a self-professed libertarian and follower of the Austrian "school" of economic thought, Sen. Rand Paul (R-Kentucky) has a lot in common with the central bank skeptics who helped get Bitcoin off the ground.Of course, the last time EPJ examined Rand on monetary theory, we had this to say: Rand Paul Is Embarrassing the Austrian School of Economics.
BI goes on to report on Rand's comments on Bitcoin, which reveals Rand, and BI doesn't get this, as clueless about monetary theory and Bitcoin. Here's the full Rand quote:
I was looking more at it until that recent thing [sic]. And actually my theory, if I were setting it up, I'd make it exchangeable for stock. And then it'd have real value. And I'd have it pegged, and I'd have a basket of 10 big retailers… I think it would work, but I think, because I'm sort of a believer in currency having value, if you're going to create a currency, have it backed up by -- you know, Hayek used to talk about a basket of commodities? You could have a basket of stocks, and have some exchangeability, because it's hard for people like me who are a bit tangible. But you could have an average of stocks, I'm wondering if that's the next permutation."BI calls it:
Something to consider.In reality, Rand's comment flies in the face of the reality of what is at the very heart of what type of currency Bitcoin is trying to be. He wants Bitcoin to be backed by a basket of stocks. This would require some type of middlemen and thus counterparty risk. A key part of Bitcoin is the elimination of counterparty risk. Thus Rand's idea demonstrates a fundamental cluelessness about Bitcoin. And, while Hayek did advance the idea of a a basket of commodities as the basis for a currency, Murray Rothbard vehemently objected. Though, it is unlikely that even Hayek would have been in favor of a basket off stocks, that is, a basket of liquid capital goods as a medium of exchange. It's really kind of nuts to be walking around with a volatile vehicle such as the Dow Jones Industrial Average as your money.
Rothbard, for sure, would have thought the idea insane. Rand is clueless.
I thought that I had read somewhere that Rand once drove Rothbard to or from the airport. I guess it was a very short drive.
ReplyDeleteRand is financially illiterate. One of the first things he said when he got to the Senate was that if food and fuel were included in the CPI, the rate of inflation would be 10%. Headline inflation includes food and fuel. What he is describing here is merely a mutual fund. He wants Bitcoin to be a share in a mutual fund that you can use to buy goods and services. Everything that Rand knows about economics could fit on a bumper sticker that simply says "end the fed because daddy said so"
ReplyDeleteI heard Obama once say that unemployment benefits are good for the economy because it puts "money in people's pockets" yet I bet you voted for Obama. You're even more financially illiterate than Obama I bet.
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