In a recent blog post Szabo outlines the reasons bitcoin is not a direct or immediate solution to Greece’s currency crisis, while simultaneously highlighting potential more long term solutions bitcoin can address:
…in a capital controls environment like Greece specific cycles avoid the capital controls that would be imposed on a Greek-based fiat-bitcoin exchange, and avoid the need nearly all Greek customers using out-of-country exchanges would have to futilely try to tap into their frozen bank accounts in order to purchase bitcoin.
Many people would be saddened to here such an authority point out:
Bitcoin will not, contrary to some feverish news reporting, help Greeks get money out of their frozen bank accounts.
Szabo describes the problem in a simpler form of a need to complete SMALLER closed chains of economic trade using bitcoin, these chains can be referred to as “kula Rings” in reference to a conjecture made on how money might arise. Completing small Kula Rings is a necessarily baby step for making any type of headway with bitocin adoption.
Nash also highlight some relevant points in regards to issuing/adopting a new currency, namely that:
There is a problem for the issuer of a currency, whether in coinage, paper, or electronic form, that if this currency (or money) is too good, then it could be exploited by all sorts of parties and interests that might simply wish to safely deposit a store of wealth or even to conservatively invest some assets for future good value.
Fortunately he gives a hint at a possible way to address such an issue:
…under extreme conditions the currency issued by a state could be exploited by parties not of that state as a sort of “safe-deposit box” on which they would not need to pay any rental fees or fees like those paid to the managers of mutual funds for investment.
If the value trend of a currency is such that a natural interest rate is not negative, then it is not an unattractive task for a central currency authority to mint or print the physical currency that would circulate. Then the issuer of currency would be partially in the position of a borrower not paying interest on borrowed money.
…the issuer of a currency also needs to be properly prepared for the possibility of speculation on the part of interests domiciled in foreign states, etc., etc.
But, simply to improve the conditions under which agreements regarding long-term lending and borrowing would be made, a money would be more or less equivalently good if it had a completely steady and constant rate of inflation. Then this inflation rate could be added to all lending an borrowing contracts. Hence, the problem of a money that would be too good is avoidable.
There are in fact such instances of the issuance of a currency in order to deal with economic problems involving a lack of a sufficient medium for exchange. Canada’s history has one such example using playing cards:
In 17th century New France, now part of Canada, the universally accepted medium of exchange was the beaver pelt. As the colony expanded, coins from France came to be widely used, but there was usually a shortage of French coins. In 1685, the colonial authorities in New France found themselves seriously short of money. A military expedition against the Iroquois had gone badly and tax revenues were down. Typically, when short of funds, the government simply delay paying merchants for purchases, but it was not safe to delay the payment of soldiers due to the risk of mutiny.
Jacques de Meulles, the Intendant of Finance, came up with an ingenious solution — the temporary issuance of paper money, printed on playing cards.
Card money like any other currency has inherint dangerous of irrelevance and over-issuance: