The Bitcoin Standard: The Decentralized Alternative to Central Banking

by Saifedean Ammous

All countries had gone off gold and had to face the major dilemma of whether they should get back onto a gold standard, and if so, how to revalue their currencies compared to gold. A fair market valuation of their existing stock of currency to their stock of gold would be a hugely unpopular admission of the depreciation that the currency underwent. A return to the old rates of exchange would cause citizens to demand holding gold rather than the ubiquitous paper receipts, and lead to the flight of gold outside the country to where it was fairly valued. This dilemma took money away from the market and turned it into a politically controlled economic decision. Instead of market participants freely choosing the most salable good as a medium of exchange, the value, supply, and interest rate for money now became centrally planned by national governments, a monetary system which Hayek named Monetary Nationalism, in a brilliant short book of the same name: By Monetary Nationalism I mean the doctrine that a country's share in the world's supply of money should not be left to be determined by the same principles and the same mechanism as those which determine the relative amounts of money in its different regions or localities. A truly International Monetary System would be one where the whole world possessed a homogeneous currency such as obtains within separate countries and where its flow between regions was left to be determined by the results of the action of all individuals.