Bitcoin entrepreneurs meet in Paris this week

I’m open-minded about Bitcoin and digital currencies in general. Which is to say I want 10 million people to use it for 10 years before I consider it a store of value.

Events like Paris Bitcoin Startups On Wednesday 16th April reinforce my attentisme or ‘wait-and-see’ policy.

On the one hand, if the digital currency can overcome French bureaucratic hostility and prosper there, that speeds up my adoption date.

On the other hand, it looks a lot like venture capitalists playing with ‘out-of-the-box’ business ideas. Exciting, but not safe. For now, gold wins.


Gold price fix: enter the lawyers

First we had a glut of gold. “We Buy Your Gold” on every street corner.

Then the accusations of price rigging (having a “spot fix” with five banks on conference call doesn’t exactly inspire confidence that there won’t be collusion).
Continue reading “Gold price fix: enter the lawyers”


Eggs in two baskets

Supporters of sound currency have a pretty good idea about what’s wrong with the present paper currency and banking arrangements. They also have clear views on what should replace it, although some put more emphasis on gold, others on baskets of commodities.

I remember the excitement I felt as I first read Friedrich Hayek’s The Denationalisation of Money. My preference was for gold, though the fluctuations of the early 1980s made me aware that reintroducing the Gold Standard could be turbulent. It would be politically “courageous” if not a sure election loser.

After grasping the idea that a basket of goods could be more stable than gold on its own, I eagerly turned to the last page. I hoped to find a compelling step-by-step guide to how to bring this “standard” currency into existence.

To put it mildly, I was disappointed.
Continue reading “Eggs in two baskets”


Amazon Prime cheaper in commodity terms



Incoming from Dave Doctor at Monetary Choice:

The dollar price of Amazon Prime, the two-day delivery program for Amazon, rises on April 17th to $99, from the original $79 price set in 2005, a 25 percent increase. However, when measured in gallons of gas and pounds of coffee, the price or cost declined, by 27 percent in gas and 53 percent in coffee. This is not surprising since Amazon is much more efficient now. The dollar price rose because there are twice as many dollars, created by banks to fund the U.S. federal government’s deficit and low-interest loans, all at the expense of savers.


On the subject of free trade and world peace

Richard Cobden was renowned for his role in the Anti-Corn Law League, campaigning against import tariffs. He was also a champion of the idea that peace would be strengthened by more individual business contacts across national borders.

I think it’s fair to say that Cobden would support the European Commission’s plan to scrap trade barriers between the European Union and the Ukraine announced last week. The Ukraine is not threatening war against any European Union countries and such boost to trade as will happen between now and September would tend to help peace and democracy in the region.

But surely it would be counter-productive to re-introduce barriers to trade with the Ukraine when the six months are up? And couldn’t similar arrangements be offered to Russia if its government decided to stop its own mercantile approach?


John Butler: Bitcoin, the Monetary Touchstone

Click to download PDF

Click to download PDF

Is Bitcoin a sound form of alternative money? Does it provide a viable, alternative store of value with gold? These are questions that John Butler answers in his latest Amphora Report, which is reprinted below. This article offers a useful background to the thinking behind Bitcoin and it’s potential as a disrupter of fiat currencies.

BITCOIN: THE MONETARY TOUCHSTONE Created in 2008 by the mysterious ‘Satoshi Nakamoto’, in the past few months bitcoin has gone from a fringe financial technology topic to a mainstream media phenomenon. The debate is now raging as to whether bitcoin is, or is not, a sound form of alternative money. As the Amphora Report has, from inception, focused regularly on monetary theory and the financial market implications of activist central banking, in this edition I survey a handful of prominent, diverging views on bitcoin and then share some of my own thoughts. In brief, I believe that bitcoin’s ‘blockchain’ technology enables a low-cost payments system capable of disintermediating the banking industry, but I do not believe bitcoin presents a viable, alternative store of value on par with gold. In any case, bitcoin serves as a monetary ‘touchstone’ of sorts, distinguishing those who lean toward economic and monetary authoritarianism from those who favour market-based organisation instead.


Satoshi Nakamoto, the initially mysterious and now legendary creator of bitcoin, finally became a mainstream celebrity last week, having been ‘outed’ by US periodical Newsweek. Many who have followed the bitcoin story, however, find Newsweek’s claim rather dubious and instead believe that ‘Satoshi Nakamoto’ is a pseudonym adopted by either a single individual or team responsible for researching and publishing the original 2008 paper describing the specific, ‘blockchain’ algorithm behind bitcoin.

I have no strong opinion on Newsweek’s specific claims, nor on who, or what group, created bitcoin, although I am curious, for reasons that will become apparent. More important is to understand whether bitcoin could function as a sound, alternative money.

To begin, we need first consider why an alternative money would ever be necessary in the first place. Well, repeatedly throughout history, due to financial pressures, governments have chosen to debase their coins or inflate their paper currencies to service or settle their debts, by implication appropriating the wealth of prudent savers in the process. Wars, for example can be expensive and most large debasements in history have occurred either during or following major wars, in particular in those countries on the losing side of the conflict. But even the winners can succumb, as Rome demonstrated in the 3rd century or as the victorious WWI powers did in the 1920s and 1930s.

