Matthew C Klein, Columnist

Lenin's Lesson for Frequent Fliers

Libertarians who want to replace government-backed fiat money with currencies issued by private entities should pay attention to the recent devaluation of Southwest's frequent-flier program.

September 25, 2013 at 8:15 PM UTC

By Matthew C Klein

Matthew C. Klein writes for Bloomberg View about the economy and financial markets. He previously wrote for the Economist magazine and its economics blog, Free Exchange. Before that, Klein was a research associate at the Council on Foreign Relations, where he spent more than two years studying the history of the Federal Reserve and the intellectual history of monetary economics for an upcoming book by Sebastian Mallaby. He also worked at Bridgewater Associates, where he studied the economies of Central and Eastern Europe and advised institutional investors on asset-liability management. Klein has a bachelor's degree in history from Yale University. Originally from Chicago, he lives in New York.

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Printing money is easy -- getting people to accept it for transactions is the tricky part. (Try it sometime if you don't believe me. Being a government-backed bank helps a lot.) Although governments have a big advantage because they decide how people pay their taxes and how to pay welfare and retirement benefits, this hasn't stopped private individuals and firms from trying to issue alternative currencies.

The most successful of these are credit-card reward points and frequent-flier miles. Despite their ubiquity, these private currencies have lots of problems that prevent them from being used more widely. Anyone hoping to replace government-backed money with private alternatives (I'm looking at you, Bitcoin and free-banking enthusiasts) should think carefully about a recent move by Southwest Airlines.