Money Without Boundaries

Chapter 9Pillar 3 – Solving the Trust Gap = Blockchain

“Trust, but verify.”

– Ronald Reagan

When the Nixon administration decided to yank the United States off the gold standard in 1971, there really wasn't a lot anyone could do about it. Citizens of the United States – and the world – had little choice but to accept that the words “redeemable in lawful money at the United States Treasury or at any Federal Reserve Bank” were no longer printed on the dollars they used. Instead, they were told to simply trust that the US government would uphold its promise of backing its “legal tender” with its “full faith and credit.” As the US Treasury explains: “Federal Reserve notes are not redeemable in gold, silver, or any other commodity, and receive no backing by anything.…The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are ‘backed’ by all the goods and services in the economy.”¹

By untethering itself from the gold standard, the US government was in effect implying that it wanted to compete with any issuer of privately created money in a full faith and credit society. The government lost control of money and opened the way for Friedrich Hayek's vision. We could have denationalized money! Anyone could create a bank, issue ducats, and post balance sheets in the newspapers so consumers could judge whether they were more creditworthy than the government. This was something! But as we discussed in ...