The greatest accomplishment of Satoshi’s technological advancement must be the ability to make huge power structures irrelevant. Making money and the financial system based in math and not in the whims of central authority is the most revolutionary change we may see in our time. However, there is a growing political thought that opposes the traditional monetary system for all the wrong reasons.
Greenbackers are fiat money supporters that want to end the Federal Reserve and central banks in order to give the power of money to the government, allowing the state to print off money instead of issuing debt and borrowing.
They are not to be confused with the Austrian School of Economic Thought who also support ending central banking, but for reasons of ending inflationary policies and freeing the financial system to the competitive forces of the market.
[divider]Austrian? Greenbacks? What?[/divider]
Let’s have a crash course on what these mean.
The Austrian School of Economic Thought emerged at the University of Vienna back in the late 19th century. This was a time when most highly regarded philosophers were German, so it was considered a bit of a mockery to call them simply ‘Austrian philosophers.’ Leading founding figures include Carl Menger, Ludwig Von Mises, and Friedrich Hayek.
They ideas on monetary policy and the financial system are very reflective of Bitcoin in that they support competition of money, financial services, and limiting inflation. Inflation is understood as the increasing of the money supply and it has dire effects. When the central bank lowers interest rates by printing off money, this creates a huge disturbance in the way that prices tell investors what to invest in. Since the interest rates are therefore falsified, consumers and investors end up spending more money over limited resources and in the end, a lot of long-term projects as well as unprofitable projects that only seemed profitable with the false interest rates fail and we get a recession or depression. This is why a lot of the Austrian School support gold and hard money over fiat money. With the emergence of Bitcoin, a lot had a hard time trusting something not backed by physical commodity, but after much discussion, the Austrian School has generally accepted it philosophically. That is a discussion for a later time.
Their big schtick is to allow money and finance to compete, requiring that government cannot control the money and thus allowing the markets to provide the money and the financial institution.
The Greenbackers get their name from the old Greenback currency issued by the North during the US Civil War which allowed them to print off money freely in order to pay for huge war expenditures. Inflation ensued and a lot of problems came down the line, but Greenbackers embrace inflation, seeing it as a way to help those in debt. What they oppose is not the central authority of the central bank; they oppose the issuance of debt. Many Greenbackers actually support the shifting of monetary powers to the Senate. Their solution to economic problems revolves around printing off money debt-free at the hands of the government.
A lot of their solutions can be traced back to the gilded age with the old US populist movement that favored inflation and money supply expansion. Their big schtick is to end debt.
[divider]So what’s the big deal?[/divider]
Bitcoin is not a Greenbacker dream. Yes, it’s technically not backed by any physical commodity, but it’s not a money that can be inflated at the whims of a government, nor would we want it to be. Governments and their central banks have had terrible track records in sustaining their country’s money as well as huge corruption in wielding such power. It’s here that Greenbackers overlook the fact that central banks are an extension of the government already and are not the product of the free market at all. Tom Woods wrote a fantastic article about this here.
“Let’s oppose the Fed for the right reasons, and let’s oppose it root and branch: not because it doesn’t create enough money out of thin air (is this really a fundamental critique of the Fed, after all?) but because the causes of freedom, social peace, and economic prosperity are at odds with any coercively imposed monopoly, and because the naive confidence in the American political class that the Greenbacker alternative demands is beneath the dignity of a free people.”
Instead, Bitcoin is most certainly influenced by Austrian thought. Jeffrey Tucker writes here for the Foundation of Economic Education:
“For my part, I was incredulous about bitcoin for two years after I heard about it. It just seemed crazy that money could somehow be created by a computer without any external or physical foundation. […]
‘It’s time for a retrospective on exactly who among economists anticipated such a radical idea, that markets themselves could discover and sustain a money independent of the State. When looking for economists, we need to begin with those who regarded money as a market good, created through entrepreneurial experimentation.
‘That path points directly to the Austrian school.”