As the fight against Bitcoin continues
Terence Zimwara
Imagine getting a 1971 Land Cruiser as part of your perks
for that new job you just landed. Or try picturing this, a teenage receiving a
stereo from the 70s as a gift from her brother who happens to be much younger
than the gift itself!
The outcome of the two scenarios above is quite predictable,
a total rejection of the offer yet that is exactly what the financial elites
have been doing.
Money has not evolved as has everything else since it adopted
its current form in 1971 and strangely we accept this. Richard Nixon, then US
President, set a worldwide trend when he announced the temporary suspension of
the gold standard currency and the birth of fiat currency. Almost fifty years
later, fiat currency remains the medium of exchange of virtually every country.
In fact, today few people understand the gold standard--the
previous money system widely used prior to 1971-- many are now accustomed to floating
currencies and the associated inflation.
It is curious that only money has lagged behind as many
other facets of our lives have changed. We used to have LP records, audio
cassettes, alarms, video cassettes, compact discs, memory cards, wrist watches but
they have all come and gone, making way for better products.
We had a fax machine once but it has become outdated, we no
longer send telegrams because we now have better ways to relay information
quickly. Of course we cannot talk about innovation without mentioning the
internet. The internet itself gave birth to a host of new products and it has
become hard to keep up with the inventions.
So why have we not seen disruptive innovations in the
currency arena as well? Why have the controls or regulations that guarantee a
monopoly to currency issuers increased over the years?
Usually when a product or service fails to perform, it usually
spurs on a race by entrepreneurs to try to find a solution, by designing
alternatives. When an alternative succeeds, the old product is gradually phased
out yet this does not seem to apply to fiat currencies!
Since 1971, countries have experienced monetary problems
that culminated in the collapse of their respective fiat currencies.
Surprisingly, every time this happened, clueless governments have simply hoodwinked
citizens by introducing yet another paper money, with the promise that it will
not collapse.
Immediately after a currency is rebased or reintroduced,
government officials will start another process of debasement (depreciating it)
by repeating the same policies that resulted in runaway inflation and
devaluation of currency.
Famous academic, Albert Einstein, once described insanity as
the act of doing the same thing over and over again but expecting different
results. The failure to reform the way currency is created fits with Einstein’s
conclusion that governments are either insane because they keep resurrecting a
failed currency system or they are deliberating creating giant Ponzi/Pyramid
schemes disguised as money to impoverish hardworking people.
Today, the currency debasement phenomenon is no longer an
aberration, citizens are actually pre-conditioned to expect this, the budget
deficits or interest rates manipulation.
However, the growing recurrence of
currency crises has simultaneously had many people questioning the very
foundation of money. It is this sort of questioning that ultimately led to the
emergence of crypto-currencies.
Nevertheless, it has to be noted that between 1971 and 2008,
there were several attempts to create an alternative to fiat currencies that
are issued by central banks, but every time those efforts were crushed.
Government leaders acknowledge the flaws of the present system of currencies,
but choose to ignore this because of the power that the system gives them.
Consequently, private citizens who have attempted to run
parallel systems have been fined, they have been hit with heavy lawsuits and
sometimes even jailed. Others saw the state using frustrating tactics to stop
such private currency initiatives. For example, Italian lawyer Giacinto Auriti
introduced his own paper money, a culmination of his long-running campaign
against central banks and their monopoly on money production. In 2000 the
Italian financial police, the Guardia di Finanza, shut down his experiment.
Apparently, there is an agreement between monetary
authorities globally that the monopoly to create money is non-negotiable. It
does not matter if the country is a communist state, a totalitarian state, a
dictatorship or a fully fledged democratic state. They all want the exclusive
rights to issue currency for selfish reasons--wealth accumulation and power.
So for a long time, academics and social commentators have a
waged the battle to against this system without much break through.
Friedrich Hayek, a famous Austrian economist and a Nobel
Prize winner, is one prominent figure to publicly call for the establishment of
competitively issued private moneys in his book, The Denationalization of Money
published in 1976.
Hayek famously made this quote, ‘I do not think it is an
exaggeration to say that history is largely a history of inflation, usually
inflations engineered by governments for the gain of governments.’
He went further,’ I fear that since ‘Keynesian’ propaganda
has filtered through to the masses, has made inflation respectable and provided
agitators with arguments which the professional politicians are unable to
refute, the only way to avoid being driven by continuing inflation into a
controlled and directed economy, and therefore ultimately in order to save
civilisation, will be to deprive governments of their power over the supply of
money.’
It is remarkable that Hayek made the observation less than 5
years after fiat currency was introduced. There was a problem with fiat currencies
then but the problem would only grow, first culminating in the 1987 New York
stock market crush and finally the financial recession of 2008 caused by New
York banks.
There is so much evidence pointing to an eventual collapse
of currencies and naturally governments should be drawing up plans to pre-empt
this sort scenario.
It is thus bewildering that creative minds are being
persecuted for creating or supporting alternatives to national currencies.
Across much of the Western capitals, people have been arrested for trading in
crypto-currencies while Bitcoin exchanges have been shut down and others hacked.
It did not end there, the International Monetary Fund (IMF) has
urged central banks to fight crypto-currencies. True to form, central banks are
frustrating crypto-currency traders. Just recently in Kenya, a client who
wished to purchase Bitcoin had a nightmare when a bank refused to clear a
transaction only to reverse it after seven days.
Unbeknown to the client, the Central Bank of Kenya (CBK)
seems to have an agenda against Bitcoin because apparently, when the same
transaction was repeated but only this time, the client simply stated the
reason for the payment just as ‘business’ without referring to Bitcoin, the
payment went through smoothly.
It is these kinds of tactics that effectively scare
potential users of Bitcoin, at least in the short term, because by threatening
to lock out those embracing crypto-currencies from their funds inside banks,
central banks achieve their immediate objective—blocking a quick and
significant embrace of Bitcoin.
However, without offering an alternative that at least
matches Bitcoin, no central bank will be able to stop Bitcoin or alt coins. The
long honeymoon is over, the Blockchain technology was created to fight the
central bank system and after nearly fifty years of zero innovation, the fight
looks to be over before it has even begun.
Central banks particularly those in Africa, should actually
pioneer embrace of digital currencies by incorporating crypto-currencies into
their financial systems to reduce exposure to volatile world currencies.
So when the rest of the world follows suit, the continent
central banks will be at an advantage.
Terence Zimwara is a Zimbabwe based writer, economic analyst
and crypto-currency enthusiast. You can contact him on +263 771799901 or email tem2ra@gmail.com.
brilliant!
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