Why Bitcoin ISN’T the solution to our currency issues

IN his book, Survival Of The Richest, Douglas Rushkoff describes his meeting in Davos with five billionaires who question him on where the best place is to build their respective bunkers in a post-apocalyptic world: New Zealand or Alaska?

One of them admits that he already has a bunker but asks “How do I maintain authority over my security force after the “event?”

This is a clear example of why community/society is important and why, when it breaks down, a vast collection of government-issued IOUs will have zero value in maintaining your safety. In such a world, it’s likely that “your” security force will kill you for the contents of your expensive Smeg fridge. After all, it’s a skill-set they possess and have honed for just such circumstances.

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Surprisingly, I have found that many within the independence movement are unsure about Scotland having its own currency, indeed so much so that I have heard questions such as, “how will I pay my mortgage?” and “where will I get my state pension”?

Ignorance of these issues is not their fault as during the 2014 referendum having our own currency was portrayed as the second-best option when it should have clearly been the first and only option.

For those who were then more au fait with the concept of monetary sovereignty, it was clear to them that we could not have political independence without fiscal independence. In turn, there is no real-world fiscal independence without monetary independence, because in a fiat currency world, monetarily sovereign governments spend first and tax second.

The National: Bank of England policymaker Swati Dhingra has cautioned that holding off from cutting interest rates until inflation falls further could risk leaving the economy with a ‘hard landing’ (PA)

Furthermore, we apparently have had a currency union for 317 years, but that’s not working out so well for Scotland. Moreover, despite the Act of Union coming just 13 years after the formation of the Bank of England, the UK’s central bank didn’t bother to do a rebrand. Know your place, Scotland.

For some folks, the imposition of a state fiat currency and the accompanying taxation system is viewed as controlling and coercive. Bitcoiners view fiat currencies negatively and believe that Bitcoin’s self-imposed system of scarcity is what makes it valuable. But who controls Bitcoin, and what happens when someone steals your Bitcoins? Although Bitcoin presents itself as the key to libertarian dreams, reliance on it as a currency is limited, and it certainly isn’t insured by your government, unlike the £85,000 of your fiat savings is in the UK, or €100,000 in The Netherlands.

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In fact, Bitcoin is a Ponzi scheme, reliant on the next person buying it and believing that it has real value. However, if most of your income is spent on housing, food and heating, it has no value to you whatsoever. Bitcoin has no inherent “moneyness” for most of us, whereas your monetary sovereign’s fiat currency has the most. However, if you vote for political leaders who are corrupt, have begun ignoring the rule of law and are making no investment in vital infrastructure, the real value of their – now mostly electronic – IOUs will diminish.

Bitcoiners are not communitarians, and therein lies Bitcoin’s weakness. Anthropologists and biologists will wax lyrical about how the success of the human race comes down to our ability to co-operate, and therein lies the fundamental success of a state-backed fiat currency. It belongs to all of us and is a policy tool of the people whom we elect. Except if you’re in Scotland of course.

The National: (Alamy/PA)

Fundamental reasons why your state-backed currency works domestically are:

• You pay your taxes with it.

• Everyone else pays their taxes with it.

• Your government pays your civil servants with it.

• Your government pays state pensions with it.

• Your government pays social securities with it.

Therefore, we all use it to exchange goods and services, so we really must avoid electing politicians who will debase it by making poor economic, political and legal policy decisions. Lawlessness has a tendency to debase your currency and if we want to trade and our politicians don’t play by the rules, your country will become economically sidelined.

So get along to those hustings, as many of them as possible.

Scottish independence supporters must put their faith in a national currency and, by default, in each other. Moreover, they must pay very close attention to whomever they vote for in our future independent Scottish elections. The democratic process will continue to require serious attention in an independent Scotland for us to trade successfully and to build and maintain the types of infrastructure that our neighbours to the east have gotten quite used to.

A fiat currency is a democratic collectivist tool, which is why a healthy and robust democracy are important for its success. If your chosen government is in no way creating value for their IOUs, then they will become increasingly worthless, both domestically and abroad.

A robust currency requires a robust democracy and we will all be able to play a part in iScotland.

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