The free Market and Bitcoin

[Bruru_]

Hi,

Today I was preparing something for my bitcoin workshop when I came to the following observation.

If we are in a free market society with the principals of capitalism how can it be that the money we use (fiat) isn't part of that same system. And isn't it so that to have a truly free market system that money also have to be denationalized and uses the same principals like the free market itself ?

Can there be a free market with fiat currency ?

And if so isn't bitcoin and it's competition not the ultimate form of payment in this free market.

I'm no expert in economics, I read al little bit of Hayek's works this afternoon, but it would be great of anyone can help me with this question.

Thx

[mindrust]

First, we are not in a free market. Everything's price is being regulated by someone or some government or some central bank. (mostly central banks)

So, yes, there can't be a free market with FIAT because FIAT is being regulated and we buy bitcoins with FIAT, getting what i'm sayin?

[Idrisu]

First, we are not in a free market. Everything's price is being regulated by someone or some government or some central bank. (mostly central banks)

So, yes, there can't be a free market with FIAT because FIAT is being regulated and we buy bitcoins with FIAT, getting what i'm sayin?

We are not in free market with fiat. Mindrust has said it all,IF we are in free market why do we have government backing fiat before it becomes legal tender? In bitcoin we might not have free market as you are always ask to provide information about yourself before you can buy it. Also we pay tax for fiat translation the same with bitcoin fees for transactions.

[Qartada]

capitalism
ˈkapɪt(ə)lɪz(ə)m/Submit
noun
an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.



Now that we've got that clear, let's start analysing.

Capitalism is centred around countries' trade and industry.  Money is not a trade nor an industry, it just allows trades and industries to operate.  Therefore since fiat currency does not prevent these operations from occurring, it doesn't inherently block capitalism.  I would therefore argue that fiat currency can operate in a free market because a free market doesn't have to exclude a central government from existing.

Everything's price is being regulated by someone or some government or some central bank.

The only thing which has its price regulated by a government or central bank is the currency.  Everything else is free despite regulations (for example, value added tax).  Of course everything's price is regulated by someone - in most cases, it's regulated by the business which is selling the product.  Actually, this is the case nearly all of the time.

[HabBear]

I believe the economics definition of "free market" is about the freedom of the market to set prices based on the supply and demand forces. Policies that eliminate that freedom are tariffs countries impose in imports/exports (among other reasons).

Bitcoin is part of the economy alongside fiat, they're peers.

There's a free market as long ass goods/services can be echanged at free rates...the curreny used to pay for those goods and services is irrelevsnt.

[shinratensei_]

Can there be a free market with a fiat currency?

free market means no regulation, intervention or regulation has restricted the market. And remove some of the rules. It means all of the action by the individual is a voluntary.

And if so do not Bitcoin and that competition is not the ultimate form of payment in the free market.

What do you mean about it? We are on the free market of crypto because all of the individual act and economic decision based on the voluntary without there is a regulation has been regulating the market.

[mindrust]

The thing is, you can pump&dump bitcoin's price freely if you have the power. (money) Because it's a free market but your FIAT's power of being able to pump&dump prices is decided by someone else. (the central banks) So it's not that free. :p Got it now?

[mrcash02]

Bitcoin is a good experience of free market, it'san idea to escape the state bureucracy, regulamentations and a way to help the common people trying to pay less fees without decrease the financial system quality.

But looks inevitable the free market isn't immune to lobby threats. A group of holders can try to rule the free market as they are the majority part on it and no one can stop them. Powerful and ambicious guys will exist always, on both ways, free market or regulamented market.

[cryp24x]

I guess this is the reason why cryptocurrency are getting popular.  It get rids of regulation.  We are free to setup our demand and sell price. 

The thing is, you can pump&dump bitcoin's price freely if you have the power. (money) Because it's a free market but your FIAT's power of being able to pump&dump prices is decided by someone else. (the central banks) So it's not that free. :p Got it now?

This is a good differentiation of a free market.  No body are regulating the price so everyone has the right to pump or dump the market.  While in fiat, if ever there is some irregularities happening, central authority butt in and fix the issue.

[Bruru_]

I'm already stunned by this book that is available for free on this site.
This is a book from 1970 and in this book Hayek is predicting the use of private competing tokens.
It's a great read.

https://mises.org/library/denationalisation-money-argument-refined

"As soon as one succeeds in freeing oneself of the universally but tacitly accepted creed that a country must be supplied by its government with its own distinctive and exclusive currency, all sorts of interesting questions arise which have never been examined."



Competition in currency not discussed by economists

It is an extraordinary truth that competing currencies have until quite recently never been seriously examined.1 There is no answer in the available literature to the question why a government monopoly of the provision of money is universally regarded as indispensable, or whether the belief is simply derived from the unexplained postulate that there must be within any given territory one single kind of money in circulation—which, so long as only gold and silver were seriously considered as possible kinds of money, might have appeared a definite convenience. Nor can we find an answer to the question of what would happen if that monopoly were abolished and the provision of money were thrown open to the competition of private concerns supplying different currencies. Most people seem to imagine that any proposal for private agencies to be allowed to issue money means that they should be allowed to issue the same money as anybody else '(in token money this would, of course, simply amount to forgery) rather than different kinds of money clearly distinguishable by different denominations among which the public could choose freely.

 F. A. Hayek. 'Denationalisation of Money: The Argument Refined'.

[SONG GEET]

If we are in a free market society with the principals of capitalism how can it be that the money we use (fiat) isn't part of that same system. And isn't it so that to have a truly free market system that money also have to be denationalized and uses the same principals like the free market itself ?

