RE: What Would Jefferson Think of Cryptocurrencies?
As a former assistant professor of law at West Point, I salute your interest in discussing the fundamental principles of government espoused by Jefferson as applied to cryptocurrencies.
First, everyone should recognize that when Hamilton and Jefferson were debating over the pros and cons of authorizing the First Bank of the United States, the debate not only sharpened each side's positions, but caused those positions to be stated in the strongest, most extreme form -- much the way two sides in a tug of war end up standing at 45 degree angles to the ground. They would not, and could not, maintain such an extreme stance without the opposing force of the other side.
Hamilton won. And since then, his extreme 45-degree angle positions have been treated as not only straight-standing, but as somehow "fundamental" for our national proseperity. The extreme praise and build-up of the play "Hamilton" is partly evidence and partly cause of this.
But Jefferson understood that if private bankers were allowed to control and create the country's currency out of nothing, as their relatives who owned the Bank of England did in England, they would soon control the government, the making and interpretation of laws, and the way the Constitution was taught and interpreted.
He was right. Even Judge Bork, who was in every other respect a strict-constructionist of the Constitution, bent to the status quo of the Federal Reserve when it came to interpreting the Consitutional stipulation that only Congress had the power to create money.
So in one respect, cryptocurrencies are antithetical to Jefferson's idea that the nation's money should be created by elected representatives who are accountable to their constituents. But the other side of that coin is that when Private Bankers (The Federal Reserve is neither "federal" nor a "reserve") have seized all control of money and banking to themselves, an alternative that is under the control of the populace itself should be welcomed and encouraged.
I have written elsewhere that Bitcoin may be standing in for gold in the financial markets, because A) it is based on ownership rather than debt, and B) it is not yet under the control of the central bankers.
I suggest that all of Jefferson's warnings about the dangers of private-bank-control of currencies should be heeded when it comes to cryptocurrencies. Letting bankers capture control of when cryptocurrencies can be used, or regulate how transactions must be reported by exchanges, or any of a myriad of other intrusions they will undoubtedly try to make, are all areas where the crypto community must maintain great diligence to defeat re-centralization of control.
Thanks for your reply! I also agree that people should be more conscious about the future of cryptocurrencies so history doesn't repeat itself! Could you explain to me a bit more in detail what Jefferson meant by creating money by representatives (like in Congress?) and if this has any correlation with people who currently utilize mining rigs to gain cryptocurrency?
The history books teach a myth about Continental currency. The British made a Hurculean effort to "break" the Continental currency, which was issued directly by Congress, but could not do so. The British dumped tons of counterfeit Continental dollars on the economy, and the colonies continued to trade and to produce and to fight.
So when the Constitution was written, the founders did not think it was necessary to elaborate on what they meant when they said that Congress shall have the power to coin money. They thought that was clear enough, in light of the fact that the Continental Congress had been doing exactly that.
Unfortunately, our elected representatives seem to have no clue about how money is created. On some level they know that when the US Government issues a bond, and the Federal Reserve buys that bond, the money to buy it is created out of thin air solely as a "mechanism" to balance the books. They have a bond on their books, so they simply write an offsetting or balancing entry that balances the IOU from the government with a "deposit" owed back to the government -- in the form of credits in the government's checking account.
This is exactly the opposite of what happens with mining cryptocurrencies. The currency may in fact be "created" out of nothing, but it is not linked to anything other than the owner. As soon as it is created, it is owned. And not owed to anyone. And not capable of destruction.
Fiat money is destructible. The man whose name adorns the Federal Reserve building in DC explained to Congress that under the Federal Reserve system, if all debts were paid off, there would be no money. That can't happen with cryptocurrencies. The tokens that have been created are in the blockchain to stay.
Your reply makes me excited for the future of cryptocurrency. The way the Federal Reserve can one up the government by buying these bonds is scary for the future of the fiat monetary system that so many people depend on.Thank you for sharing your ideas, it made me do some research but I learned a lot!
Thank you!