Friday, November 10, 2017

Alan Greenspan Compares Bitcoin to Civil War Greenbacks and Continentals

In an exclusive interview on FOX Business Network’s “Mornings With Maria,” former Federal Reserve Chairman Alan Greenspan said “Bitcoin is what used to be called fiat money.” He then compared Bitcoin to the currency issued by the Continental Congress after the American Revolution began.

“I would use the analogy of
Continental currency. Continental currency in 1775 was issued with no backing and it sold at par in the marketplace for quite a while until they started to build up more and more printing of continentals.”

He went on to say, “Human nature is such that if you get something such as Bitcoin, you think there is some value there whether there is or there isn’t.  But that’s the same thing as a Continental, greenbacks in the Civil War, all of these currencies which didn’t have any backing.”

Greenspan is way off here.

The problem with the Continental and the Civil War greenbacks is that the government could print a near unlimited supply---and they did--which caused hyperinflation. As things stand now, the number of Bitcoins that can be created is extremely limited.

The risks for Bitcoin are government regulation and recession.



  1. That's like saying the mercurial rise in market value back in the day, of Beanie Baby dolls and Cabbage Patch dolls near Christmas time (remember the run on stores by parents, searching for "must have" gifts for their kids?) is akin to government fiat money. Ridiculous.

  2. Although Bitcoins are theoretically limited, they are infinitely divisible. Moreover, cryptocoins as a whole can be infinitely digitally printed.

  3. The short run problem is state intervention, and the long run problem is scarcity. The denomination of "Bitcoin" is indeed scarce, but crypto-currency itself is the commodity in question, and it can be infinitely reproduced under different names. Bitcoin gets a boon now while everyone waits to see the government reaction, but as soon as that plays out, if the idea of a privately produced currency is still standing, increasingly more crypto-currency denominations will be created, and all fiat money will all the sooner be exposed as disfunctional. States will likely anticipate and do everything possible to prevent that outcome, though. Seems like state-regulated crypto-currency would be the logical "way out". I wonder who will be called "Maestro" when he proposes it.

    1. "Bitcoin" is neither "money" nor can it be described as being "fiat." It is not a common means of exchange, and it has not been declared as legal tender by State decree (or fiat). Apparently, it has the opportunity to become money, especially in areas like Venezuela which suffer from hyper-inflation of the local fiat money, but which for some reason are unable to dollarize. Should that happen, it must be considered a commodity money as people apparently value it for non-monetary purposes.

    2. Greenspan was using fiat in a different sense as kind of the opposite of regression theorem money.

    3. "Constructivist" wanta-be money, a la Hayek's bank-supplied commodity-basket money in the Denationalization of Money tract.

    4. His example is two government printed fiat dollars that were printed till they were worth nothing. If he was comparing one to the other it would make sense not to bitcoin.