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Will Bitcoin claim the economist Nobel laureate Friedrich Hayek?

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The creation of money has actually been in private hands since, well, forever. If we consider modern times – after the creation of the US Federal Reserve System in 1913 – one of the most common misconceptions in the masses is the belief that public institutions, such as the Fed or the ECB, are the only expression of public interest and that the creation of money is the exclusive prerogative of the sovereign "nation-states". Although it is so widely claimed – or simply conveniently believed – the truth is rather different.

Indeed, in addition to the fractional reserve banks – which allow commercial banks to create the largest part of the currency at broad sense in the system – the same well-known commercial banks, too big to fail, also have a substantial direct interest in the aforementioned institutions. Take the example of the ECB, its governance is officially in the hands of 6 members of the Executive Council and governors of each of the 19 national central banks of the Member States . So you might think that all this is politically approved by the democratically appointed governments of each member country. Well, not really.

In Italy for example – although it is the same for the other countries of the EU – the shareholders of the Banca d 'Italia are for most private banks or large insurance companies such as Unicredit, Intesa Sanpaolo and General Assicurazioni .

Although the situation is much more obscure in the United States, the concept is the same: the national banks have each of the 12 federal reserve banks which are then part of the EDF . As for which members of the 12 FRB, good luck finding them because it is quite difficult to find a lot of information. This seems to be a well kept secret.

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Independently, there is a monopoly on the creation of money, which is attributed by governments to the private banking sector – though it is hidden by the appearance of the EDF and the ECB as independent authorities – and it is safeguarded by the same governments that legally support private trust funds and make them legal by decree, thus perpetuating the privileges of the banking sector.

In 1976, FA Hayek – Nobel laureate of economics in 1974 and one of the most prominent members of the ] Austrian School of Economics – wrote a pamphlet entitled " Denationalization of Money " , in which he foresaw the emergence of private funds that could compete with each other and against the monopolies of governments, which, in his words, has the shortcomings of all monopolies such as " " prevents the discovery of better methods to satisfy a need for which a monopolist has no motivation ".

Friedrich Hayek. Image credit: Flickr. Despite his visionary and very interesting theories, all his assumptions about the benefits of a competitive regime for money remained essentially untested that, monopoly and legal privileges can not be questioned by private funds without these being immediately attacked by the governments.

But Bitcoin was the first private currency that allows for a radical paradigm shift and can begin to effectively test Hayek's assumptions because he is able to challenge monopoly privilege through his decentralized nature and properties that make it resistant to coercion, censorship and geopolitical manipulation.

Without a central point of failure, governments can not effectively attack Bitcoin.

While granting Hayek that the banking monopoly of money creation is one of the causes of the many diseases of our financial system and increasing social inequality to levels never seen since 1929, the so-called benefits competing amounts are yet to be proven.

Hayek envisaged a competitive monetary regime that would allow the stability of currency prices, the preservation of purchasing power and reserves of value, as well as the usability as a unit of account and a means of financing. 39, exchange for daily purchases.

The Italian FM Ametrano professor of the Universitat Bicocca Milano and Politecnico di Milano, which is one of the most important voices in favor of Bitcoin, was the only one of its kind. one of the first to plead – in 2016 – for the new system of competition funds planned by Hayek.

Professor Villaverde, of the University of Pennsylvania, is one of the first to have recently studied the impact of cryptocurrencies and this new regime of competitive money allowed by Bitcoin. In his column, he casts doubt on the ability of a regime of competing currencies to maintain price stability . But we must also consider that the crypto sector is developing and experimenting at the speed of lightning, which makes any analysis rather quickly obsolete. Take the emergence – in the meantime – stable parts for the sake of example. Even though I personally share most of the concerns highlighted here about their ability to maintain price stability in stressful conditions they are a clear and important sign that there is has a growing trend of creating different cryptocurrencies with different properties and features, all of which may have a specific market and a good reason to coexist. There is clearly a need for cryptos that preserve purchasing power and that can become a valuable stock (such as Bitcoin), there is a need for stable coins to be used as a unit of account and a means of credit. exchange, problems (such as Monero), etc.

All these cryptos can theoretically fulfill different functions and also be requested by the users.

Then, of course, the problems – such as their interoperability and how to efficiently exchange each crypto with others, as well as their ease of use – must all be solved by new technological developments in a timely manner .

But a point raised by the Prof. Villaverde in his column is mainly important: " the threat of competition from private funds imposes market discipline on any government that issues currencies If a central bank, for example, does not provide a "good" enough currency, it will have difficulty implementing the allocations, which may be the best feature of cryptocurrencies, in a world where we can move to Bitcoin or Ethereum, central banks must provide, paraphrasing Adam Smith, a tolerable monetary administration.Currency competition can have a great advantage for human well-being after all "


If Gresham 's law does not fully apply and money does not release money, then I hope it will make the money much better and will confirm Hayek's vision after all.

About the Author: Andrea Bianconi is an international business lawyer with more than two decades of experience, a Scholar of the Austrian economy, monetary and geopolitical history, a believer in the future of Blockchain technologies and an active member of Blockchain Hub Berlin, a legal consultant, an investor himself and an online trader with interests in commodities, precious metals, currencies, stocks Tech and Cryptos.

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