Government Failure Makes Bitcoin Succeed

Bitcoin, the premier cybercurrency, is at an all-time high in price and an all-time low in volatility. In a new article, Bitcoin: Order without Law in the Digital Age, Kyle Roche and I compare Bitcoin to fiat money and show why and how it may succeed in the long run in becoming a currency relied on by millions. In this post, we focus on the flaws in fiat currency that may enable Bitcoin’s success. In the next we will describe how Bitcoin is succeeding.

In 1924, Georg Friedrich Knapp, the father of monetary theory, wrote that “[t]he soul of currency is not in the material of the pieces, but in the legal ordinances which regulate their use.” The state must instill confidence through law that its currency will retain value. And it is the uneasy relation between a state and its currency that gives Bitcoin the opportunity to grow. Citizens in some nations rightly distrust their currencies, precisely because they have little confidence in the legal ordinances and institutions, like central banks, that regulate their use.  For instance, in the recent past nations, like Argentina and China, have undermined the value of their currencies and yet also tried to prevent citizens from using other more stable and reliable currencies to maintain the value of their assets.

Bitcoin provides many people in monetarily oppressive regimes with a better alternative.

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When Graft Is the System

I love the Wall Street Journal—the daily diary of American despair. Even if some of the stuff isn’t exactly news, or news of the “I told you so” variety.

The Manhattan Institute’s excellent Steven Malanga reports that states and their hangers-on have tried to cover up the state pension crisis.

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Corruption: The Week in Review

StandardPoors

This past week brought more news of wholesale public corruption. Jaw-dropping except that it’s becoming routine, and we are becoming inured.

Standard & Poor’s paid a $1.5 billion settlement ($125 to Calpers, with the remainder split between the feds and the states) over its alleged manipulation of ratings of mortgage-backed securities back in 2004-2007. If the allegations are true, $1.5 billion is a pittance to pay for the wreckage wrought in the mortgage meltdown; once again, a company got off cheap because it’s too big to jail.

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Geithner’s Gangster Government?

Here and there I’ve noodled over the prospect that the U.S. might turn into Argentina. I did not mean it as a policy recommendation.

Geithner Testifies At House Hearing On International Financial SystemComes news that in 2011, then-Secretary Timothy Geithner called Harold McGraw III, Chairman of Standard & Poor’s Ratings Services’ parent company, to warn him that the firm would be held “accountable” for its downgrade of U.S. debt (prompted by the melee over the debt ceiling).

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The Pesofication of America

Now available in print: Michael S. Greve, “Our Federalism Is Not Europe’s. It’s Becoming Argentina’s,” 7 Duke Journal of Constitutional Law & Public Policy 17 (2012). Alternative title: “We will pay our debts—in pesos.” Among the more salient points and predictions: bailouts of lower-level governments in the U.S. won’t take the form of rescues of individual states (this isn’t Europe). Rather, they will take the form of across-the-board—and in that minimalist sense programmatic and rule-like—financial assistance, probably under some already existing statutory framework. A bailout of teacher pension funds under No Child Left Behind is an option, as is the federal…

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The Debt Trap, Part (3): Cristina Kirchner’s Constitution

 

There’s been a lot of talk that our federalism might come to look like the EU, with Illinois starring in the role of Greece or Italy. However, the institutional differences are far too great for meaningful comparison. For example, Chancellor Merkel can depose the Italian Prime Minister with a phone call; our Constitution does not give the President, the Congress, or for that matter the National Governors Association any such agency in the affairs of a member-state. For another example, the EU (outside the egregious but fairly small Common Agricultural Policy and a few other slush funds) isn’t a transfer union. Our federalism is or rather has become that sort of union. That doesn’t mean we have a smaller problem than the EU; it just means that we have a different problem. For purposes of comparison and instruction, you want to look at a federal system that shares our problem. Come visit Argentina: you’ll see the future, and it doesn’t work. 

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