• Is the UK big enough for the pound, britcoin and bitcoin?
  • There’s no such thing as a public good
  • The Uber and Airbnb of money has arrived

How many different currencies do you keep in your wallet? It sounds like an odd question. But what if it becomes a rather important one for your financial future?

Currency competition may well be inconceivable to most of us. Having multiple forms of money floating around an economy certainly sounds like complete chaos.

But I suspect North Koreans feel the same way about supermarkets. They can’t imagine trusting anyone but the government to organise their rations. However meagre they may be…

I mean, who would make sure the right food is in the right place at the right time if a government bureaucrat isn’t in charge? And isn’t having multiple supermarket chains confusing? How do you know where to go to get the food you’ve been allocated?

When my friend went to Cuba to research his book Socialism Sucks, he was struck by an intriguing difference to his home in Texas. Different even to the long list of other socialist countries he’d visited “for the book”. In Cuba, there’s no advertising. The streets are bare. In fact, the shops are as well hidden as their shelves are empty.

It’s because there’s no incentive to sell or provide things in Cuba. Many people simply can’t imagine what competition for basic goods would be like. At least, not outside of the black market…

I’m accusing you of the same ignorance as North Koreans and Cubans have. Just about money instead of food or other items. A free market full of competition in currencies is actually the norm.

Ironically, the Cubans understand the idea of competing currencies very well. They like to have US dollars or euros.

In Argentina, there’s an entire variety of different currencies competing with each other at various official and unofficial exchange rates.

The reason why is obvious: because the national currency is not fit for purpose. People need an alternative that does the job properly. And, because there are a variety of options, there are a variety of currencies.

My question to you is whether the pound is working particularly well for you these days. And whether it might be time to consider adding some of the alternatives to your wallet…

But first, a quick detour to persuade you I haven’t lost the plot.

Public goods are a lie

Every culture has blind spots about what goods and services can only be provided by the government. It’s one reason I’m so pro-free market. Living in other countries opens your eyes to how well the private sector can do things that are usually labelled “public goods” in your own country.

A “public good” is an economist’s way of saying that only the government would provide it. No private company can.

But, for every public good you’ll find listed in an economics textbook, you’ll find a real-world example of a private company providing that good. Usually better than governments do elsewhere.

Lighthouses are the original example of this. For more than a hundred years, economists used lighthouses to explain the idea of public goods. If the government didn’t build lighthouses, who would?

But when an economist decided to test whether economics textbooks were in fact correct, he found the opposite to be true in practice. It’s just that no economist had ever bothered to wander down to the local lighthouse and ask who built, owned and operated it.

It turns out lighthouses were private, until the government took them over. Ever since, free market economists and I have been on a campaign to expose such presumptions about public goods. Not by arguing or publishing articles in journals. Instead, we just find real-world examples of the private sector providing things that economists say are public goods.

Americans suffer under the public good delusion when it comes to air traffic control. They can’t imagine anyone but the government providing such a service. But much of the world privatised its air traffic control long ago.

In the UK we are proud that our railways are privatised… for now. But nobody can privatise the railway track, right? Everyone knows that has to be owned and operated by a government entity. Except for the Japanese, who privatised their rail lines long ago.

Anyway, the point is that competition in currencies is a perfectly plausible idea. It’s just that you are conditioned to think otherwise. But don’t worry, only people in Argentina and Zimbabwe would think less of you for being so ignorant.

Funnily enough, the UK has a rich history of competing privately issued bank notes. Why do you think the UK still has so many note-issuing banks? Scotland alone has several.

These are historical remnants of the currency competition we used to have in the UK. It’s gone now, of course. The government claimed the banknote business for itself, just like lighthouses.

But it is losing that power over money.

The Uber and Airbnb of money

Whenever I hear fellow free-market advocates promote privatisation, I always shudder. There’s nothing to discredit the free market like a semi-privatised former government service. They never quite fully allow the free market to take control, after all.

Instead of privatising government services, we should simply allow competition. Get rid of government monopolies and the free market will find a better way. If not, people can just avoid it and stick with the government’s version.

What made the innovations of Uber and Airbnb so successful is that they circumvented heavily regulated industries. Taxi licences and hotel licences are difficult to obtain and abide by. Uber and Airbnb made it possible for anyone to provide hotel and taxi services.

Of course, these companies eventually lost their way. It’s now difficult to provide an Airbnb or become an Uber driver. The rules and regulations are vast.

But the point is that such innovations can happen. And they happen quickly, when they do.

Cryptocurrencies are the Uber and Airbnb of money. They’ve created a system where anyone and everyone can launch their own currency. You can use the ones you want to, without restrictions or restraints, whatever the government’s laws might say. And the best currencies will win.

For example, there are cryptos that offer gold backing. Cryptos that are anonymous. And cryptos that are pegged to the value of government currencies.

That last one highlights the point I’m trying to make. What are such stablecoins for? Why use a cryptocurrency version of a normal national currency instead of the original currency itself?

Well, stablecoins’ value may be pegged to currencies. But they avoid the inconvenience of having to deal in those currencies’ banking systems, for example.

Governments can impose capital controls on their money. But they’d struggle to do it to a stablecoin.

Remittances and international exchange are a major use of cryptocurrencies already.

If I ever buy a house here in Japan, I certainly won’t be using the mainstream financial system to move the money. Stablecoins evade fees, restrictions and reporting requirements imposed by banks. Not to mention the delays that go with it.

Competition is good for the consumer

Unlike almost all other goods and services we use, money doesn’t have any competition. Not since the government monopolised it for the Bank of England.

As a result, the value and quality of money has fallen. It’s now a royal pain in the neck to use. It falls in value each year. Control over it rests with your bank. And using it encounters all sorts of costs and fees.

It’s a nightmare. But now, we have alternative options. And not just the currencies of other equally dodgy countries.

You might want to focus on which particular cryptocurrencies have the brightest future. But I want to mention something else for you to consider.

You might want to focus on which particular cryptocurrencies have the brightest future. But I want to mention something else for you to consider.

The very act of introducing competition changes the nature of the game radically. Do you think the Bank of England’s pound can compete with cryptocurrencies?

It certainly can by some measures and on some tasks. You might have a tough time paying your taxes in bitcoin, for example. That’s why you need multiple currencies in your wallet. Different ones suit different uses.

When it comes to preserving the purchasing power of your savings, I don’t think the pound can hold a candle to bitcoin.

When it comes to the cost and convenience of international transactions, cryptocurrencies are edging ahead.

When it comes to escaping the trappings of the dodgy banking system, your choices are to use cash or cryptocurrencies… for now.

As you can see, change is well underway. And time favours bitcoin, not the pound.

The real question is when you will decide to make your move. Will you wait until the pound is in such bad shape that you positively need to use bitcoin? I anticipate capital controls within the decade, for example.

Or will you wait for bitcoin transactions to become cheaper and more efficient than the pound before making your move?

Perhaps you prefer to use an asset-backed crypto? That opportunity is already waiting for you. A few are gold backed, for example.

I think the best time to shift some of your money into cryptocurrencies was yesterday. Just to be ready.

But the truth is that people obsess about prices in the short term. They want to buy cryptocurrencies that’ll go up in price.

The good news is, you may be able to do both. Transition to owning some cryptocurrencies while also potentially profiting from them. It all comes down to when you buy. And this week offers a quadrennial opportunity.

Until next time,

Nick Hubble
Editor, Fortune & Freedom