Economic historian Dr. Barry Eichengreen of UC Berkeley and the National Bureau of Economic Research, writing in the New York Times June 17 just before passage of the Senate’s GENIUS Act for crypto “dollars,” also heard the strains of Gone with the Wind, and foresaw U.S. monetary and banking chaos. Eichengreen’s piece was headlined, “The Genius Act Will Bring Economic Chaos.” He wrote: “The Genius Act would give hundreds—perhaps even thousands—of American companies the ability to issue their own currencies…. America had a similar banking system more than 150 years ago, and it unleashed chaos and financial ruin…. The intent, evidently, is to let a thousand cryptos flourish.”
More precisely, Eichengreen wrote, in the decades after 1837, when President Andrew Jackson shut down the nation’s Second National Bank: “Similar to what is being proposed by the Genius Act, every bank was entitled to issue its own dollars as long as it held $1 of collateral for every $1 issued…. Those assets were sometimes all but worthless—resulting in panics and bank runs.” There was no uniform national currency; even where the state bank “dollars” did not collapse, they all traded at different values. That, Eichengreen adds, will be much harder on economic activity today, than it was in the 1840s and 1850s.
When today’s “stablecoins” are hit with runs and fail, their issuers will rapidly have to sell off those Treasury bills they hold as collateral; “Treasury prices could collapse, sharply increasing interest rates and destabilizing other financial markets and our entire economy.”
