A Bitcoinworld would be Liberism on steroids (if you are lucky)
I've been told that Bitcoin (and cryptocurrencies in general) are a revolution that would democratize the markets and shake the foundations of modern capitalism.
Perhaps. But not the revolution I'd like to see. Let's make an intellectual exercise and try to imagine what would happen if Bitcoin- or any other cryptocurrency- would take off and really substitute Fiat currency. This is, obviously, extremely unlikely to happen for great many reasons which I am not going to discuss here. Rather, I will briefly try to discuss the implications of such an unlikely event.
With Central Bank Fiat currency, the Public mantains -even in a globalized world- a residual capacity of steering the price level and supporting both public spending (through direct and indirect purchases of public bonds) and private investment (through interest rate management). It does not always work as expected; there are trade-offs of all sorts, not least the conflicting relationship between price stability and unemployment. There are many constraints, since modern economies, integrated in the world market, are limited in their capabilities by factors such as their hard currency reserves, their export sector, and the credibility of their central bank governors; abuse is often severely punished by the markets, with widespread effects on short-term social conditions of a country; etc. In other words, Fiatworld is far from Eden; yet with all its limits, Fiat currency ensures that the price level and unemployment level remain legitimately within the sphere of the possible goals of public policy.
Instead, a crypto-currency based world lacks any possibility of public steering of money supply.
In the "good" case, like Bitcoin, money supply is pre-determined by a God-like algorithm that cannot be changed. There is a maximal amount of Bitcoins that can be extracted (at an increasingly higher energetic cost) and this is it. Money supply is a given, is not a policy variable. Hence the entire price mechanism is left to the markets alone, a jump back of a couple of centuries at least. Bitcoinworld is liberism on steroids, since any residual capacity of public steering of money supply (and hence, price levels and fiscal policy) is lost. in the "bad" case (such as more shady cryptocurrencies) money supply is controlled by private agents with sets of goals that have nothing to do with public policy objectives. Bitcoinworld is cancelling central banking. (shady)Cryptocurrencyworld is giving the keys of the Central Bank to the Maddoff of the future. Forget your short-term portfolio gains. Are you sure it's a revolution you like?