Can Bitcoin Keep Central Banks in Check?

Jose Nino Comments

Is Bitcoin the antidote to fiscal and monetary irresponsibility?

Certain individuals in the financial space, like cryptocurrency fund executive Travis Kling, believe that Bitcoin is one of the biggest game-changers in monetary economics. In his view, Bitcoin has developed into a hedge that could protect people’s wealth in the current economic climate which looks increasingly unstable heading into 2020 and beyond.

During a CNN interview, Kling argued that Bitcoin’s properties, such as its decentralized structure and limited supply, make it an innovative insurance policy against the volatile fiscal and monetary policies of governments.

Kling sees Bitcoin’s importance in the context of current events. He explains:

Now is an incredibly interesting time from a global macro perspective and […] it appears that crypto has been created for such a time as this. With what we have in terms of monetary and fiscal policies from central banks and governments, big tech overreach, government overreach, data privacy issues that are coming to the center of the collective consciousness.

As a “non-sovereign, hard cap supply, global, immutable, decentralized digital store of value,” he believes Bitcoin shines above other crypto assets, which makes its value proposition rather strong in a time when digital currencies are gaining more interest from the public. Indeed, Bitcoin provides a unique opportunity for those interested in monetary economics. Only ten years old, the cryptocurrency is changing the way people view the concept of money. The jury is still out on whether Bitcoin will succeed and become a legitimate competing currency against fiat currencies. Nevertheless, the beauty of this experiment is that it will sink or swim based on the decisions of private actors, and not government coercion.

The 20th century was notorious for government power grabs, from matters of taxation to bureaucratic overreach. It was no coincidence that central banking arose during this time period, enabling unprecedented growth of the state, which was most apparent during the New Deal and the Great Society. When politicians had the power of inflating the money supply, they could finance extravagant government programs without having to turn to the politically unpopular means of direct taxation.

Interestingly enough, money-printing eventually leads to the hidden tax of inflation, which can become devastating once it fully surfaces. Just ask a country like Venezuela — who hasn’t witnessed inflation below the double digits since 1983 — what it’s capable of doing to an economy.

This is why cryptocurrencies are so important. Their introduction can help educate people on why money should be kept out of the state’s hand. At the very least, this dynamic could guide people back to embracing gold— a commodity that has historically served as sound money for centuries.

Time will tell if cryptocurrencies become commonly accepted. Their arrival has at least gotten people asking questions about what constitutes sound money and why governments should have a monopoly on the issuance of money. We can only hope that these currencies succeed and correct the many political and economic errors of the 20th century.

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