It is December 2021, and the Turkish lira is near its all-time low against the US dollar as President Recep Erdogan continues to enforce wall street journal “Unconventional Economic Policies”. Turkish households saw the value of the national currency fall by nearly 30% in the last month alone, making everything from food to fuel quite expensive for already struggling families.
Like many others, I believe bitcoin can fix the Turkish lira problem. And to understand why, it might be helpful to dust off a book written 45 years ago by Austrian economist Friedrich Hayek.
in the book, nationalization of wealth, The Nobel laureate says that the government’s monopoly on money is just as undesirable as any other monopoly. He argues against the creation of a common European currency – something that would become a reality in 1999 when the euro was introduced – and proposes that private institutions should be allowed to issue their own currency.
It’s an idea that Hayek acknowledges is “very unfamiliar and even dangerous to most people.” And yet, he says, those same people will eventually learn to see the benefits of a system that allows government-issued fiat currency to “compete in favor of the public.”
But with whom to compete? Although written half a century ago, Hayek’s book anticipates the rise of digital assets such as bitcoin and ether, the closest thing we have today other than gold and silver, which are “denied” money.
“When one studies the history of money, one cannot help wondering why people should exercise a special power for so long with governments that routinely exploit and defraud them. is used.”
– Nobel Prize winning economist Frederick Hayek (1899–1992)
“Bitcoin Fixes It”
According to CoinMarketCap, as I write this, there are over 15,000 different cryptocurrencies available to trade. Hayek would also agree that it’s a lot of competition. To keep things simple, we will continue to talk about bitcoin.
As a decentralized asset, bitcoin is exactly the kind of asset Hayek would have had in mind. It is neither issued by any government nor does it belong to any government. No central bank controls it. It is completely border-agnostic. I can no longer send money to anyone in Cuba using Western Union because the operation ended last year. But bitcoin? There is no problem.
What’s more, bitcoin has been a formidable store of value compared to traditional currencies such as the Turkish lira and even the dollar, whose purchasing power has steadily deteriorated since the Federal Reserve’s founding in 1913. In the past 40 years alone, the greenback has lost two-thirds of its value as Fed governor and has pursued increasingly more unconventional monetary plans.
As far as the problem of monetary manipulation is concerned, Hayek sees competing currencies as the solution. If people had a choice, they believe it would “prevent governments from ‘protecting’ the currencies they issue against the harmful consequences of their own measures.” In other words, central bankers and finance ministers will have a harder time “hiding” measures to devalue their currencies.
It should begin to understand why countries such as China and Turkey have effectively banned bitcoin, and why bureaucrats and policymakers in the US and Europe are eager to regulate it.
free markets, free currencies
Despite Crypto Ban, Many Turks Reportedly turned to bitcoin, Not to mention gold, as the lira continues to sink due to Erdogan’s insistence on lowering interest rates to combat out-of-control inflation. Yes, central banks usually raise rates, not lower them, to control higher prices, but Erdogan reportedly doesn’t want to risk economic momentum for the sake of economic stability. And before you say that, no, heads of government are generally not put in charge of monetary policy.
The country’s finance minister, Lutfi Elwan, resigned in protest last week, and Erdogan promptly replaced him with a loyalist. This tells me that the president won’t be abandoning his easy money plan anytime soon, which is bad for consumer prices but good for bitcoin’s use case.
I believe in free markets, as are you I think you are. Competition does not benefit consumers simply because it gives them choices; It also gives rise to innovation and helps to keep the price under control.
Monopolies usually have the opposite effect, but for some reason, we don’t usually think of the lira or the dollar or any other fiat currency as a “monopoly”. Maybe it’s time we should.
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