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The Mises View- Bitcoin and Central Banking – Peter G. Klein

I don’t have a crystal ball, but I would anticipate that if so-called digital currencies like Bitcoin or many other brands that are trying to do the same sorts of things as Bitcoin, if they continue to be successful, if they are adopted by more people, if they begin to be used by more and more businesses, accepted by businesses, used for more and more transactions so they become more like money, I think it’s very likely that the government will do everything that it can to try to regulate and control and get its hands into the operation of these currencies.

There’s a more fundamental point sort of at stake here. Personally, I’m all in favour of these cryptocurrencies, I think they’re great entrepreneurial experiments. I wish their creators well. I think it’s great if people want to use them. I’ve even dabbled in some of these myself. But I’m not convinced that the widespread adoption of these kinds of currencies is necessarily going to lead to a dramatic reduction in the role of government in the economy. Here’s why: as Mises always emphasized, to get economic freedom, to bring about improvements in economic conditions we really need people to have the right ideas. In other words, ideology is more important than technology. Unfortunately, at present, most people in the US and other Western countries – all countries – tend to accept a sort of paternalistic intervention as government. Most people believe that government intervention is for their own benefit, the government just wants to help them out, the government is here to protect against market failure, the excesses of capitalism and so on. As long as people continue to have that mindset, my concern is that they will voluntarily give up control of their private digital wallets and other technologies that they use for transactions rather than use them to bypass the state to sort of hand them over to the state.

There was an up-ed in the Washington Post just a couple of days ago about Bitcoin, pointing out that the value of Bitcoin relative to the Us dollar has fluctuated quite a lot in recent weeks calling for a central banker for Bitcoin. What Bitcoin and other digital currencies need according to the Washington Post is some government planner who can regulate the supply to keep the prices stable and so forth. Most of us would scuff at such a recommendation and indeed, digital currencies were created precisely to prevent that kind of monetary smoothing on the part of the central authority. But as long as most users of digital currencies continue to believe in Keynesian economics and a benevolent dictator role for the state, it’s quite likely that they would also embrace such cause for regulation.

Some of these digital currency technologies don’t allow for artificial manipulation of the supply, that’s one of their key selling points. But who knows what sorts of regulations people would call for or embrace? People or consumers might switch away from something like Bitcoin and more towards another currency in which the keys are given to the state, in which the Fed has control of the digital currency because they don’t understand the reason for separating money and the state.

That’s why educational organizations like The Mises Institute are so important. It’s great to have available technologies that allow to bypass some of the state’s interventions in the economy. But ultimately, to bring about long term social change, we need to change the way people think. We need an ideological revolution and not just a technological one.