Letter #237: The U.S. Dollar - A Currency Backed By Theft
Read now to learn how you’ve been misled about the existence of value “backing” fiat currencies like the U.S. Dollar.
Dear Readers,
An all too common criticism of Bitcoin throughout its history has been that “it isn’t backed by anything”. That criticism likely finds its root, at least somewhat, in the fact that fiat currencies, in their early days, were backed, first by precious metals like gold and silver, and subsequently by faith in the solvency of the banks who held deposits of those precious metals for their customers. In other words, you could literally convert your fiat currency into the precious metal or ownership of the bank backing it.
Bitcoin certainly isn’t backed by either of those. You can’t redeem your Bitcoin for any precious metal; although you certainly could buy gold or silver with Bitcoin. There also isn’t any bank, government, or other entity guaranteeing the liquidity and value of Bitcoin — Bitcoin is an open market, in which anyone or no one can choose to participate.
This article won’t address common counterarguments from Bitcoin supporters, such as that Bitcoin is backed by the energy spent mining it or backed by a growing group of people who use Bitcoin to store wealth and as a currency no matter what. Instead, the purpose of today’s article will be to address the often unspoken part of the criticism about Bitcoin’s “lack” of backing; that is, the (false) idea that fiat currencies today are backed by anything.
An Honest Look
Take the U.S. Dollar for example. People repeat without end the quote that the dollar is “backed by the full faith and credit of the U.S. government”. Meanwhile, others will claim that the dollar is backed by the might of the U.S. military. Both statements are extremely misleading, because both the credit of the U.S. government and the might of its military are funded by taxpayers, or in other words, by the government’s ability to extract taxes by any means necessary.
So when someone says the U.S. Dollar is backed by the government, what they’re really saying is that it’s backed by the government’s ability to rob you blind against your will.
If only it were the case that just the U.S. Dollar suffered from that troublesome weakness. On the contrary, all true fiat currencies are backed by nothing more than the solvency of impotent taxpayers.
The truth hurts sometimes, doesn’t it?
A Return To Self-Sovereign Money
Bitcoin may not be backed by anything that the ill-intentioned critics of today mistakenly find valuable, but that does nothing to negate the fact that it is self-sovereign money that you can control.
Well-protected Bitcoin can’t be taken away from you against your will, which gives all Bitcoin users more financial security than any other money can ever aspire to give them. And financial security often begets other types of security, like the ability to express your freedom of speech without fear of being ostracized or attacked.
Gold and silver can be easily confiscated. Fiat currencies can be frozen. Governments and companies can fail. Bitcoin can outperform and outlast them all.
Backing or no backing, isn’t it about time that we open ourselves up to using better money?
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This is not financial or business advice. This newsletter and related content are for informational purposes only. Cryptocurrencies and digital assets can be risky. Always do your own research before making any sort of investment.