There are some things government leaves to the free market and some things it reserves for itself. One of the functions the government decided to keep for itself is issuing currency.
Truthfully, the government keeping control of our currency is not all bad. There was a time when different entities in this country issued a variety of currencies. It was economic chaos. The federal government stepping in to issue a central medium of exchange solved a lot of problems for a growing nation at the time.
Today we’re in a situation where government has kind of bungled the currency thing. Not just the U.S. government, most of them, actually. The tragic part is the free market is just itching for a chance to help and there’s no reason government and private industry can’t cooperate for the benefit of both. Unfortunately, things are off to a rocky start because the government declares anyone using a medium exchange as circulating currency is breaking the law. The federal prosecutor for the Western District of North Carolina, Anne M. Tompkins, an Obama appointee, went as far as to equate it with domestic terrorism.
The Liberty Dollar
The Liberty Dollar was the one Anne Tompkins labeled as domestic terrorists and in March of this year Bernard von NotHaus, producer of the private currency, was found guilty of various counts including making counterfeit coins.
In fairness to the Feds, the warehouse receipts, which could be exchanged for real gold and silver by the bearer, did look a lot like currency. Though they did not say “legal tender” anywhere, they were marked “NEGOTIABLE”, were denominated in U.S. dollars and it probably didn’t help that the company starting the private currency was openly at odds with the Federal Reserve system.
Bitcoins are more problematic for the feds but also pose problems as a private medium of exchange. Bitcoins are actually complex digital tokens tracked by a distributed network of independent servers secured behind high-tech encryption.
Bitcoins don’t claim to be currency of any type, have no backing by any commodity, or central managing authority. The absolute number of bitcoins are limited by the available computing power in the world. The more bitcoin that are created by networks of number-crunching computers, the longer it takes to run the calculations to create new ones.