The problem with the modern economy, Byrne says, is that it rests on the whims of our government and our big banks, that each has the power to create money that’s backed by nothing but themselves. Thanks to what’s called fractional reserve banking, a bank can take in $10 in deposits, but then loan out $100. The government can make more dollars at any time, instantly reducing the currency’s value. Eventually, he says, laying down a classic libertarian metaphor, this “magic money tree” will come crashing down.
But bitcoin is different. It’s like online gold: The supply of the digital currency is controlled by software running across a worldwide network of computers, and its value is decided not by the feds or the big banks, but by the people. “It can make our country more robust,” says Byrne, a disciple of the Austrian school of economics, which holds that our economy should rest on the judgments of individuals, not a central authority. “We want a money that some government mandarin can’t just whisk into existence with a pen stroke.”
