Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Let's talk about Bitcoin and other cryptocurrencies and how they fit into the long history

of privately issued currency. While the technology underlying cryptocurrencies is new, the core idea of

non-government-issued money has been around a long time, and usually it existed to solve

problems that sovereign currency could not. In the United States, the government is not the only

entity legally allowed to issue money.

Private citizens and businesses are allowed to do so too.

And throughout US history, they've done this.

This type of money is referred to as private money, and it had mostly disappeared from circulation until Bitcoin was created in 2009.

Today, more than 8,000 cryptocurrencies exist, and more are appearing every day.

The extreme volatility that we see in cryptocurrencies, mostly caused by Elon Musk's Twitter

activity, highlights that most people view them as more of a speculative vehicle than as usable money right now.

Historically when private currencies were widespread in the United States, they were used

for day-to-day spending by the general public, and people mostly just hoped that they would

hold their value. Before the Federal Reserve Act of 1913 and the printing

of the first Federal Reserve notes, hundreds of banks in the United States issued thousands

of different kinds of currency, which were as a group the effective currency of the country.

So why were these private currencies so popular and so widely used?

Well, initially in the colonial era, there just wasn't enough sovereign currency to go around.

Later, huge amounts of money were printed during the American Revolution to pay the troops,

which led to hyperinflation and food riots.

The British government printed counterfeit

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