It was in the media recently that an entity is trying to set up a Bitcoin exchange in Jamaica. I am astounded that any Jamaican authority would even shake hands with any proposer of this idiocy. I am therefore alarmed that, according to the deputy governor of the Bank of Jamaica Livingstone Morrison,”We have had some exploratory discussions with them, talking about the regulatory framework and the process that would have to be engaged in order for them to secure approval so they can offer the service.” The Gleaner, September 18, 2016)
Bitcoin and its proponents are not to be recognised; they should be chased away. Cash Plus — flawed as it was — had more merits than Bitcoin. And the fact that Bitcoin is being recognised is a reflection of the intellectual inadequacies that now rule countries and the globe.
What is Bitcoin? It is currency plain and simple. Any country that allows a private citizen to create currency has lost its mind. What will the authorities do when Mary Jane decides to reintroduce shark teeth as currency? Or Dorlan H decides to issue “Ginger Ridge Script” (copying the Colonial Script that was issued in pre-revolutionary America)? Will the authority say that Bitcoin is computer-generated so therefore it has validity? But since “Ginger Ridge Script” is printed the old-fashioned way, or even on a 3-D printer, it has no similar value?
The issuing of currency is and ought to remain the sole prerogative of one central authority. Money supply must be heavily regulated and tightly controlled. Money is a medium of exchange used to circulate goods and services. Money has to be in proper proportions to the amount of goods and services that is to be circulated. If there is more money than goods and services hyperinflation can occur.
But it is significant to note that if an oversupply of money does not cause inflation it can nevertheless blow up the economy. It was an oversupply of money caused by the then Government’s unrelenting tax cuts, and its refusal to spend, which led to the blowing up of the American economy and that of the globe in 1929. The same oversupply of money was again present in 2007 blowing up America’s economy and that of the globe when George W Bush unleashed over US$2 trillion of tax cuts in 2003.
In short, money can be too much! And when any Tom, Dick or Harriet is allowed to create currency that is a recipe for financial and economic madness!
A spin-off of Bitcoin is Caricoin. The report stated that Caricoin has a development office in Kingston and a spokesperson for Caricoin said: “It is focused on delivering a secure, user-friendly, and less costly way of storing wealth and moving it around.” Wealth?! How was this wealth created? This is 1636 all over again and the tulip bulbs are coming. Soon it will be tulip mania once more. Such thinking must be killed in its infancy!
Governments need to understand where they can allow innovation and where no innovation should be permitted when dealing with money. Transactional innovation is good and should be encouraged. Moving from metal alloy coins as currency to paper and now polymer is fine and convenient. The introduction of cheques was good. It saved people having to walk around with millions of dollars to transact business. Wire transfers and interac debit transactions are all useful innovations which facilitate transactions. Any additional innovation in this regard should be welcomed. Any whiz kid can brainstorm and come up with more and new ideas that will help people transact business.
The creation of currency, however, is a whole other matter. That should be the business of one central authority. Bitcoin is currency created on a computer. What did the creators do to acquire the value they claim for Bitcoin? Was it by fiat? Or was it because fools chose to bid on it? How is this different from people who in 1636 were exchanging an estate for one tulip bulb which previously fetched the price of an ordinary onion?
Dorlan H Francis is a personal financial adviser and author. Among his books is
The Economic and Financial Crisis of 2007 – What Caused it : How to Avoid a Repeat. Send comments to the Observer or