SabaGoodarzi

APEconomics
April10th,2014
Mrs.Pinchback

BitcoinExploratory

ThefirstbasiceconomyexistedonaBarteringeconomy,Barteringisasystemofexchange
whichdoesnotusecurrencyasamediumoftheexchangebutratherthegoodsorservicesthemselves.
Barteringwasveryinefficientbecauseitreliedonthedoublecoincidenceofwants,toincreasethe
efficiencyoftransactionthenextevolutionwastocommoditymoney,thisallowedconsumerstoeclipse
thelackofefficiencyinbartering.Commoditymoneywasapaymentmediumthathadsomeintrinsic
value.CommoditymoneyledtoSymbolicMoneywhichisjustapapernoteofvalue,TheU.S.dollaris
anexampleofsymbolicmoney.TheU.S.dollarisbackedbythefullfaithandcreditoftheU.S
Government,andthefederalreserveandfederalgovernmentbothregulatethevalueofthedollar
throughthemanipulationofdifferentfiscalandmonetarypolicycombinations.In2009Satoshi
NakamotocreatedBitcoinanonlinecurrencythatcanbeusedinmanydifferentmarkets.Thecurrency
hasnogoverningbody,andpeopleessentiallyarewhatdictatehowthevaluefluctuates.Youcanbuy
bitcoinsthroughexchangeofonecurrencyorbyusingacomputerasaservertobitcointominethe
currency.

TheconceptofhavinganinternationalcurrencylikeBitcointhatisnotregulatedbyagoverning
bodyisanidealstateforsome.ThomasH.GrecoJr.arguesinhisbookTheEndofMoneyandThe
FutureofCivilizationthatgovernmentsareirresponsibleathowtheyoftenspendabovetheirmeans,that
thefractionalreservebankingsystemcreatesalotofpowerforthebankstodistributemoneytoasmall
economicallypowerfulandpoliticallypowerfulfewthatcontroltheworldeconomy.Hecallsforthe
separationofmoneyandstate,andbitcoinistheperfectsegwaytothis.Bitcoinisacurrencythatisnot
regulatedbyanygovernment.Itssimilar
totheeurointhesensethatallthecountrieshaveacommoncurrency,exceptagainthereisno
regulatorybody.Itseemslikeaninterestingidea,butItdefinitelycallsforsomethought.Withouta
governingbodylotsofcorruptioncouldoccur,italsomakesbitcoinveryunstablebecauseifdemand
forbitcoinbecamenonexistentitcouldcauseanexchangecrisiswherenoonehasmeansof
transaction.

AnotherinterestingaspectofBitcoinisthatitsmoredifficulttomanipulateforyourown
personalbenefit.Forexampletodaysinternationaleconomy,ifsomeoneinvestedalotintheU.S
economy(asatactic)theywouldincreaseAggregateDemand,whichincreasesPriceLevelintheU.S.,
whichdepreciatesthevalueoftheU.SscurrencyrelativetoothercountriesbecauseDemandforthe
U.S.dollardecreases.Thisdepreciationincurrencycouldbeatactic,asPLincreasesintheU.S.
macroeconomypeoplewillinvestinothercountries.ThiswillencouragetheFederalReservetotryand
raiseInterestRatesthroughmonetarypolicysotheycouldappreciatetheircurrency.Alltheselevelsof
manipulationcouldusedforsmallamountsofpersonalgainthatmaynotbesignificantonasmallscale,
butonamassivescalecanbemonumentalongains.AninterestingaspectofthisisthatofEquilibrium.
ManyClassicalEconomistsspeakabouttheroleofEquilibrium,thatalltheseinteractions(similarto
thosestatedearlier)willbringacountrieseconomybacktoasweetspotwhereitwillremain.The
currentsetupoftheinternationaleconomycallsforalotofmanipulationandexploitationonamass
scale.Ifyouhavelotsofmoneyandyouplaceitallaroundtheworldyoucanmanipulatedifferent
marketsthroughinvestmentstoincreaseinterestratesindifferenteconomiesforpersonalgain.Through
manipulationofinflationratesmainlyinothercountriesbyinvestmentyoucancontroldifferent
economiesonamassscale.Thisiswhybitcoinissointeresting,itallowsforlessmanipulation.

Althoughtheideaofbitcoinbeinganinternationalcurrencymightbesweetitcouldnever
happen.Thereisasortofunitythatisexpressedintheconceptofaninternationalcurrencythatis
againsthumannature.HumanNatureencouragespeopletobeingroupsfortheircollectivesurvivaland
tocompeteagainstothergroups,anexampleispacksinearlycivilization.Themodernexampleis
countries,suchaconceptofcollectiveofearthratherthansmallergroupsisgenerallydislikedbecause
ofourpassionfordifference.Peoplewillstrivetobedifferent,andthisiswhatcausessocietalissues
suchasracism,thisshowshowEconomicsapartfrombeingadiscussionofDemandandSupplyisalso
adiscussionofHumanNature,andhowhumansinteractinexchange,isreallyimportantinstudiessuch
associology.AsKarlMarxoncesaidinalettertohisfather,
Ifwehavechosenthepositioninlifeinwhichwecanmostofallworkformankind,noburdens
canbowusdown,becausetheyaresacrificesforthebenefitofallthenweshallexperienceno
petty,limited,selfishjoy,butourhappinesswillbelongtomillions,ourdeedswillliveonquietly
butperpetuallyatwork,andoverourasheswillbeshedthehottearsofnoblepeople.
ThisquoteistheepitomeoftheconceptoftherelationshipbetweenEconomicsandSociety.ButIfeel
thatitisbecauseofthisissueofHumanNature,andourtendencytoliveingroupsseparatefromthe
collectivethatMarxsbeliefincollectiveismoreofidealstateratherthanpossibleeconomicreality.But
wewilllivetheremainderofhumankindinthisconstantbattlethatEconomicshaslaidoutbetween
IdealismandPragmatism.Butmaybebitcoincouldbringustothisidealstate,inaveryconvoluted
humanisticapproach.Bitcoincouldhelpbringpeopletogether,andstoplotsofpoliticalcorruptionand
massmanipulationofcurrency,whichmakesitveryintriguing.