Nakamotan vs Hayekian Vision of Money and Bitcoin

Discussion

Stefan Eich:

(from an interview conducted by Evgeny Morozov)

“EM: The Nakamoto vision was even more radical than Hayek’s, in that Bitcoin sought to remove control over money creation both from the state and from the banking system, entrusting it to a well-defined and regulated algorithmic process. Do you think Hayek himself would be a Bitcoin advocate if only he had imagined the kinds of technological opportunities that would be available? To me, it seems that, schematically at least, and aside from the volatility and speculation, Bitcoin does seem to impose a certain algorithmic discipline that one would previously have associated with the Gold Standard. So, in that sense, perhaps, Hayek himself would be mining crypto now?

SE: During the 1980s, Hayek quickly realizes that his call for the denationalization of money is a political non-starter and destined to become a libertarian utopia at best. He essentially accepts that most states will never give up issuing their own currency and will not allow having privately-issued competing currencies physically circulating. Indeed, in a lecture given to Visa executives in Athens in 1981, he described his own proposal as a kind of “bitter joke.”

But he doesn’t give up on the underlying vision. On the contrary, he insists that what is needed now is a “practical proposal” and he gets very excited about the leeway banks have in creating accounts and creating credit, essentially their ability to create money of account out of thin air. But rather than creating credit in existing currencies, Hayek begins to pitch bank executives the idea that they should consider creating accounts in their own new currency units. There are some extraordinary speeches on this to the boards of London banks from the early- to mid-1980s in Hayek’s personal papers.

In some sense this was merely pushing the logic of so-called Eurodollars even further. In the case of Eurodollars, non-US banks or the foreign branches of US banks issued loans denominated in dollars even though these dollars existed outside of the Fed-supervised US monetary system. If that’s possible, Hayek asked, why not issue them in a new currency unit? Some of his interlocutors immediately comment that perhaps such a new unit should be called a “Hayek.” Hayek himself hilariously insists to the executives of banks in the city of London that he already has the perfect name, and that it would be worth millions of pounds, but that he is being prevented from telling them since intellectual property lawyers had advised him that the name could not be patented. So Hayek places an extraordinary amount of faith in banks as his allies to liberate money from the tentacles of the state and its central bank.

Crypto is fundamentally different in that regards. The crypto perspective is here fundamentally shaped by the bank bailouts of the financial crisis of 2008 – remember that the Bitcoin genesis block includes a headline by the London Times about bank bailouts. In some sense, what the financial crisis revealed to the crypto community – as it did to so many else – is that banks are not strictly speaking private companies, but that they live in close relation – symbiotic or parasitic, depending on whom you ask – to the state. The updated proposal for de-democratizing money in the form of cryptocurrency is directed as much against banks as it is directed against the state.”

(https://the-crypto-syllabus.com/stefan-eich-on-hayek-and-money/)