Bitcoin Again


Howard R. Gray

Bitcoin will have one potent chance to insert itself into the economy as savior, no more so when the US dollar reaches the Weimar moment which is very likely to be soon. Is Bitcoin real enough to do that?

What is the point of a fiduciary currency when there is no faith left? Bitcoin, or one of its competitors or co operators, may well create a way to survive a valueless currency when the moment arrives. Legal tender laws could be amended to accommodate novel currencies and money, which may well be the only way a government, can survive a currency melt down without a political meltdown. I suspect we are about to find out soon how all this will work.

Merely switching one dud currency for another won’t go down well, there will be a need for money backed by value, bitcoin is one entity that might not pass muster on this one but an amalgam of bit-money and bitcoins could make it to the table instead. If there is a unique way to print out cash with an encrypted graphic similar to a bar code then there may be ways to transfer cash outside of the net in the open market in real as well as cyber space. Is any of this possible, you tell me?

Cyber-ducats, Barter-Bits, Info-Franks or whatever the money may become, the result will be the first stages of removing state monopoly from value exchange. Liberating interest rates and exchange rates from the power of the banking classes would be a huge advance in liberty. Government would have to operate on value of the services it provides rather than the favours it bestows on those it corrupts to support it. Yes they can bust in and arrest the miscreants who use cyber money, which will only work so long as they can pay the black flack suit guys and gals, not so easy when you are playing the Zimbabwe gambit.

Hayek and his view of private money has laid the foundation of why private or non state money is a good thing. The technology of doing it may just be about to emerge. Now let us imagine how to run a deficit spending Keynesian economy should any of this happen. Hmmmmmm…..

Evolve, if you will, to a world where there are free market interest and exchange rates, how would that work out? Imagine a wee bit further where there is private money and public or government currency in a situation where the arbitrage between the two might just create a stable monetary system to replace the Breton Woods model. Amended legal tender laws to accept viable money in competition with state currencies would add a deep dimension to the international currency exchange trade. Which way would Gresham’s law operate here?

Honestification of currencies to ensure that they become more like money would be a real advance. No more coin clipping, printing press or computer key currency fraud, wouldn’t that be nice?

The SWATistas in the black outfits might be better off if they stay home when this one goes down. An emergent natural monetary order might permit very rapid recovery from a transnational fiscal meltdown. Entitlements will be gone, government grants will be gone, overseas aid will be gone, Keynesian economics would be gone, no IMF or UN and so on and so forth. Then what? Perhaps Mr. “Spooky dude” Soros just might put his feet up and retire.

None of this is vaguely viable but one can dream!

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12 responses to “Bitcoin Again

  1. Perhaps the trashing of the media of exchange around the world is the intention and not simply an unfortunate side effect of otherwise good intentions?
    And that the powers-that-be already have their total control plan in place for a global currency, or medium of exchange to be rolled out when they have managed to smash up most of the others.
    Much as the dictators are taking over Egypt now that the nasty tyrants have been got out of the way.
    But it would be nice, indeed, if a sane, non thievery-based system of exchange could be established.
    Could a system like PayPal, or one of the skype lookalikes, be a network on which it could be established?

  2. let’s wait for the geek all around the world to implement that payment module in their e-store :)

    we need adopters !

  3. Bitcoins in the physical form already exist! They are in beta / testing right now though. http://bitbills.com/

  4. How does one establish their value?
    Based on gold? Then someone has to back them with gold.
    Otherwise it is just another free floating currency worth whatever a manipulator says it is?

  5. Single Acts of Tyranny

    I have to agree with John B, Bitcoin, cyber money or whatever is either commodity backed or Fiat and it looks like the latter to me

  6. Fiat means it is money by government decree. No government is forcing anyone to use Bitcoin so it isn’t fiat.

    People use Bitcoin because they like it’s properties. It is easily traded, secured, audited, etc.. The definition of a commodity is:
    A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market.
    The only part of that definition that Bitcoin doesn’t fit is it being a good, because it is not physical. However this begs the question, “Why couldn’t a commodity be digital?” As the online world becomes more an more important, doesn’t it make sense that some virtual items will become valuable for their own sake? This has already been happening for some time with online video games and domain names. If one needs a theory for why Bitcoin is valued I would say because it is a new commodity which is valued for it’s own unique properties.

  7. “No government is forcing anyone to use Bitcoin so it isn’t fiat.”

    Nonsense. Coercion is the overthrowing of another’s will.

    Tony

  8. Who is overthrowing another’s will to get them to use Bitcoins?

  9. From an economic point of view, what’s the significant difference between Bitcoins and gold?

    Gold has a relatively stable, slowly expanding supply, and more cannot simply be willed into existence by any government or small group of individuals.
    Bitcoin has a relatively stable, slowly expanding supply, and more cannot simply be willed into existence without a consensus among its users.

    Gold is a shiny rock with no intrinsic value for 99% of people except that they like the way it looks and will trade it for other things. It doesn’t even make good tools.
    Bitcoin is a string of numbers with no real intrinsic value except that people find it convenient and will trade it for other things. It doesn’t even make good tools.

    The disadvantage to gold is that it’s heavy and has to be shipped around.

    The disadvantage to bitcoin is that it’s dependent on access to a functional Internet and proper backups of your data.

    Pick your poison, but while I think there’s currently a bit of a bubble in bitcoins, I also think it’s a currency that’s likely to stick around due to stability and ease of use. Especially when all the money-printing governments around the world have been doing lately starts to catch up to them.

  10. Gold does have quite a few industrial uses. http://geology.com/minerals/gold/uses-of-gold.shtml

    Bitcoin I specifically designed to be a currency. I can’t imagine it being used as anything else.

  11. To get gold out of the ground s a very hard slog and that’s what makes it valuable (as long as people want it, okay).
    But they do. It is highly valued for jewellery and conductive and non-corrosive properties.
    It has been recognised as a store of value/wealth for thousands of years.
    Bitcoins are not fiat. Agreed. Their value is not established by government decree. The word “fiat” is misleading down the garden path. A conflation.
    But they are free floating insofar as they can be manipulated by whoever produces them electronically.
    What is a Bitcoin worth?
    They are worth what someone values them at.
    I don’t actually understand the Bitcoin concept, but I understand the mechanisms of a medium of exchange. More or less.
    Bitcoins seem to be standing on their own word and little else.

  12. David:

    My objection was aimed at your suggestion that only governments can coerce.

    Tony