On The New York Times' DealB%k section, Edward Hadas opines that Bitcoin's attempt at privatizing money will fail because "money that is not issued by governments is always doomed to failure."
Bitcoin relies on thoroughly contemporary technology. It consists of computer-generated tokens, with sophisticated algorithms guaranteeing the anonymity, transparency and integrity of transactions. But the monetary philosophy behind this web-based phenomenon can be traced back to one of the oldest theories of money.
Economists have long declared that currencies are essentially a tool to increase the efficiency of barter, which they consider the foundation of all organized economic activity. In this view, money is a convenient instrument used by individuals to get things done. It is not inherently part of the apparatus of government.
I think of the concept of privately issued tender as right money, because the whole idea appeals instinctively to right-wing thinkers. They dislike centralized authority of all sorts, including monetary authority. For example, Friedrich Hayek, Margaret Thatchers favorite economist, proposed replacing the states monopoly on legal tender with competing currencies offered by rival banks.
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