Is Bitcoin the Solution to What the Government Has Done to Our Money?

What is money? We use money every day to pay for virtually everything in our lives. From purchasing gasoline to power our vehicles, groceries to feed our families, or a plane ticket to vacation or visit friends and family, all of them cost money in order to exchange for the goods and services we desire. We sacrifice hours and hours every week, of our precious time with our family and loved ones, and chose to spend that time working. In exchange for our time at work we earn money, to then provide for ourselves and our family. Most of us are so busy with our everyday lives that we have never stopped to think about this very important yet very basic question that effects all of society. What exactly is money? As defined my Meriam-Webster, money is: Something generally accepted as a medium of exchange, a measure of value, or a means of payment: such as officially coined or stamped metal currency or paper money. Now that the term money has been defined, we need to go back and understand the origins of money itself and how we got to the monetary system we all live in today.

In 1963 Murry Rothbard wrote a book titled “What Has Government Done to Our Money?” The book details the extensive history money has had throughout human civilization. It also details how the government has increasingly gone beyond its constitutional authority and has used the power of government to further distance America from a system of sound money backed by gold to a fiat system backed by the faith and power of the Federal Reserve Bank and Federal Government themselves. In a comprehensive and easy to understand way Murry Rothbard details what money is and how government intervention of monetary systems during the 20th century has directly resulted in great harm to the user of that currency and therefore the citizens of the country. In order to correct the problems with our money, Murry Rothbard advocated for the United States and all governments to get back to a system of “sound money” that is backed 100% by the value of its gold reserves.

Rothbard begins his book with early human civilizations engaging in barter-based systems of exchange to the transition to the “gold standard” and then eventually on to the paper backed notes that the federal reserve banking system still issues in America today. First, how did the original system of barter and exchange work and why did we transition away from that system and towards the “gold standard”.

Barter and exchange were primarily used throughout early human civilization and the idea around it is as follows. “If Jones hires some laborers to build a house, with what will he pay them? With parts of the house, or with building materials they could not use? The two basic problems are "indivisibility" and "lack of coincidence of wants." Thus, if Smith has a plow, which he would like to exchange for several different things—say, eggs, bread, and a suit of clothes—how can he do so? How can he break up the plow and give part of it to a farmer and another part to a tailor? Even where the goods are divisible, it is generally impossible for two exchangers to find each other at the same time. If A has a supply of eggs for sale, and B has a pair of shoes, how can they get together if A wants a suit?” (Rothbard, 5). 

In order to solve this problem groups of people in early civilization began to agree upon a third-party material that all goods and services could be divisible by. The issue was that this material had to be relatively scarce and relatively evenly distributed across the world. Originally groups of people near the ocean wanted to use sea shells, but since the highest concentration on shells are near the ocean those civilizations would disproportionally benefit from the shells being used as currency. As time went on gold was the mineral of choice that the collective world associated with value and the weight of gold became divisible for virtually any good available. This was a major revolution in the way the world performed economic exchanges between one another and caused gold to become the standard currency of the world.

Once gold was established globally as the worlds currency another problem arose. As Rothbard put it “Even in the convenient shape of coins, gold is often cumbersome and awkward to carry and use directly in exchange. For larger transactions, it is awkward and expensive to transport several hundred pounds of gold” (Rothbard, 36). In order to solve this problem people began creating “gold warehouses” or “banks” to store their physical gold money in order to keep their wealth secure and protected from thieves. While also being relieved of the burden of carrying their entire wealth on their person at all times. In exchange for housing your gold in the bank the person would be charged a small storage fee and be given “paper dollars” that represent the value of the gold stored. At any point in time that paper dollars can be taken to the bank and the equal value of gold would be given upon request. This was the inception of the modern banking system that we still use in our society today.

Originally the main purpose of the bank was to protect the customer’s physical gold that was store in their vaults and provide ease of exchange in commerce by using paper currency instead of gold coins. Quickly though banks began to gain power and influence within an economy and began lending out the gold reserves with interest, in to order further profit off of other peoples stored gold. Originally though banks were bound by the “gold standard” and could not issue more paper currency than physical gold in the bank. The problems with banks began to escalate to new levels in 1913 with the creation of the Federal Reserve Banking system. The Federal Reserve system despite its name is not part of the Federal Government and is in fact a private group of multiple banks that have the sole power of lending to the United States Government. The idea behind it was that the Federal Reserve would be used in a time of extreme crisis as a lender of last resort. The system was primarily created as a result of World War 1 and 2. America and the rest of the world had to take on extreme levels of debt as a country in order to fund the war efforts. The Federal Reserve was there to artificially provide more currency than gold that was available in reserves. Some would argue that this was a noble a just purpose and was crucial for America and its allies to win the war. But the addiction of the Federal Government to spend more money than it has in gold reserves was just beginning. 

With Rothbard’s book being written in 1963 and only shortly after that in 1971 the Nixon administration officially took the United States completely off the “gold standard” only worsening the underlying problems with our currency. This led to unprecedented levels of high inflation in the 1970’s, the dot com bubble in the 1990’s and the housing market crash in 2008. All are examples of economic calamities that have resulted directly from government intervention in monetary policy. 

After the crash of 2008 a solution to the problem of our monetary system was created by an unknown entity who goes by Satoshi Nakamoto and that solution is Bitcoin. Satoshi stated that “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party” (Redshaw, 7). Bitcoin is a digital reserve currency for the 21st century that will give people back the power of sound money without fear of government manipulation. Bitcoin is optimized for security and transparency with its decentralized verification system built within it at a fundamental level. “As Bitcoin is designed with a policy of finite supply, this restores the stability of a gold standard in a form fit for the digital age. For many users, Bitcoin thus stands as the next stage in an evolutionary history of money” (Redshaw, 13). Bitcoin is the non-government solution to all the problems articulated by Murray Rothbard himself almost 60 years ago. Rothbard argued that we needed to return to the “gold standard” but today he would argue that we need a “Bitcoin standard”.

Money is a fundamental reality of life. We can choose to remain ignorant of it or we can learn from its history and be a part of shaping its future. We all participate in the fiat monetary system that is only backed by faith and not true tangible value. As a species we have unlimited economic desires only limited by the resources we can obtain. Many of our problems in society stem from classism and wealth disparity. The government controlling the monetary supply has only exacerbated these disparities in our society. It’s time for us to embrace sound money by embracing Bitcoin.