Tuesday, 31 December 2013

After the Bitrush - a comment on the politics of money

Well, I dreamed I saw the silver
Space ships flying
In the yellow haze of the sun,
There were children crying
And colors flying
All around the chosen ones.
All in a dream, all in a dream

The predictions - oh yes, the predictions! Everywhere we see them, all giving their take on the future of money following the remarkable growth of Bitcoin.

But first let me tell you of a little story. It's not my story, it's Neal Stephenson's story. And it's the story of in-game money and the way that money (and assets created in the game by that money) 'leak' into the real world. Moreover, like Bitcoin's recent ups and downs the focus is on China and the desire of rich Chinese folk to get round their government's tight control of money leaving for other countries.

Remember folks that this desire is real - it actually happens. Here's something from an article back in 2006:

In one extreme case last year, an online gamer in Shanghai killed another player who had taken his cyber-weapon, called a Dragon Sabre in the popular online game Legend of Mir III, and sold it for 7,200 yuan (US$871).

The gamer almost forfeited his real-world life for doing so when he was handed a death sentence with a two-year reprieve.

Still, Tencent spokeswoman Catherine Chan said in a written statement that the company's virtual money did not pose a threat to the real-world economy.

Q coins were created to work as tokens for the consumption of the company's online services, and the Q coin "is definitely not a currency," she said.

All sounds a bit familiar, eh? And, if the bubble theorists and tulip fans are right and Bitcoin falls over, there will be another way for people to circumvent the nosiness of government. Another on-line system - call it a currency or an exchange system, maybe even a game, it doesn't matter. People will use it to get round the arbitrary controls governments place on our actions.

Ms Chan, quoted above, is right - virtual money isn't a threat to the real-world economy, it's a threat to government. Hence the concerns about taxation and the polemics about Bitcoin being evil. I would therefore leave you will an alternative view - not from some techno-whizz or Randian obsessive but from Hayek:

"We have always had bad money because private enterprise was not permitted to give us a better one.  In a world governed by the pressure of organized interests, the important truth to keep in mind is that we cannot count on intelligence or understanding but only on sheer self-interest to give us the institutions we need.  Blessed indeed will be the day when it will no longer be from the benevolence of the government that we expect good money but from the regard of the banks for their own interest.”

Those who believe that the only safety is the safety of government guarantee are wrong - cruelly wrong. This supposed guarantee is a fraud, corrupted by inflation and fed by the need of bureaucracy to fulfil Parkinson's Law.  It doesn't matter whether or not Bitcoin is a good investment, whether it is safe or whether other people use it for illegal acts. It really doesn't matter because the stopper is out of the bottle - the genie of liberated money is out of the bottle and is a weapon for those who would tear down the castle.

How we respond to these changes will be a measure of how much we want liberty and whether we prefer choice to government edict.


1 comment:

Ian B said...

There was an interesting comment a little while ago at Tim Worstall's blog, to the effect that the key thing about Bitcoin is not whether it's good money or not. It's that it implements a property rights system without any central registry or "owner" of the system. This struck me as enormously important; because one of the increasing problems we have is control through systems ownership, whether it's the likes of Google "owning" search, or credit card companies and banks owning the money, which is quite frightening as we approach "the end of cash", the physical token money.

The idea of unmoderated property rights seems to me to be one of the most hopeful opportunities for libertarianism, and a very positive thought to take into 2014.

Happy new year!