justifies dictatorial control over money
any more than it would justify dictatorial control over the market for
something like soda beverages or dog food. Trust in mathematics trumps
trust in central bankers.
The question of political control over a monetary system is the
greatest litmus test for discovering those that seek control over
others. Usually, it will be cloaked in terms like full employment, price
stability, temporary stimulus, quantitative easing, and economic
growth, but manipulation of the money supply serves only to favor the
issuers of that particular monetary unit.
Money has a lot in common with religion. At some level, it requires a
huge leap of faith. Yes, a belief in gold requires this too as the
non-monetary value assigned to gold is probably no more than 5% of its
market price. However, this is also what makes bitcoin the ultimate social
money because for its value it merely requires others, not the law.
Money is already the most viral thing on the planet and the network
effect exponentially reinforces that.
Krugman actually struggles to assert that bitcoin is antisocial
because he cites economist Paul Samuelson who once declared that money
is a “social contrivance,” not something that stands outside society.
Samuelson is absolutely correct on that point and bitcoin stands firmly
within society. It is no one’s right to question why some place value on
bitcoin and some do not since all value is subjective. The rationale
for assigning value to bitcoin is as varied as the human fabric itself.
In this context, society can be defined as those mutual users willing
to agree to a medium of exchange and a store of value. Since bitcoin,
just as the Internet, recognizes no political boundaries, Krugman
resists seeing the global monetary unit as something social. Krugman sees society only as a multitude of aggregated fiefdoms where he is the emperor’s cherished tailor.
Though, just like the untainted child in the Hans Christian Andersen
fairy tale, some of us are beginning to notice. It’s not the illusion
itself that so offends our sensibilities, but more the notion that a
competitive illusion is not to be permitted. If a free market illusion
voluntarily agreed to from the bottom up is so desperately feared, then
the protectors of the State-sanctioned illusion must not have the most
benevolent of motives in store for us plebeians.
I don’t know about you, but I for one can stand up and exclaim: “the fiat emperor has no clothes!” What if more of us did?