Ten years ago, the world was introduced to a remarkable truth with a real-world experiment. Government does not need to operate a monopoly on the product we call money. Money can be fully private, both in production and distribution. It can be a new money, valued independently from government issues, and it can improve based on the usual methods we use for improving everything else in life, namely the forces of entrepreneurship and trial and error. The good we call money can be like our phones, shoes, and cars, with lots of providers and products and unending experimentation toward serving people better.
The thing that opened up this insight is of course Bitcoin, which history will forever credit with being the first fully operational attempt to produce and distribute private money in the digital age. That in turn, over the last ten years of a wild and enterprising history, has given birth to a mighty industry with experimental applications.
One of the most promising experiments in this post-Bitcoin world is Facebook’s idea of creating its own private currency based blockchain technology. At the outset, it must have seemed like an easy thing to do. The tech is here, so why not embrace it? We’ve seen how cryptocurrency can function as a fully independent money without relying on central banks and departments of treasury. Why not take the next step and have international companies innovate their own currency for anyone in the world to use?
In a normal world, people might say: cool idea. Go for it. But these are not normal times. Government wants to control and regulate everything. Nationalism is back and surely that comes with national monies controlled by the state. There must be endless hearings that demand answers to the great question: how will you comply with regulations forged in the old ways with a currency whose greatest merit is precisely that it moves beyond the strictures to give the world something entirely new?
What looks like Congressional hearings and compliance requests really amounts to harassment. Consider the latest news that many mainstream providers of credit cards have backed away. Why have they done so? It’s not because it is not a promising project. It’s not because they don’t think it can succeed. It’s not because they don’t want to be part of it. The Wall Street Journal gave the whole game away with this passing remark:
The pressure on Libra’s financial partners intensified after the U.S. Treasury Department sent letters to Mastercard, PayPal, Stripe and Visa asking for a complete overview of their compliance programs and how Libra would fit into them.
In other words, the innovation is being stopped by force. Over the long term, that can’t work.
The same week after Libra lost its partners, the U.S. Treasury forcibly shut down another innovation in the space. The messaging service Telegram, which specializes in encrypted chat, created its own money-like token called a Gram. The government now says it can’t do that because that’s like a security and hence must be regulated like one. Imagine that! It’s not a stock. It’s a purely digital good, and entitlement to nothing but itself, invented by a company and offered to willing owners. Now the government steps in and says no.
Now, just think for a minute what is going on here. You have governments trying to stop the future. How do you think they can do this for the long term? You can’t just make innovation go away. It’s absurd. The forces of enterprise and innovation are infinitely more powerful than governments. Governments have only edicts and guns to enforce them. Ideas, on the other hand, take flight because they enter into the human imagination, spread like wildfire, and construct the narrative of history itself.
Ok, let’s just try a mental experiment. It’s the 11th century and some blacksmith has come up with a thing called a horseshoe. It causes the horse to be much more powerful and last much longer, vastly increasing crop yields and creating efficiencies all around. But let’s say some annoying prince decides that it’s dangerous because it is enabling the peasants to have too much free time. Here’s the question: if this one prince had succeeded in the 11th century in abolishing the horseshoe, is there any chance that today we would have them?
Nothing governments do today can forever forestall the realization of private currency innovation. Central banks and government currencies used 20th-century technology. Today we have something better. There aren’t enough guns in the world to keep it from happening eventually. Governments can slow it down but they can’t make it go away forever. They are fighting a losing battle, one with lots of carnage along the way, but they will lose this war. The people will get their money eventually.