Bitcoins: a viable alternative currency?

10 Sept 2013: Paul Duane talks Bitcoins with Austin Craig – click here to listen

Provo, Utah couple Austin & Beccy Craig decided to spend the first 90 days of their marriage using ONLY Bitcoins, a new electronic currency, instead of dollars. I interviewed him to learn about the history of Bitcoins, how they work, and how they pay for groceries, gas, rent, and insurance using Bitcoins.


These are not meant to be comprehensive or a transcript of the show, but these are the notes I used in preparation for the show and I figured that sharing them with you might enhance the presentation of the podcast.

History of US Dollar

When the Civil War required vast new expenditures, the banks wanted extremely high rates of interest on any loans to the Union (15 to 36 percent), and so Congress felt compelled to issue fiat money. These “greenbacks” could not be redeemed in gold or silver and were limited somewhat in the things for which they could be spent. Their value soon dropped to around 35 cents.

Finally, in 1878, Congress promised to redeem the greenbacks in gold. This changed the greenbacks from cheap fiat money to debt money, redeemable at face value. At first there was a run on gold as people traded in their greenbacks, but when they found they really could get the gold, then people didn’t want it. They returned the gold to the bank and took back paper money instead. This left the United States on the gold standard until 1933.

Meanwhile, Congress phased out the bank notes issued by state banks by putting a tax on them, thereby discouraging their use. In 1863-64, Congress passed a series of national bank acts which set up a system of privately owned banks chartered by the federal government. These national banks issued notes backed by the U.S. government bonds, and these national bank notes became the country’s chief currency. When the greenbacks received gold backing in 1878, they also moved up to a par value with the national bank notes.

In 1913 the Federal Reserve replaced the national bank system, and Federal Reserve notes were issued with a promise to redeem them in gold on demand.

Then, in the year 1933, the United States abandoned the gold standard. These were the circumstances:

  1. On April 5, 1933, one month after his inauguration, President Franklin D. Roosevelt declared a national emergency and ordered all gold coins, gold bullion, and gold certificates to be turned in to the Federal Reserve banks by May 1. This order applied only to those residing in the United States. It did not apply to foreigners living abroad. Within the United States, only those who had special gold collections or needed the gold for industrial or professional use were allowed to retain quantities of the yellow metal.

  2. As gold coins, gold bullion, or gold certificates were turned in, the American people received Federal Reserve notes redeemable in silver.

  3. On May 22, 1933, Congress enacted a law (48 Stat. 31) declaring all coin and currencies then in circulation to be legal tender, dollar for dollar, as if they were gold. It also empowered the President to reduce the gold content of the dollar up to 50 percent.

  4. On June 5, 1933, Congress enacted a joint resolution (48 Stat. 112) that all gold clauses in contracts were outlawed and no one could legally demand gold in payment for any obligation due him.

On January 30, 1934, the Gold Reserve Act was passed, giving the Federal Reserve title to all the gold which had been collected. This act also changed the price of gold from $20.67 per ounce to $35 per ounce, which meant that all of the silver certificates the people had recently received for their gold now lost 40 percent of their value.

The next day the President proclaimed (48 Stat. 1730) that the dollar was to be fixed at 15 and 5/21 grains of standard gold and was to be maintained at this level “in perpetuity.” This is still the definition of the “dollar” in the United States code. Russia and the central banks of Europe began buying up gold in huge quantities. Thus there came into being a dual monetary system: a gold standard for foreigners and Federal Reserve notes (redeemable in silver) for Americans.

From 1914 to 1973, American currency went through the following erosion:

  1. From 1914 to 1933, every Federal Reserve note was redeemable in gold and silver.

  2. Between 1933 and 1963, all Federal Reserve notes promised to pay (or be redeemed) in “lawful money,” which meant silver. Then the wording on the Federal Reserve notes began to be changed to somewhat obscure language, which should have given Americans a warning that the government was planning something.

  3. In 1965 President Lyndon Johnson authorized the treasury to begin issuing debased “sandwich” dimes and quarters with little or no intrinsic value, and the quantity of silver in fifty-cent pieces was reduced to 40 percent.

  4. On June 24, 1968, President Johnson issued a proclamation that henceforth Federal Reserve silver certificates were merely fiat legal tender and could not be redeemed in silver.

  5. On December 31, 1970, President Richard Nixon authorized the treasury to issue debased “sandwich” dollars and half dollars.

  6. By August 1971, many of the European countries had collected so many billions in Eurodollars (foreign aid, money spent by the U.S. military abroad, etc.) that European banks had begun to get nervous about redeeming their money in gold. A threatened run on the U.S. Treasury resulted in the American gold window being slammed shut. This resulted in collapse of the dollar on the world market. Since then it has fluctuated on the world market like any other commodity, since it is no longer redeemable in precious metal and therefore has no intrinsic value.

  7. In 1973, the U.S. dollar was officially devalued, changing the price of gold from $35 per ounce to $42.23 per ounce.

  8. On March 16, 1973, Congress set the American dollar completely afloat with nothing to back it up but the declaration of the government that it was “legal tender,” or fiat currency.

  9. The world market immediately reflected serious erosion in the value of the American dollar. To buy an ounce of the gold it took not $42.23 but $100, then $200. After that, it moved higher and higher until it required $800 to buy an ounce of gold. Gradually some confidence was restored in the dollar as the symbol of the American economy, and so it settled back down to a plateau of approximately $300 plus.

Today, the American economy operates under a monetary system which is completely outside the Constitution. Its fiat money is continually manipulated both in value and quantity. This has had a devastating impact on its purchasing power, which is now down to about 8 percent of its 1933 value. It has eroded the value of savings, insurance policies, retirement funds, and the fixed incomes of the elderly.

The Making of America, by W. Cleon Skouson


What are Bitcoins?

Some Interesting Facts…
  • Bitcoin is a digital currency

  • Because it is digital, you can literally backup your money, so, when properly cared for, it can’t be:

    • Lost

    • Stolen

    • Frozen or seized

  • Allows a direct and immediate transfer of value between two people anywhere in the world.

  • No banks, governments, or organizations control or influence it.

  • Cannot be counterfeited, inflated, printed, or devalued over time.

  • A peer-to-peer network functions as a distributed authority to record transactions.

  • Bitcoin operates on free, open-source software on any computer or smart phone.

  • There are no start-up, transaction, or usage fees.

  • Purchases can be completely anonymous.

  • Transactions cannot be reversed.

  • Privacy is enhanced with Bitcoin and it reduces identity theft.

  • Bitcoins can be exchanged in open markets for any other currency.

Austin Craig’s kickstarter:


  • What inspired this?

  • E-gold fell because it became a haven for criminals, due to it’s anonymous nature. How is Bitcoin different?

  • At what point in your dating did you two start talking about currency?

  • When did you decide to spend the first 90 days using only Bitcoin?

  • What has the response from the public been like? What kind of outlook has this given you on the potential widespread nature of bitcoin?

  • What are Miners?  How are they creating value?


Multiple attempts have been made at creating rules to oversee virtual currency operations.

In March, the Treasury Department’s Financial Crimes Enforcement Network released guidelines that brought Bitcoin businesses under the same umbrella of laws as other money services businesses.

“FinCEN guidance was a starting-gun shot for the industry,” said Marco Santori, a business attorney and chairman of the Bitcoin Foundation’s Regulatory Affairs Committee. “It signaled that bitcoins were not contraband, but a legitimate form of value transfer.”

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