Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“When the people find that they can vote themselves money, that will herald the end of the republic. Sell not liberty to purchase power.”     Benjamin Franklin

January 28, 2014

Ron Paul: Bitcoin Skeptic

by Stephen Littau

The virtual currency known as Bitcoin is beginning to become accepted by more and more businesses even beyond underground websites such as the recently shuttered Silkroad. Overstock.com is among the more ‘mainstream’ internet retailers to accept Bitcoin (Overstock.com sold $126k in merchandise in Bitcoin the first day of Bitcoin sales) and a few Las Vegas casinos have jumped on the bandwagon as well. No doubt there will be even more merchants participate in this experiment in 2014.

Many in the liberty movement are very bullish on what they believe is or will be an alternative to the dollar but there are a few notable skeptics within the movement. Among the high profile Bitcoin skeptics are Peter Schiff and Ron Paul.

Just over a month ago, Ron Paul expressed his skepticism of Bitcoin in his weekly podcast (Episode #43).

I’m suspicious. I don’t fall into the category and say ‘Hey, this is it. This is the solution. This is going to replace the dollar.’

One time somebody quoted me in the media saying ‘I believe that Bitcoin was going to destroy the dollar’ and that’s not quite my position. But the Bitcoin could be a participant in a process where the dollar destroys itself…or that is the Federal Reserve policy destroys the dollar. Then people have to leave the dollar and go into something else.

Ron Paul went on to say that he believes Bitcoin (along with any other medium of exchange) should be legal currency for those who wish to accept it as such but wondered out loud why the government hasn’t cracked down on Bitcoin in a significant way.

The reason I’m hesitant to say ‘Hey, this Bitcoin sounds like the answer’ is that it’s hard for anybody who knows a lot more about Bitcoins than I do to tell me what it really is. If I had to, and you had never heard of gold as money I could show you a gold coin and you could put it in your hand and you could feel it and then we could look at some history. That’s not the case with Bitcoin.

[…]

But right now the Fed hasn’t come down hard on Bitcoin so you wonder what’s going on. Why haven’t they? Because I am absolutely convinced that the federal government and our central bank does not permit, will not permit competition in currencies. They’re not going to let you and I mint some gold coins and put them out in circulation. You can go to jail for that. […] It must not seem at the moment to be a threat to the Federal Reserve and to our system.

Paul also expressed some doubts that Bitcoin could become a preferred medium of exchange with a crash of the dollar:

This is why Bitcoin is around is to offer an alternative [to a weak dollar]. […] I’m a skeptic on that but I certainly think it’s fascinating. I try to keep up with it the best I can but I would feel much better having some gold coins in my pocket than a little computer that I can carry around and recover my Bitcoin. I wouldn’t feel very secure doing that.

However one feels about Bitcoin, I think it’s important that Ron Paul’s views on the subject be reported accurately. I’m personally intrigued by Bitcoin and hope it turns out to be everything its supporters hope but I do think some skepticism is warranted (for the reasons Paul gave and more). I certainly wouldn’t put all my eggs in the Bitcoin basket but I wouldn’t worry about a little experimentation.

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3 Comments

  1. The federal government can do nothing about Bitcoin because Bitcoin is not a touchable currency, it has no bills or coins despite the name.

    Even if the government doesn’t interfere, I still believe Bitcoin will fail. It will grow and get increasingly bureaucratic. It will suffer from internal strife, and it will die.

    Comment by MingoV — January 28, 2014 @ 2:32 pm
  2. MingoV,

    I’m agnostic about whether or not the Fed or the federal govt can do anything about Bitcoin but I do think the Fed also believes Bitcoin will fail on its own. Perhaps the thinking is that if Bitcoin fails, the critics of the Fed will be discredited. This is why I think it’s important that individuals with the stature of Ron Paul and Peter Schiff urge caution and skepticism with Bitcoin. I personally worry that if too many people associate the liberty movement with Bitcoin it could do a great deal of damage in the event that it does fail (i.e. “libertarians were wrong about Bitcoin; we can’t trust anything they say about any other issue”).

    My biggest problem with Bitcoin is that it has no intrinsic value whatsoever. In the event of an EMP attack (however unlikely), how could anyone even access their Bitcoin? Even if you could access your Bitcoin, what value would it have in a true disaster? Even gold has its limits and gold actually does have intrinsic value. In a true disaster non-perishable food, clean water, seeds, and ammunition is what people would truly value IMO (see my post “Walking Dead Economics”).

    Comment by Stephen Littau — January 29, 2014 @ 11:56 am
  3. Libertarians were wrong about PayPal, but that error didn’t cause much harm. That’s mostly because we’re such a small slice of the population that few care about us.

    Your comment about EMP is correct. But it applies just as much to the dollar. If all electronics are gone, we’ll be back to a barter economy.

    Comment by MingoV — January 29, 2014 @ 3:02 pm

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