January 5, 2015 Reading Time: 2 minutes

As several of the worse performing currencies are in countries where the government manipulates statistics and exchange rates, it is not easy to come up with a perfect ranking. Using the inflation rate is a good approximation. In Venezuela the official price inflation is over 60%. In Argentina statistics are so manipulated that it is not worth mentioning what the government states, but private sector analysts place the Argentine 2014 inflation rate close to 40% . The Russian ruble, feeling the impact of factors that go beyond money, has lost almost half its value against the US dollar. Competing for the last place in these currency wars is Bitcoin, its price fell from $770 one year ago to less than half today. Unlike the Peso, the Bolivar, or the Ruble, Bitcoin is a market-based currency.

Its price is influenced not only by market forces but also by government policies, considerable hype, and misconceptions. During 2014 I attended several programs with panels on Bitcoin. The best was this past October in Indianapolis during the Free-Market Forum. This annual forum is hosted by Hillsdale College and the Acton Institute. The presentations on Bitcoin were by Garrick Hileman of the London School of Economics; Sam Patterson, author of Bitcoin Beginner; and George Selgin, of the Cato Institute. The presentations can be watched on easy accessible video on the Free-Market Forum website. Money is the most commonly used means of exchange so Bitcoin has yet to earn its role as such, so far it is a currency. Considerable part of the demand, used for payments more than for “saving,” comes from countries such as Argentina, with a dismal monetary record and abundant controls. One of the problems for Bitcoin and its free-market advocates is clear: the more that they convince Argentina or Venezuela to move to sounder money policies and more freedom to exchange, the worse for the price of Bitcoin.

I finish the year with the hope that in 2015 we will find better “Roads to Sound Money” founded on the best knowledge and traditions of respect for private property, rule of law, and contracts. Gold served that purpose well for relevant periods of civilized life. There might be other alternatives and together with our talented colleagues at the Sound Money Project, we pledge to work to find them.

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