Will Bitcoins Become the People’s Federal Reserve?

Bitcoin
Bitcoin

Henry Ford said, “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

Ford was right, and that revolution has begun. It has taken the form of Bitcoin and Bitcoin spinoff currencies, such as the soon-to-launch “ProducerCoin”, that are quickly spreading throughout the world.

Since Bitcoin surfaced in 2009, speculation has run rampant regarding the identity of the individual or group responsible for it’s development. The question is certainly intriguing, but unless the inventors had something sinister in mind, the origin of Bitcoin is of little importance, because the coin’s decentralized peer-to-peer protocol acts as a protective firewall for each user.

Critics of Central Bank monopolies, this reporter included, hope these so-called crypto-currencies will offer a new form of “percolate up” economics to a struggling world dominated by powerful banks.

Recent trends may be a good measure of that probability. When the Mt. Gox Bitcoin exchange went bust, detractors declared Bitcoin dead, but they were wrong, for even in the face of these big losses, the total market cap of all crypto-currencies continued to grow. The number of new Bitcoin-based currencies has doubled in recent months, now totaling 190, with several more launching each week. A full list of all of these new crypto-currencies is available at coinmarketcap.com.

Although many of these coins resemble pump-and-dump penny stocks with names as foolish as their mission statements, others are founded on sound economic principles with altruistic goals.

What the soothsayers of Bitcoin’s doom don’t understand is that teams of people are hard at work to perfect software programs that ride on top of the original Bitcoin protocol, similar to the way HTTP rides on top of TCP-IP, and these companies will soon have a clickable GUI, similar to the graphical user interface of Windows which will allow folks like you and me to easily launch new currencies specifically for niche applications.

This new piggyback system will effectively elevate crypto-currencies from the “rabbit hole” of programmer’s language to an intuitive, easy to navigate environment. When this happens, the original Bitcoin will probably change from a speculative crypto-currency to a permanent TCP-IP platform. Subsequently, Bitcoin should develop an intrinsic value that can’t be destroyed by speculation.

The companies involved in this GUI land rush around Bitcoin include Counterparty, Mastercoin, Humint, Ethereum and NXT, just to name a few.

At this writing, it appears that Counterparty is leading the race, with the others not far behind. Most of these companies will use the Bitcoin protocol for their launch pad and a few are trying to improve upon the basic Bitcoin concept.

Currently, KCAA Radio airs five programs each week about Bitcoin. The source of this programming is a fast growing Internet-based Radio Network called “Let’s Talk Bitcoin.”

As a result of this association, KCAA Radio became the first terrestrial radio station in North America to accept Bitcoin as payment for airtime.

This is where the story takes a totally unexpected turn. It can be summed up by the late Paul Harvey’s signature quote, “And now, the rest of the story.”

As a long time critic of “The Fed” and co-author of a book on alternative monetary policy, “The Nature Of Wealth,” published in 1994, I have consistently advocated for the direct injection of United States notes into the economy.

I believe this will spur economic growth without increasing debt, because U.S. notes can be printed and spent into circulation in order to fund the important work of government without borrowing the funds into existence from a central bank, which creates an endless cycle of capital debt expansion.

Since any new issuance of United States notes is politically impossible while the Federal Reserve exists, the next best “people’s currency” seemed to be Bitcoin, at least at first glance. However, Bitcoin is deflationary, because only a limited number can be mined. This can pose big problems when Bitcoin’s value outgrows it’s functionality. It could eventually become the Berkshire Hathaway of crypto-currency.

Enter the idea of launching ProducerCoin and EmploymentCoin, two crypto-currencies based upon the aforementioned book that can begin to improve the lives of small farmers and workers who currently earn disastrously low wages.

When these coins are launched, consumers can buy them on coin exchanges like Coinbase and use them to purchase non-GMO organic production from local farmers at parity prices and in turn, those farmers will be required to pay a living wage for the labor force they use to produce this top-quality food.

The first rule of parity pricing is as follows; The value of an hour of labor at minimum wage must be equal to the parity price of a bushel of wheat at the first point of sale. In the year 2014, these two numbers are $18.00. (See page 32 of this USDA publication.)

This parity value is perfectly logical, because when a nation fails to price it’s farm production and labor force at parity, public funds must be used to subsidize the farmers and millions of people on the low end of the labor force. This creates unnecessary debt and economic hardship.

ProducerCoins and EmploymentCoins can begin to reverse this trend. These two additions to the Bitcoin “Universe” are given value when they are bought with USD by consumers. This instant monetization reduces the risk of excessive speculation, especially since the coins will be used to purchase food and labor which have an intrinsic value.

This is the type of niche that a crypto-currency can fill, and the application of such currencies is only limited by our imaginations.

Photo credit Zach Copley