Bitcoin fixes a Greek problem – but not the Greek debt problem

Wanna GTFO? Yay, blockchain

Well done to Satoshi and friends

However, this is not the same as stating, as some do, that Bitcoin is going to be the solution to Greece's problems. As Alphaville again points out, the adoption of Bitcoin generally in that country would make the problems vastly, hugely worse, not better.

It is true that Yanis Varoufakis, the former Greek finance minister, once suggested an alt-coin approach, FTCoin. But this was simply a bit of intellectual onanism: he knew as well as every other economist that the good things about the plan had nothing at all to do with it being a cryptocurrency. It was the economic equivalent of issuing more Treasury bills.

What the plan actually was, was that the Greek government would issue these FTCoins and firms and people would buy them. Then, a couple of years later they could use them to pay their taxes: and there would have been a discount on the original price to compensate them for waiting a couple of years. In an economic sense this is the same as issuing zero coupon (i.e., no interest payments, but issued at a discount to provide a profit over time) Treasury bills and or bonds. The alt-, crypto- and even -currency made no difference at all to this fundamental identification.

And it's also true that if the country introduced a new currency then most of their problems would be over. But that again is true whether it's an alt-, crypto- or paper one: it's the new part of the “new currency” that makes the difference.

But the adoption of Bitcoin (or litecoin, or any other extant currency) would simply make their problems much worse. Consider the two major problems that Greece has in a monetary sense.

The first is that it doesn't have its own monetary policy. Thus it cannot set monetary conditions for the state of its economy. Yes, despite current stories, it does still have an economy: and one that needs very much looser monetary policies than it has now. But Bitcoin also doesn't allow you to do that: you have no control, as a policy lever, over the amount of Bitcoin in circulation, over interest rates or any of the other things you might be able to use to vary monetary conditions.

This is touted as a benefit, of course, but that's because all too many of the alt-bugs are infected with the same delusions as the gold-bugs of yore. We don't actually want a currency that governments cannot manipulate because it is actually possible for government to manipulate a currency to our benefit, as quantitative easing has recently shown. No one has particularly enjoyed this recession but it's a damn sight better than the depression that we would have had without QE: which is the reason it was done, of course.

The second problem is rather more obvious but does still seem to escape some people. The Greek government's problem is that it doesn't have enough euros. It also doesn't have the power to simply print more. The Greek government also doesn't have any Bitcoins, nor does it have the power to print more. So, moving from the euro to another currency it has even less of doesn't sound like a great idea.

As above, the joy of having a new currency would be that the Greek government could print as much of it as it wanted: for that it does needs a new currency, yes. And that could well be an alt-currency, although I have my doubts about the wisdom of that.

Have you noted that the banks have been opening a day a week so that pensioners who don't even have bank cards can get some cash out? In a society like that, a currency which only resides on computers might lead to just a tad of social exclusion.

Bitcoin itself isn't a solution to any of the problems that Greece faces. Up at the top, though, it's an absolutely marvellous solution for the citizenry to avoid some of the problems the country faces by getting their cash the hell out of there. ®