To continue reading, download the Amphora Report here (PDF): Amphora Report, Vol 5, 12 March 2014.


Press Release: Greece is a warning to the rest of Europe

This press release may be downloaded here:

Public perceptions of economics are vital to resolving the current crisis, Greece is a warning to the rest of Europe

The political and economic problems facing Greece are of such a magnitude and the proper solutions are so unlikely to be adopted that social unrest must be a possibility, according to a paper published by the Cobden Centre. Deep-rooted political beliefs among the public and problems with the political and social structures have combined to facilitate bad fiscal management by successive Greek governments, according to Anita Acavalos, an economics student currently based in the UK.

“The Cobden Centre has published the article because we believe that it shows just how important public education about economic theory and policy are in avoiding crises such as the one affecting Europe today,” Antoine Clarke, a spokesman for the group said. The Centre is an educational charity to promote the Cobdenite tradition of liberty: honest money, free markets, free trade and peace as the means to the maximum of social progress for every person.

In her paper, titled “I predict a riot,” Ms Acavalos notes the problem of accurately estimating the scale of Greece’s problems: “Soaring budget deficits coupled with the unreliable statistics provided by the government mean there is no financial newspaper out there without at least one piece on Greece’s fiscal profligacy.” The paper ends with a call for “Greek people learn to listen to the ugly truths that sometimes have to be said,” adding that “the time for radical, painful, wrenching reform is NOW.”

She warns that what may appear to be “simply the result of gross incompetence on behalf of the government,” is the consequence of “the country’s social structure and people’s deep rooted political beliefs” which show that the current crisis “could not have been avoided even if more skill was involved in the country’s economic and financial management.”

Among the cultural difficulties are “suspicion of and disrespect for business and private initiative,” a widespread belief that “big money” is earned by “exploitation of the poor or underhand dealings and reflects no display of virtue or merit,” Ms Acavalos argues.

The political patronage system, whereby may voters expect their support of a politician to be rewarded with favourable treatment by the public authorities, in some cases by outright bribery, poisons the relationship between the electorate and the political class.

“[P]eople feel that they are entitled to manipulate the system in a way that enables them to use the wealth of others as it is a widely held belief that there is nothing immoral with milking the rich because they are commonly perceived to be everything that is wrong with Greek society,” Ms Acavalos writes. One example that might be seen as destroying private initiative is that getting a job is considered to be someone one does by asking one’s contacts with the public administration.

The result of politicians promising everything and the lack of entrepreneurship is:

“Greece is the perfect example of a country where the government attempted to create a utopia in which it serves as the all- providing overlord offering people amazing job prospects, free health care and education, personal security and public order and has failed miserably to provide on any of these. In the place of this promised utopian mansion lies a small shack built at an exorbitant cost to the taxpayer, leaking from every nook and cranny due to insufficient funds which demands ever higher maintenance costs just to keep it from collapsing altogether. The architects of this shack, in a desperate attempt to repair what is left are borrowing all the money they can from their neighbours, even at exorbitant costs promising that this time they will be prudent.”

There is hope however, Ms Acavalos believes:

  • family ties and social cohesion are still strong and have cushioned people from the problems caused by government profligacy;
  • families make “huge sacrifices” in order to raise money for their children’s private tuition or send them to universities abroad whenever possible;
  • the poor quality of university education in Greece is compensated for by the large numbers of young Greeks who study outside their home country; and
  • private (as opposed to public) levels of indebtedness although on the rise are still lower than many other European countries.

Notes for editors

1. “I predict a riot,” by  Anita Acavalos, published by the Cobden Centre, can be accessed online here:

2. The paper is part of the Cobden Centre’s range of publications, available from:

3. The Cobden Centre is an educational charity, dedicated to the causes that were championed effectively by Richard Cobden in the 19th century: free trade, honest money, social progress and peace.

For more information, contact Antoine Clarke on +44 (0) 7720 152 096, or email .


Giants fighting in a sandbox

Even gold is no guarantee to hold value when bloated government currencies compete as to which one can inflate the most. The current problems facing some of the eurozone’s member states means that, paradoxically, the price of gold may fall as people cash in their assets. Elsewhere, one notes the performance of the US government in announcing a “spending freeze” which does not include 87% of federal government outgoings or the unspent hundreds of billions from last year’s stimulus bill. A good account of the problems in Europe can be found here and the Cato Institute has a report on the US “spending freeze” here.

However, it seems all too likely that at some point the futility of swapping euros for dollars and back will become clear as the demented game of paying one credit card bill with another credit card. At that point, tangible assets will become the targets of panic-stricken investors, destabilizing such stores of value as gold or land.

