What will be the money of the future? A review essay of Lawrence H. White’s Better Money: Gold, Fiat, or Bitcoin?

Better Money seeks to answer a simple question: If the government treated all potential monies equally, allowing market participants to freely choose, which would they choose as the better money: fiat, gold, or Bitcoin? White dismisses our current system of fiat money owing to its tendency toward inflation and business cycles in the inept hands of central bankers. Then weighing gold versus Bitcoin, he concludes that gold is the better money due to greater price stability. Although both gold and Bitcoin are non-inflationary owing to inherent limits on the creation of new money, Bitcoin’s complete supply inflexibility makes it more volatile than gold, the supply of which can be increased or decreased by gold miners according to changes in demand. This reviewer raises the question of whether the rapid flexibility of changes in the quantity of fiduciary money (checking deposits and banknotes issued by banks against holdings of Bitcoin base money) could make the supply of Bitcoin money more responsive to demand, thereby reducing its price volatility, and making it potentially a “better money.”