“[Bitcoin]’s a bubble,” asserts Alan Greenspan — who, as chair of the US Federal Reserve, oversaw a 77.5% inflation of the US dollar. Greenspan asserts that “you have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it.”
Somehow, however, he can stretch his imagination to reckon “intrinsic value” in ledger entries and green pieces of paper backed by nothing more than “the full faith and credit” of politicians who yank double-digit percentages of the wealth supposedly represented by those dollars out of the economy in direct taxation, who have “borrowed” (after having the Federal Reserve create it out of thin air) another $17 trillion, and who have committed the US government to future liabilities of tens of trillions more, all on the premise that they can find some way to steal that wealth from the rest of us to finance their schemes.
No chutzpah deficiency there, that’s for sure. Lecturing other people on “bubbles” and Cloud Cuckoo Land projects after his own career in same? Really? On the other hand I guess he is, by definition, an expert on the subject.
I’m not an economist, and I try to avoid playing one on the Internet. Yes, I’m aware that some economists — not just Keynesian and monetarist nutcases, but the real thing, i.e. Austrian School types — are skeptical of Bitcoin as “real money” for various reasons. I respect their skepticism. I guess we’ll see.
It’s important to keep in mind, though, that the concerns of politicians, bureaucrats, regulators, crony banksters and other members of the political class over Bitcoin are neither true economic concerns (if Bitcoin IS a house of cards, it’s no more so such than the political class’s own “currency” regimes) nor regulatory concerns (did regulators protect us from Bernie Madoff or from the 2008 bank collapses?) nor crime/fraud concerns (in 2012, credit/debit card fraud cost $5.5 billion and affected 10% of Americans … did politicians suggest avoiding credit/debit cards?).
The concerns of the politicians and their hangers-on are far more simple than any of that: What they fear, as they should, is loss of control.
Taxes are part of that fear, and rightly so. The movements of a transnational, decentralized, peer-to-peer, potentially anonymous (Bitcoin is NOT inherently anonymous, but is fairly easy to obscure identity links to) digital currency will be difficult — OK, impossible — to tax. But governments can adapt by taxing things that are harder to hide. Land occupancy and use, for example, or the movement of physical goods.
The bigger issue, to the political class, is that a transnational, decentralized, peer-to-peer, anonymous digital currency is far more immune to political manipulation. If its creation system is secure and if they don’t operate that system themselves, they can’t “borrow” money by creating it. If it’s truly transnational and widely adopted, it will be harder to use it as an instrument of economic war between or within states. If it can’t be effectively regulated, Big Business can’t have its friends in government use it to bar entry to, or disadvantage, new competitors.
And of course such a currency is great for the rest of us for all the same reasons. A complete separation of economy and state will be a major step toward abolishing the latter and putting the former more efficiently to work for the rest of us.
Will Bitcoin be the instrument of such a separation? Maybe, maybe not … but that instrument is coming.
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Citations to this article:
- Thomas L. Knapp, Digital currency is more immune to political manipulation, Dhaka, Bangladesh New Nation
- Thomas L. Knapp, Why They Really Fear Bitcoin, Dhaka, Bangladesh New Age, 12/12/13
- Thomas L. Knapp, Why They Really Fear Bitcoin, Nagaland, India Eastern Mirror, 12/12/13
- Thomas L. Knapp, Why They Really Fear Bitcoin, Before It’s News, 12/07/13
- Thomas L. Knapp, Why They Really Fear Bitcoin, London, Ontario Free Press, 12/11/13
The criticism I've seen is its use to pay for illicit drugs, but maybe drugs can't be illicit in a stateless society.
So which currency to protect ones wealth in the future where governments become shaky and plagued by insolvency. Large states will start grabbing everything that isn't nailed down in the event of the now inevitable collapse of the paper money system.
Based on the prior history of successful large company stocks and government paper, bitcoin will go through a few terrifying 50% corrections over the next 10 years and double or tipple the number of 25% corrections. The drops will give investors pause for months at a time before spectacular climbs in value RELATIVE to the dollar and Euro. So long as the encryption can't be cracked the corrections will be swamped by the gains to bitcoin over long periods of time. Much of this prediction is predicated on bitcoin becoming MUCH more user friendly then it is now and the assumption that no weakness can be found to crack the encryption around bitcoin.
With cash in your wallet you have to fear a thief with a gun or government taxation (same difference) but with bitcoin your biggest fear will be mathematicians finding larger prime numbers and other "wedge factors" that have been used to break encryption in the past. However "Pretty Good Privacy" (PGP) has been around for many years and to my knowledge remains unbroken. What we need is an article by a crack code breaker and mathematician who can (using layman's terms please) explain how hard bitcoins are to crack and what future developments could be used to break into them.
Still its worth buying a some bitcoins, as well as some gold, silver, platinum and palladium to fight all those pirate currencies that the looters (governments) control. So long as the encryption on bitcoins remains unbroken the bitcoins will be much much more secure then gold as a store of value. Most gold outside asia/india is in government/corporate controlled vaults no matter who the nominal owners are. This is a problem as governments might flood the market with gold to pay their expenses in the event of a currency collapse. Gold might end up appreciating in value (quickly enough to outpace inflation) only AFTER the last pillar of creditor government fiance collapses. Those living in debtor governments however get more of a benefit from gold. All the precious metals are bulky and inconvenient for small transactions such as gasoline, breakfast or morning coffee but ideal for buying land or houses after a currency crisis. (One gold coin could buy a square block of land in down town Berlin after the infamous inflation of the 1920's).
Bitcoin is much much better as a currency for everyday life, particularly if you end up in a police state where being caught with competing currency could land you in jail and labeled a terrorist. Paper money is just convenient but bitcoins will eventually become just as much if not more so for everyday transactions in city areas where law enforcement has weak legitimacy on the ground. In rural areas of the western world however expect silver coins to become a standard coin for everyday life even before governments completely collapse.
I have been living in Asia and I can tell you now that silver markets at least in Thailand are just awful and difficult to trade near the spot price, but this won't remain the case when paper currencies crack under the waste ,fraud and abuse of the governments that issue them. Gold is already the metal of choice in South Asia.
Before you get gold or bitcoins however you might want to stock up on "disaster rations of dry food and fresh water, wine,whiskey and comically enough a month or two of toilet paper before you stock up on a basket of alternative currencies . Buy yourself a few solar panels or a small fuel cell generator if you can pay the high costs. Most of all buy yourself a gun if you live in the countryside but defensive weaponry becomes problematic to practice with if you live in a city area. Once you have the basics squared away or you travel too much to pack in a large store of survival supply then you can grab hold of two or three types of alternative currencies.
One thing I can say for certain is the US dollar and the Euro are going the way of the dodo bird or the Tyrannosaur. Having a bit of everything will keep you going during hard times then just having one currency that might experience disruptions in trade. Bitcoin will likely be the hardest to disrupt of them all if you live in a city but silver or gold is you friend if you live well outside of town.
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If the Austrian School is skeptical about the bitcoin digital monetary trey probably have some reasons about this. Good writing!