Bitcoin threatens government ergo Bitcoin is evil

****

This is the essence of Paul Krugman's argument suggesting Bitcoin's sinful nature. And this evil is defined in a quote Krugman takes from Charlie Stross:

BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions. 

It is on this basis that Krugman makes the judgement that Bitcoin is evil. Indeed, he recognises that the debate about the morality of private money is very different from the debate about how (or whether) the private money actually does the job that state money does.

Krugman's core criticism of Bitcoin - and one assumes other means of exchange (or value storage) that aren't controlled by government - is that is undermines big government. Moreover, if private money succeeds (and the jury is out on this) then there is no foundation for monetary systems that drive these big state, big corporation systems - what we can call 'national accounting arithmetic' or 'magic money tree' models.

This is only a moral question is you accept that there is a moral basis for taxation.

Since I don't believe there is any moral case for taxation (as opposed to pragmatic, practical cases) then I see no reason at all to be concerned that private money makes it hard for the government to monitor my financial transactions.

What happens under this system is that government has to make the case for raising taxes - to set the price of government at a level where people willingly pay. Just as importantly, such a change more or less destroys the use of  income taxes to promote 'equality'. Taxes become what they should always have been - means for government to provide the services that people require of that government rather than a blunt instrument of social control.

We still have a way to go - these private monies are risky and unproven. But if the direction is towards a smaller, less intrusive and consent-based government then, far from being evil, Bitcoin is a source of moral salvation.

....

Modern Money Theory - the economics of tyranny

Giuseppe Volpi would have loved Modern Money Theory. I picture him in some dystopic alternative history clattering across Rome clutching the incontrovertible proof needed to justify the corporate state. It seems that a theory that places the state - in the form of the central bank - at the heart of the economy provides just the set of tools that Volpi needed to build a corporatist utopia. No need to worry about where the money would come from to drain marshes, ensure the trains run on time and build a military machine capable of conquering Abyssinia.

The idea that currency sovereignty provides government with the means to control the economy is, without doubt, the economics of tyranny. I know that MMT merely describes how things are rather than proposing a substantively alternative economic model. But there is no doubt that tyrants everywhere would love the ability to print whatever money is needed and use tax or borrowing to regulate how the economy responds to that new money.

And this is the problem. It isn't a matter of whether MMT works (in narrow economic terms) but the social consequences. As an approach to economic policy, MMT fails the 'dictator test' - would the policy tools help or hinder some future totalitarian leader. And there is no question at all that the model - however much it fits with the current structures of central banking and finance - would result in the obscene situation where people are taxed for reasons other than the raising of finance for government. It is the rebirth of what Finer called the "oikos" state, a polity of de facto slavery where all work is directed to the interests of the state and that state provides, according to some plan, for the needs of the people.

The advocates of MMT - good people in the main - do not appreciate that the tools they propose provide the tyrant with more control than is healthy (assuming we wish to be free). This is not to criticise a economic approach founded on the reality of our current international finance system but to question the premise - that this international finance system is desirable. Put more simply, do we wish to have a system that allows government total control - that facilitates tyranny? It seems so appealing right now - reject austerity and simply print enough money to do all those things government wishes to do. But where is the end of that?

I'm sure there are wiser heads who can have the argument about the economics of MMT but on the wider question - the matter of liberty - we should fear a system that hands to the tyrant those tools he needs for control.

....

How money differs from magic fairy gold

OK so we like money. And we rather understand money. We work at producing stuff and get money in return. We know that is really is as simple as that - the idea of money isn't complicated at all. It is a conduit for turning the added value that our labour or our investment generates into the things we want - houses, cars, food, drink, nice holidays in warmer parts of the Mediterranean, satellite TV and much else besides. It isn't the money we want (unless you're Scrooge McDuck) its the stuff.

But then these people - clever economist types with PhD's and tenured professorships at fine sounding American universities - pop up and tell us that it ain't so. They have discovered a different, previously unknown form of money - let's call it 'fairy gold'. And the people who play with the fairy gold work in banks, in government treasury departments and other grand finance houses.

The first idea behind this fairy gold is simple - the government cannot run out of money so long as it has a central bank and a printing press. Indeed, the government does not need to raise taxes, issue bonds or all the paraphernalia of the news around budget time. All it has to do is run the presses. Those taxes and those bonds are merely useful tools for regulating the economy - stopping inflation running riot, facilitating redistribution and encouraging growth.

The essential premise of this 'modern money theory', this belief in magic fairy gold, is that is accurately describes the system of finance that has existed since the collapse of the Bretton Woods agreements back in the 1970s. Money exists because governments wills it to exist and those governments can will as much (or as little) of the lovely fairy gold into existence as they wish. And - within certain arguments - this is true, the theory does describe the financial system under which we live. Something we should worry about given the complete disaster that it has proven to be over recent years.

However, the second idea behind this 'money as fairy gold' theory is much the more worrying one. Our clever economist types tell us that only governments can create money and that unless they create that money, we cannot capture the value of our labour or investment and buy that good stuff we want. We are but serfs labouring at the (largely metaphorical) coalface depending on the willingness of the government to create money. If that does not happen our labour will be in vain!

Unlike the description of the financial system (and the fact that a government controlling a sovereign currency cannot run out of money) this position is not an accurate description of reality but a deeply disturbing ideological position. It takes as it premise that all the money is the government's and, therefore, that all the value we add by our labour or investment belongs first to that government. Indeed, how much value we add has no bearing on how much fairy gold there is for us to scoop up.

So the government - regardless of value added - can produce as much fairy gold as it wishes and this accumulation can masquerade (indeed has been masquerading) as money. We are afforded the idea that the government, should it wish to build a new railway, increase welfare payments or build a 100ft statue of the central bank governor, has only to magic up enough fairy gold and issue the contract.

The reason why all this is mad, bad and dangerous - however much it may accurately describe the lunatic casino that is our financial system - is that it turns money away from its purpose. Remember back at the start of this piece - how money is a conduit for turning the added value that our labour or our investment generates into the things we want. That is what money is for - by inventing a 'theory' that describes the production of fairy gold, we do not get to an understanding of money. And pretending that you can put the fairy gold production system on steroids so as to solve the problems created by the fairy gold is to destroy entirely the idea of value. Why on earth should anyone work if the government can just summon a bit more fairy gold?

This modern money theory rather reminds me of the labour theory of value and the lump of labour fallacy - superficially appealling, internally consistent but ultimately an ideological fix that places ordinary folk as mere hamsters scampering round the state's wheels and nibbling at the goodies that state allows us to have. If I have learned one thing from 'modern money theory' it is that the system it describes - however accurately - is a kingdom of madness. And the fairy gold turns to fairy dust, useless. Blown away on the wind.

....