A good rule of thumb is that, whenever Ron Paul speaks out about economics, whatever he has to say is 100% grade-A bullshit. In the case of Bitcoins, the Goldbug Geezer had this to say:
"There will be alternatives to the dollar, and this might be one of them," said former U.S. congressman Ron Paul. If people start using bitcoins en masse, "it'll go down in history as the destroyer of the dollar," Paul added.
Bitcoins seem to have replaced the gold standard in libertarian economic fantasies (I've been referring to unregulated free-market theories and the inevitable bubbles as "the moonbeam economy" since first reading about credit default swaps in the 'noughts). The more quixotic libertarians (or the most cynical scam artists- hard to tell with this lot) have dreams of leaving the tyrannical state and it's dependent moochers behind. Tellingly, the real "producers" involved in the project would rather take fiat currency than magic beans or jars of moonbeams:
"Our farm workers and suppliers still want to get paid in pesos,” Ken Johnson, the project’s founder and managing partner, explains.
Hilariously, about two months after Ron Paul's prediction about the demise of the dollar, hackers have stolen "millions of dollars" worth of bitcoins using malware (note scare quotes), and a major bitcoin exchange has collapsed. Double bing-bang hell, I just found out via Thom Hartmann that the MTGOX exchange was started to exchange game cards.
Unlike the "fiat currency" printed by the Fed, bitcoins are backed by the full faith and credit of a handful of grifters and the libertarian cranks they are taking to the cleaners. Tellingly, early adopters of bitcoins have had the opportunity to sell the fake currency at inflated prices in order to make a killing, which is a hallmark of a classic pump-and-dump scheme. Even the pro-bitcoin crowd would have to acknowledge that it was easier to "mine" bitcoins at the start, making the whole process seem like a Ponzi scheme:
Libertarians tend to overstate their intelligence, giving rise to the term Dunning-Krugerrand to describe Bitcoins. I imagine quite a few of the John Galt wannabes were taken to the cleaners by investing in these Freedumb Francs. Most of them will, no doubt, claim that the free-fall in the value of these magic cyberbeans was due to a conspiracy by governments or central banks.
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11 comments:
I think they've just been mining 8 bit coins in a 32 bit world.
Are there Super Mario bits?
As you mention in your post, it's funny how they suddenly find value in a fiat currency created out of 0s and 1s, while one created out of paper and ink is somehow to be suspect.
I'm not as cynical as you - the idea of an anonymous digital currency is a good one, and probably will come to frition at some point. It's hard to scoff at an ultimate goal of an anonymous way of making online transactions considering the multi-government/multi-corporate surveillance state in which we live. I'D like to have a way to make anonymous purchases or transfers, just as I can with good old Benjamins.
But the problem with Bitcoin was clear from the beginning to anyone who thought about it deeply. A currency essentially requires two characteristics. It needs to function as a medium of exchange. Bitcoin functioned perfectly. But it also needs to be a reliable store of value. Stuff dollars or Euros under your matteress and you've got something, even if inflation reduces it over time. Bitcoin had wildly fluctuating values, more like a junk bond than a currency, and therefore could not meet the most basic demands for a real currency.
But I think you're kidding yourself a little. What Bitcoin did was provide an object lesson, not only on how you might create an anonymous digital currency, but also a powerful lesson on how NOT to do so. Smart people are paying attention, and new code is being written as we speak. There are more than grifters and suckers, there are activists and believers and hopeful millenials who understand the power of the network effect.
Lastly, don't underestimate the concerted effort of the global economies to kill these kind of efforts. One of the things they create, if successful, is an alternative store of value out of reach of the tax man. You mock this very use case in your post, Mr. Bastard, but think about it. Better code, better encryption, better execution and it JUST. MIGHT. WORK. If you think that doesn't keep policymakers up at night you're kidding yourself...
Speaking of out of reach of the taxman...
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I found it amusing that the Fox Network's serialized Blade Runner-esque show --"Almost Human", wrote bitcoins in as the currency in use.
The concept of Bitcoin has only been as successful as it has been, due to the anti government enthusiasm of its target market. They were all too willing to ignore the drawbacks of an anonymous digital crypto currency in order to seize its perceived benefits. As I understand it, the benefits are largely that one can make any kind of monetary transaction (including and especially the kind that the police take a dim view of, such as buying drugs) and that those transactions are shielded from governmental taxation. One of the asserted benefits are that it is free from the kind of currency manipulation that the Fed for example engages in. As Mikey explains, it certainly is a functional medium of exchange, they can be used to purchase anything that a seller who is willing to accept bitcoins is able to offer for sale. The drawbacks in my mind far outweigh the benefits.
Some of those drawbacks are that it is intentionally inherently inflationary. Since there are a finite number of individually numbered bitcoins, and due to hoarding, negligence mischance and bit rot, a declining supply, it behooves an investor to sit on their bitcoins in the hope of cashing out at some future higher value. No one will take out a loan in a deflationary currency, it has all of the drawbacks of a sub prime variable interest rate mortgage, built right into the nature of the currency. Avoiding the tax is a drawback, unless one isn't fond of roads, schools, police forces, national parks, foreign wars, Space programs, social security, national monetary policy, foreign aid, or any one of the ten thousand things the government does to earn a paycheck.
Taken to its ultimate conclusion, crypto currencies would lead to the collapse of society, as modern civilizations live and breathe by taxation.
sorry, to begin the second paragraph read "intentionally deflationary"
Fortunately, I traded all my bitcoins in for quatloos before the bottom fell out.
I've moved my portfolio from crypto currencies to Ningis and I've never been happier.
My entire investment portfolio is now in strakh.
Dogecoins are now all the rage. Yes, as in the internet meme.
Such funny. Very ponzi. So scam. Wow.
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