Bitcoin is not going away, and if anything it is growing into the mainstream at a consistent pace. Many American corporations, some of the largest corporations in the world, have spent 2014 endorsing Bitcoin, in spite of the drop in value. 2014 has seen nothing but price declines, but greater market acceptance in exchange. And it has even gotten the attention of the world’s largest and most influential government, the United States, to respond to it in earnest. Taxation, regulation, and condemnation have all had their moment in the sun from America’s governance. The U.S. seems both confused and intrigued by Bitcoin’s unique abilities. What is the right way forward when it comes to Bitcoin?
Also read: Ecuador’s Centralized National Digital Currency
The issues facing the global reserve currency that is the United States Dollar have been well-documented here by yours truly. Many geopolitical and economic forces are foreshadowing dark days ahead for the greatest fiat currency man has ever known. The current stock market bull run is clearly inflated by federal reserve banking interests injection of money and not a free market’s natural machinations. Bilateral trade agreements worldwide are more common than domestic spy programs against the citizenry. Forget the constant counterfeiting issues that have dogged the dollar since its inception. It doesn’t take a great mind to foresee fiat currency may be running out of time in The Digital Age, where digital currency is getting ready to carry the baton of finance. Is the U.S. Government ready to get with the times? If they lose the dollar’s status as the Global Reserve Currency, is a digital dollar a good fallback position as a hedge against hyper-inflation?
Meet James Angel, Professor of Economics at Georgetown University. He feels that a digital currency for the United States as a whole is a wise strategy going forward. He thinks the government should create what he calls “bitdollar,” a Bitcoin-like digital currency that’s backed by the US dollar.
A “bitdollar” would help bring the idea of an open payment network to “maturity.” he says. And because it would be backed by the dollar, it could bring new life to foreign countries struggling for economic stability, such as Venezuela, by giving them a stable digital currency. “I think Janet Yellen (new head of The Federal Reserve) ought to get out in front of this, to put some competition into the payment space,” Angel says.
Obviously, this would have some advantages and disadvantages. How would you convert the world’s now second-largest (behind China) economy to a digital currency? No nation has tested this out fully or successfully, though Ecuador is undergoing such measures as we speak. Pretty big difference in economies between Ecuador and the United States. It’s a risky proposition. This would force many to have computer access that may not, or may be too old or infirmed to have such access. How would they be integrated?
The biggest issue would be the amount of coins needed, and the ability of government to abuse the currency by over-producing it, just like they do now with “Quantitative Easing” measures. One of Bitcoin’s greatest strengths is its ability to remain valuable due to its finite supply. This makes it attractive to owners and investors alike.
“One of the most important characteristics of Bitcoin is the limited supply,” says Roger Ver, a well-known Bitcoin entrepreneur and evangelist. “If the supply is unlimited, it isn’t nearly as interesting.”
The chances of a U.S. Federal Government backed currency having some restrictions on production are virtually nil. You can’t fund a good war without the ability to create money at will, without the will of The People. The People can’t vote on such important and expensive things as war. That level of accountability is simply un-American.
And how would a “bitdollar” affect it’s forefather, Bitcoin? Would Americans see the reproduction for what it would be, as an endorsement of the highest order, and move into Bitcoin en masse? Or would they do as they’re told, and accept “bitdollar” as their digital currency that would supersede Bitcoin, and undermine its value? Would the U.S. Government be able to handle a digital currency of this size and import? Should they adopt this program after a smaller country, like Ecuador, jumps in and tests those waters first? Can the government be trusted to execute such a financial transition competently? Is it a good idea at all?
I personally believe that is the destiny for all nations. 50 years from now, few nations and no major countries will use mere fiat currency. Is digital currency ready for prime time at this point? I say no, but by the end of the decade, the world should be ready for a new way of economics, and Bitcoin will be at the forefront. More countries will test those waters as a whole, mainly to get away from a dependence on the US Dollar to begin with, and all the inflationary strife it brings through its abuse and over-production. Establishing a gradual five-year plan for a new currency would be the best way forward whether you are the U.S. or any other country. The next five years will probably be the most ground-breaking, tumultuous, and innovative in the history of money creation and manipulation. The United States needs to be prepared for its economic future more so than any other nation, as its future as the economic leader is in serious peril.
What should the U.S. Government do with Bitcoin and the dollar going forward? Share above and comment below.
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