On March 5th, 2014, WSJ editor columnist, Michael Casey, wrote a thought provoking article which made me think of the next “runner” after the collapse of Bitcoin. Before, I have never thought of a private company can handle such an overwhelming duty of money exchange, yet I have changed my mind after reading this article. It is possible. Either by the government or by private company; the next runner of ‘money exchange’ will mostly like be the electronic dollar. Use of electronic dollars and its benefits, in terms of our professor’s blog posts, How governments can and should beat Bitcoin at its own game, can convince people to believe that complete use of electronic dollars can get rid of zero lower bound problems as well as stimulating economy more effectively than under the use of paper currency. In theory, I think that the use of electronic dollars is very profound and plausible which likely to happen in real life sooner than what most people expect. Once again, this WSJ article, What if the Bitcoin End Game is a Digital Dollar?, gave me a spark on which I have not thought about it before. That is, the possibility of U.S. government losing its own game.
Not a long ago, we saw Mt.Cox crashed because Bitcoin algorithms were hacked. This left a big punch hole inside of the most important function of Bitcoin use which is trust. Bitcoin fans, entrepreneur, and enthusiasts of Bitcoin supporters are disappointed and many of them left the market. However, those people are not given up their dream of what seems to me is like dethroning U.S. government dollars. It seems to me first that their dream must be the “Mission Impossible”, yet I start to doubt and ask questions: “What if?”
“History repeats itself” is very powerful phase. This gave me chill when I began to write this post. Think about the time when gold standard was getting replaced by paper money. I can imagine economists back then might also have been having very similar discussions as now we are talking about possible scenarios of electronic dollars replacing paper currency. For example, what I think the reason why the gold standard was dethrone by the paper currency is that U.S. government wanted to devalue their paper currency against hyper-inflation, yet they were unable to achieve because their paper currencies was originally pegged to gold. Similarly, having zero lower bound prevents the U.S. government to more economic stimulus when it needs most. In the past, U.S. government, precisely under the President Franklin Roosevelt, had forcefully yet covertly taken out the gold standard out of U.S. in order to achieve their goal of stabilizing paper currency. In side Bloomberg, How Franklin Roosevelt Secretly Ended the Gold Standard, better explains the power of U.S. government and how it was attained its goal of changing medium of money. However, it is questionable if today, U.S. president can enforce similar foot-steps of Franklin Roosevelt when it comes to politics and money matters.
This is why I think that a giant company with right approach may complete its “job” faster than U.S. government. If a giant private tech company can invent impenetrable and secure algorithms for electronic currency, it is possible that the use of electronic money may popularize faster than previous Bitcoin spread. When it does, it will also gain huge political powers. Before this time comes, U.S. government better have been prepared to win its own game against a giant private tech company, otherwise U.S. government fiscal and monetary policies may not work as effective as before.
Creativity of individuals and their own powers are influencing billions of people around the world today. With the help of more advance technology, it is quite possible that private company issued electronic money behaves like U.S. dollars. May be, someday, it even can dethrone the U.S. dollars if it get enough political and worldwide supports. This can be a disaster for many of us. This may be the end of the liberal democracy. I cannot imagine how rules and regulation will be change in the future, yet in human history, so much power in the hands of few always brought the end of empire. Thus, I hope that U.S. government getting prepared to bit its own game by considering more seriously about potential gains and losses of using electronic money.