If money is denationalized than there will be no inflation in fiat and banks/government don't want to have zero inflation because they want to print more money backed by nothing to add tax/debt to their citizens and make profit.

Can there be a free market with fiat currency ?

Most of the trade market is dominated by US dollar which is just a national currency of USA. 

And if so isn't bitcoin and it's competition not the ultimate form of payment in this free market.

Yes they are good example of free market currency which can be accepted worldwide in same form and have fixed supply like gold. But we may not see bitcoin being accepted in trade market due to lots of politics.

[jaysabi]

Hi,

Today I was preparing something for my bitcoin workshop when I came to the following observation.

If we are in a free market society with the principals of capitalism how can it be that the money we use (fiat) isn't part of that same system. And isn't it so that to have a truly free market system that money also have to be denationalized and uses the same principals like the free market itself ?

Can there be a free market with fiat currency ?

And if so isn't bitcoin and it's competition not the ultimate form of payment in this free market.

I'm no expert in economics, I read al little bit of Hayek's works this afternoon, but it would be great of anyone can help me with this question.

Thx

We are a mixed economy, not a pure free market economy. Bitcoin is more free market than fiat, but not completely free market either. At this point, the miners and the bitcoin foundation are both special interests. They govern and jockey for influence based on their own needs and there is a lot of money at stake (billions of dollars in total), and any time big dollars are at stake, ideas become corrupted.

[Bruru_]

I don't see why that's not completely free market, Bitcoin and the other crypto's can compete totally free.

After 6 years working with bitcoin I still have a hard time to express what the economic point is of the bitcoin network and the currency.
Part also of my lack of economic knowledge. After reading this book a must say that my view of BTC gets formulated to perfection ;-)

[megynacuna]

First, we are not in a free market. Everything's price is being regulated by someone or some government or some central bank. (mostly central banks)

So, yes, there can't be a free market with FIAT because FIAT is being regulated and we buy bitcoins with FIAT, getting what i'm sayin?

Yes but after the FIAT is converted into bitcoins it ceases to be under the control of central banks and any form of regulation so there can be free market after its brought into Bitcoin.

[Yanisumin]

That was hard to do because if there is a free market, who will decide the value of the fiat? It is a real money and we will be prone to theft and bribary if that happens. The idea is good but it would not be easy. Fiat don't have the same characteristics Bitcoin has, that's why because cryptocurrencies is the one who can perform that goals. Everything is getting greedy if money is involved, and I think there won't be someone who will print fiat if it is a free market. Even Bitcoin is being tampered by greedy services nowadays.

[xuan87]

there won't be any free market with fiat, because fiat is the pillar of the country's economics and it need to be controlled so the inflation rate can be controlled and without controlling the fiat there will be chaos, but it is different with bitcoin, the purpose of bitcoin was to create a currency that nobody can control, that is why bitcoin is very suitable as sub currency but not as a main currency

[jaysabi]

there won't be any free market with fiat, because fiat is the pillar of the country's economics and it need to be controlled so the inflation rate can be controlled and without controlling the fiat there will be chaos, but it is different with bitcoin, the purpose of bitcoin was to create a currency that nobody can control, that is why bitcoin is very suitable as sub currency but not as a main currency

No person singularly can control it, but there are factions that wield immense control over bitcoin. The largest mining pools control the fate of bitcoin every time they decide to support one fork over another. If the intent was to create a currency that couldn't be controlled by any one person, they may have succeeded. If the intent ws to create a currency that couldn't be controlled, they did not succeed.

[LittleBitFunny]

Hi,

Today I was preparing something for my bitcoin workshop when I came to the following observation.

If we are in a free market society with the principals of capitalism how can it be that the money we use (fiat) isn't part of that same system. And isn't it so that to have a truly free market system that money also have to be denationalized and uses the same principals like the free market itself ?

Can there be a free market with fiat currency ?

And if so isn't bitcoin and it's competition not the ultimate form of payment in this free market.

I'm no expert in economics, I read al little bit of Hayek's works this afternoon, but it would be great of anyone can help me with this question.

Thx

This is based on the assumption that a free market is a good thing, but that isn't always the case.

A "free market" is in fact based on employment and gives power to private companies.  These companies earn money from their workers and essentially take credit for it, which is why people always talk about Bill Gates when they talk about Microsoft.  There are many things about a "free market" which is bad for an economy.

Fiat currency can have a free market, simply because it doesn't restrict trade but enables it.  Decentralised currencies are just an addition to a free market.

[cpfreeplz]

I never really thought of it that way because when you grow up in a society where prices are always going up because more money is being printed you tend to automatically not think outside of the box.

Technically it's still a free market although because you're using fiat it's a grey area where you feel free, but your currency is actually causing you to lose out.

[Iranus]

I never really thought of it that way because when you grow up in a society where prices are always going up because more money is being printed you tend to automatically not think outside of the box.

Technically it's still a free market although because you're using fiat it's a grey area where you feel free, but your currency is actually causing you to lose out.

The currency is your choice though.  The government only declares what the legal tender is in the system (the fiat currency) but this is not oppressive.  In Northern Ireland, I'm told that the old pound coin is technically out of circulation, but shops routinely accept it - anyone could use anything as a currency.  In fact, if I said "I'll give you some magic beans for that cow" an you accepted the deal, we could equally view magic beans as a currency.

My point is that what the government declares about currency only restricts the free market if trading with anything except the legal tender was illegal.  Even if they restricted the use of Bitcoin or any other specific currency, even that would not affect the free market any more than restricting the sale of currently illegal products does.