Tags: bitcoin | utility | government | currency

Bitcoin and the Government's Monopoly on Money

By Friday, 20 March 2015 08:30 AM Current | Bio | Archive

Bitcoin is the free-market alternative to government's monopoly on money.

Ever since governments began minting coins, they have rigorously protected their monopoly on making money. This has been the case in Western civilization as early as the Lydian stater to as recent as the euro.

The U.S. Constitution states that only the Congress is permitted to coin money and to regulate its value, and that states cannot do the same. Only the federal government has the authority to declare legal tender. That means its money must be accepted for the payment of debts.

The power to make money has many benefits to a government. It can reinforce its brand to the citizenry through the art used on its money. It can literally make money for itself through seigniorage. And it can manipulate the value of money to further its economic and political agenda. Money projects the government's power, and its power to make money has never been greater.

The problem has been when governments are perceived to abuse that power. Without the checks and balances of money being tied to a valuable commodity like gold, governments in the modern era have made as much money as they could get away with. Case in point are all the extraordinary monetary stimulus plans by all the major and most of the minor central banks to combat the financial crisis and the accompanying Great Recession.

But the free market has a way of disrupting monopolies when they have run their course. FedEx and the mail, Skype and telecommunications companies and Uber and taxi companies come to mind. And bitcoin has the potential of having the same disruptive impact.

Unlike government's unlimited ability to make money, bitcoin is limited to 21 million coins. Its limited quantity makes it function similarly to gold. Unlike the government's ability to declare money legal tender, bitcoin's value is solely determined by supply and demand. The more utility, the more its value. And unlike government's centralized ability to manipulate currency for its own ends, bitcoin is decentralized. That means it is immune to government manipulation.

Like all free-market solutions, bitcoin will only be successful if the market believes it has more utility than government money does. Like cash, checks, money orders, credit cards, debit cards and now Bitcoin, consumers and businesses have a choice and they will choose the form of money that offers the greatest utility for each transaction.

About the Author: Edmund C. Moy
Edmund C. Moy is the Chief Strategist of Fortress Gold Group and was the 38th Director of the United States Mint (2006-2011). He can be followed on Twitter @EdmundCMoy.

© 2021 Newsmax Finance. All rights reserved.

1Like our page
Bitcoin is the free-market alternative to government's monopoly on money.
bitcoin, utility, government, currency
Friday, 20 March 2015 08:30 AM
Newsmax Media, Inc.
Newsmax TV Live

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved