Forget QE when bitcoin and barter beckon

It should come as no surprise that in these times of global economic uncertainty and political insanity the price of bitcoin is surging, again. It is perhaps the best indicator of the extent of government interference we expect in the determination of the value of fiat money.

The more we expect governments to see (and use) that blunt, tired instrument of quantitative easing (QE) — interest rate dictates — the less we want to leave the value of our money under their central control, the more we search for an alternative medium of exchange, the more cryptocurrencies become attractive. And digital is here to stay, anyway.

As soon as we moved off the gold standard (even that zeroyielding currency is getting more attractive), we moved from placing our trust in assets to placing our trust in people — politicians, nogal.

We handed over control of the relative purchasing powers of currencies to governments, with no limitations, no accountability and in defiance of the principle of fair market value.

The only qualifications you need to dictate and control the value of money is to get elected by popular vote (we’re seeing the flaws of that simplicity), or be entrenched as a dictator or some form of birthright. Experience and expertise are trumped by power — be careful, be worried.

Because QE is so easy to do, it is employed (deployed?) as seemingly the only cure for the woes of struggling economies, again and again and again … regardless of what ludicrous outcomes it may produce, such as negative interest rates. It’s popular, and that seems to be the only test.

Devaluing money (by printing without boundaries) doesn ’ t make assets more valuable, just cheaper. A spoonful of sugar may make the medicine go down, but sugar should never be mistaken for medicine — enough of it will kill you.

It should be obvious by now that this system of central control, which has so often failed us, will be disintermediated by those who know better, by those who wish to settle trades directly with one another using a medium of exchange that is not infinite and arbitrary in its supply. Peer to peer is the new game, and neither intermediaries nor decrees are required. Alternative currencies, with logically determinable market values (supply and demand) will be used to clear deals, and the unit values of such digital currencies will go up, because their quantities are finite.

Until someone works out how to cheat. In the final result we’ll go back to barter. Of course we’re not going to carry around bags of salt or arrive at the i-Store with a couple of cows in tow, but technology is going to enable consumer-level unit sizes of actual things that can be used to pay each other, on the street.

Simple examples would include airtime, or data, or cigarettes — already forms of currency, some new, some as old as trade itself, at scale. What ’ s a steak, egg and chips worth in mobile minutes? The market will work it out, but you could probably even cut a deal with the waiter. Both sides know what they want and what they ’ re prepared to give for it. I’ve seen a bottle of wine change hands for an old collectible — both sides felt they ’ d done a bargain.

Who do you want to be in charge of your purchasing power, the free market or the Federal Reserve? Barter is not without its challenges, particularly from a fiscal management and oversight point of view. We have to pay tax to fund essential services, infrastructure and developmental mandates. But a balance will have to be found between decree and respect for market forces if indeed fiat money is to survive.

Who cares whether the European Central Bank is considering cutting interest rates, again? We don’t need their money any more.