Hayek and Satoshi Meet in Vegas
F.A. Hayek is smiling, or perhaps blushing, if news has trickled up to where all great Austrian economists go. The Legends Room Gentlemen’s Club in Las Vegas has created its own virtual currency, known as LGD.
Todd Prince broke the story in the Las Vegas Review Journal that the soon-to-be-open club is “hoping a new marketing weapon – a virtual currency – will help them wrestle tech- and investment-savvy clients away from the strip club giants.”
Club owners are selling memberships to Legends for $5,000, which can be paid for with bitcoin as well as the US government’s legal tender or credit cards. “Members in return will receive 5,000 LGD, a virtual currency created by Legends Room, that can be used to pay for lap dances and drinks.”
Alert readers will notice that the club’s owners have set the LGD/$ exchange rate at par. One wonders whether it will remain there. After all, the aforementioned bitcoin has taken off yet again and it takes 1,994.42 of Uncle Sam’s bucks to buy a single Satoshi bitcoin.
A New Crypto
Non-members will be required to buy at least one LGD to enter the club’s VIP room, so the owners hope this will create a market for their cryptocurrency. If nothing else, they are dreaming big, with plans to display the daily price of their currency along with bitcoin on video monitors throughout the club.
Prince explains, “Members and other token-holders will be able to sell their LGD for bitcoin on the Bittrex cryptocurrency exchange or for cash through the club’s concierge to those seeking access to the VIP room.” LGD will be just one of the more than 190 cryptocurrencies Bittrex supports.
In a vast departure from typical strip club protocol, Legends will offer a Bloomberg terminal for patrons to monitor stock and bond prices during trading hours. No doubt some dancers will take advantage of the terminal to keep an eye on their investments. (The most remembered story I’ve told to all economics classes I’ve taught is about the worst stock tip I ever received – from a dancer in a strip club.)
A Fad No More
By coincidence, the May 19th issue of Grant’s Interest Rate Observer devotes its front page to bitcoin with the catchy title “I own tulips at 40 cents a bulb.” The folks at Grant’s queried a few investors in the bitcoin space. None poo-pooed the cryptocurrency as a bubbly fad: “It’s a stored value, a monetary asset that’s winning its place in the hearts and minds of the world’s financially repressed,” says Murray Stahl, speaking of Satoshi’s handiwork.
Stahl went from not knowing what a bitcoin was two years ago to buying 20 computer servers and beginning a bitcoin mining operation. Besides Satoshi’s technology, Stahl was impressed with the bitcoin founder’s theory. “He wanted to create a non-inflationary currency,” Stahl told Grant’s. “That is really what he wanted to do. The first one that ever existed that no government could ever tamper with, and he did it.”
By the way, Stahl says the cost to mine a bitcoin is about $1,200, but he’s not about to sell his. “I think that something has to replace the current monetary insanity.”
Another friend of Grant’s is buying other cryptocurrencies. The business plan of these currency creators is speculation, “and they all say the same thing,” Grant’s friend concludes. “It’s no problem, we’re just going to convert it into bitcoin.”
For Professor Hayek, competition in currencies was not about creating speculative vehicles, but instead, “under the proposed scheme, the managers of the bank would learn that its business depended on the unshaken confidence that it would continue to regulate its issue of ducats (etc.) so that their purchasing power remained approximately constant.”
In his book Denationalization of Money, Hayek anticipated the current monetary insanity Murray Stahl speaks of, explaining,
And it should be in the power of each issuer of a distinct currency to regulate its quantity so as to make it most acceptable to the public – and competition would force him to do so. Indeed, he would know that the penalty for failing to fulfill the expectations raised would be the prompt loss of the business. Successful entry into it would evidently be a very profitable venture, and success would depend on establishing the credibility and trust that the bank was able and determined to carry out its declared intentions. It would seem that in this situation sheer desire for gain would produce a better money than government has ever produced.
Besides its store of value potential, bitcoin and other cryptocurrencies have great advantages in ease of payment. Great wealth can be transmitted with the push of a button. Or, for the girls who will work at Legends, Mr. Prince writes, “Members would be able to scan QR bars either on the dancer’s phone or placed on her body rather than stuffing dollars into her stockings.”
While the number of bitcoin to be produced will stop just short of 21 million, the ambitious owners of Legends are giving themselves more running room, limiting the number of LGD to 30 million. Janet Yellen and Mario Draghi have no such constrictions.
Legends will open in June, and will be a great place for a field trip to see cryptocurrency in action during Freedomfest July 19th through July 22nd.
Douglas French is an Associated Scholar at the Johnson Center at Troy University and adjunct professor at Georgia Military College. He is the author of three books: Early Speculative Bubbles and Increases in the Supply of Money, Walk Away, and The Failure of Common Knowledge.
This article was originally published on FEE.org. Read the original article.