New Private Monies: A Bit-part Player?

by Kevin Dowd Durham University

Kevin Dowd argues that states must allow a level playing field as far as private money is concerned. For too long the government has stifled competition between state-backed and private currencies. Instead, central banks should welcome competition as it forces them to offer consumers greater choice and improved quality. A weakened ability to store value, growing restrictions on finance, oppressive taxes and a lack of financial privacy have resulted in growing frustration at state controlled money. The superior nature of private currencies combined with the financial freedom they offer has led to their increasing attraction. Bitcoin enables its owners, among other things, to protect their wealth, make investments free from government control and retain a level of privacy, making it increasingly attractive. The price of Bitcoin rose from 3 cents in April 2010 when first traded, to over $900 in January 2014. The relationship between restrictions on individual freedom and demand for private money is also identified in the paper. The increasing constraints on personal freedom have led to private money becoming more and more popular as it enables people to do what would otherwise be illegal. The market for private monies will continue to thrive as long as states restrict and prohibit various forms of commerce.

1 pages, Paperback

First published June 15, 2014

Reviews

[John]

Advanced economies allow the market process to produce and distribute the majority of their goods and services. But there is usually one important exception - money. It's production and regulation, long been regarded as a prerogative of the state, continues to be so.

This monopoly is now being strongly challenged. In this book, Kevin Dowd explores the way market processes, working in the emerging digital realm, are starting to provide competition to state money. Focusing on Bitcoin, Dowd demonstrates that the cryptocurrency has continually confounded skeptics and is largely fulfilling the textbook definitions of money.

But government's do not let their privileges go easily. Dowd also examines the fate of earlier experiments, the Liberty Dollar and digital gold, and describes how they were snuffed out by an aggressive and scarily lawless government monopolist.

This is a fascinating look at a subject will only become more important.