“When one studies the history of money one cannot help wondering why people should have put up for so long with governments exercising an exclusive power over 2,000 years that was regularly used to exploit and defraud them. This can be explained only by the myth (that the government prerogative was necessary) becoming so firmly established that it did not occur even to the professional students of these matters (for a long time including the present writer!) ever to question it. But once the validity of the established doctrine is doubted its foundation is rapidly seen to be fragile.” – Friedrich August Hayek in The Denationalization of Money [PDF]. The Keynesian response of governments around the world to last decade’s banking crises continues with further money printing announced by the Bank of England. Soon, the FED will probably follow, while ECB continues with its QE. The end result has led to negative interest rates, extreme appreciation in house prices, inflation at 40% in Argentina, an increase in nationalist sentiments, contemplation of potential barriers to free trade… to say nothing of the currency wars, depression in Greece, and a seemingly no way out. However, the insight of Hayek, a Nobel Prize winner for his work on the theory of money and other concepts, reached while he was battling with double digit inflation in Britain more than 40 years ago, provides a solution for which he argued in the strongest words: “If we want free enterprise and a market economy to survive (as even the supporters of a so-called ‘mixed economy’ presumably also wish), we have no choice but to replace the governmental currency monopoly and national currency systems by free competition.” The key insight he reached upon which bitcoin was most probably designed seems obvious once expressed: “The past instability […]
