One sentence perfectly summarizes the problems with modern finance, and you can find it in your pocket. Open up your wallet and take out a US bill of any denomination. On its front, you’ll find these words:
“THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE”
This simple sentence encapsulates Old-World finance, where central bankers make intimidating commandments, and governments try to manage commerce from a central point. Contrast this with bitcoin, which represents New-World finance. Several points:
1. There’s a reason why fiat currency needs special clauses. Never in history has a fiat currency maintained its value over time. Whoever controls the printing press has always inflated the money supply. Thus, fiat money, our dollar, comes with intimidating commandments: “You must accept this paper as money – or else!”
2. Bitcoin needs no special commandment. Nobody is forced to use it; nobody controls the printing press. If it came with a declaration, it would read: “This bitcoin is completely worthless unless you choose to value it.”
3. Consider the extraordinary hubris of central planners. Some distant, far away bankers declare that their special currency will be legal tender for all debts, public and private. Excuse me? Who do these people think they are? Imagine a regular person demanded you accept whatever currency he created, just because he said so. You’d probably think he was deluded.
4. Bitcoin proves that money doesn’t require government decree. Good economists understand that money emerges from a free market. It doesn’t depend on some authoritative declaration or mystical process. A growing number of individuals choose to trade with each other using something they find valuable. It’s no more complicated than that.
The new emerging financial system has no room for lofty commandments, and we mustn’t tolerate attempts to force people into one particular way of doing commerce. Believe it or not, people can figure out by themselves what currency they want to use. (Usually, they don’t want to use junk.)
We can expect the old, failing financial system to get even worse – historically, the closer a currency edges to collapse, the stricter the financial controls become. Be prepared for a flurry of new laws, rules, regulations, and threats regarding your freedom to use money.
Fortunately, bitcoin presents an opportunity to break free from this coercive system and its inflationary, fiat currency. No matter how hard they try, governments and central banks can’t create bitcoin out of thin air, and no matter how many laws they write, it’s going to be difficult to prevent people from using it. I only hope bitcoin will be able to withstand the onslaught from all the arrogant rule-makers attempting to control a new financial world.
Steve Patterson is the author of What's the Big Deal About Bitcoin? He is a philosopher working outside of academia and the host of the Patterson in Pursuit podcast. You can follow his work at steve-patterson.com.