To an individual or small business caught in this disaster, it will be like watching giants fighting in a sandbox, not caring who they tread on. It may seem odd for some to hear a humanitarian plea for sound money, but anyone who has ever seen a 1923 “5 tausend Mark” postage stamp overprinted to make it a “2 millionen Mark” stamp will have some idea of the nightmare that inflation threatens, especially to anyone on a fixed income. A few weeks after the stamp you see was issued, 50 billion Mark stamps were being issued and a loaf of bread cost over 300 billion Marks.


A Free Money Movement

An interesting development in the campaign for free banking has been the emergence of social media. I admit that when I first read F.A. Hayek’s “The Denationalization of Money” I felt that a very good pamphlet ended on a rather damp note, with the following call:

What we now need is a Free Money Movement comparable to the Free Trade Movement ofthe 19th century, demonstrating not merely the harm caused by acute inflation, which could justifiably be argued to be avoidable even with present institutions, but the deeper effects of producing periods of stagnation that are indeed inherent in the present monetary arrangements.

– Hayek, F.A. The Denationalization of Money, the Argument Refined (The Institute for Economic Affairs, 2nd edition, 1978)

The problem to my mind was: “that’s nice. But how on Earth do we achieve such a goal?”

Until recently, I was pessimistic about the creation of “a Free Money Movement comparable to the Free Trade Movement” along the Manchester Free Trade Association model. The universities were not helping much, there were no grassroots movements campaigning for this.

What’s changed is social networking platforms such as Facebook. One of its features is the aggregation of people with something in common, for example fanatics of chess, The Velvet Underground, Hello Kitty fashion accessories, and free banking.

As I write there are only 461 fans who list “free banking” on their Facebook profiles, but they are assembled from all over the world. Normally, a group of this kind would tend to become inward looking: a tiny (and shrinking) gathering of money theory nerds meeting once a month in a draughty room in what was once a town hall. But the 461 have listed “free banking” among their lists of causes they support, along with, in some cases chess, The Velvet Underground and Hello Kitty.

So when I happened to look at one of my friends list of causes, and saw “free banking,” I was intrigued enough to check out the group (one click of a mouse), and with another I had joined, and invited 20 more to join. This is how the networks of enthusiasts and the curious can come together, across borders and without the transaction costs of trying to organise a mass movement from scratch.

I’ll make one precdiction: there are going to be a lot more than 461 fans of free banking on Facebook.


The Micropolitics of Free Market Money: a Proposal

This paper originally appeared as Economic Notes No. 39, published by the Libertarian Alliance in 1992. The Paper is available in full here.

This paper is not primarily intended as a contribution to economic theory. It is instead intended to steer the debate on free banking away from statements of loyalty to the “line”: that orthodoxy of political views which is often incoherent and always an affront to individual reason. This is accomplished by concentrating upon the process of argument.

In “A Credibility Problem” (Part I), there is a critical evaluation of the depth of understanding by free banking’s supporters of their own position, and a hard evaluation of the likely effectiveness of these arguments. Then in “How To Do It” (Part II) micropolitics are applied to the free banking issue.


To expect the introduction of legal private currency – that is to say not state owned, not state regulated, and the use of which will not result in prosecutions on the grounds of issuing counterfeit notes, fraud nor ‘economic sabotage’ – is to dream.

Most people divorce their dreams from reality. In the Conservative Party’s youth wings, home to many who “dream with their eyes open”, a majority does not as yet support the privatisation of money. Given the tendency in these sections of the Tory Party to “vote the slate” and “walk the line”, heedless of the anguished bleatings for moderation from Conservative Central Office, the fact that the “comrades” are not four-square behind the extirpation of state dirigisme is perhaps an indication of how unpractical currency liberation appears to be. Perhaps it is also a problem of definition: how many people could explain the benefits of currency demonopolisation? Of these how many would the enlightened comrade entrust with his savings? I leave the reader to make up his or her mind, but for my part I know no one personally who can simultaneously convince me of the urgent need for privatization, assure me that its introduction is remotely likely, persuade me that it won’t involve considerable disruption when introduced, and sell to me the proposition that I am better off using this currency without qualms about ‘funny money’ or ‘junk bonds’. I haven’t even begun to consider the technical operation of such a currency, which is where I consider that Hayek has left a host of questions unanswered. In short there is a credibility problem.

This is a matter that I have tested before writing this paper, by asking acquaintances of mine who are not intimately familiar with the works of people who write for the Institute of Economic Affairs, the Adam Smith Institute or the Libertarian Alliance. The test was carried out by asking the respondent what he or she thinks of the privatisation of money. The response that comes to mind most readily but is not always articulated (we do live in a civil society) is: “It’s insane!”

After a period of time devoted to demonstrating the possibility that currency denationalisation is not necessarily insane, the immediate reply is: “It couldn’t work.”

This is an understandable objection because it reflects a distinction between what Ayn Rand called “an error of knowledge” and “moral failure”. Some technical arguments exist, and I propose to evaluate some of them in the course of this paper, but it would be a gross overstatement of the public’s awareness of market economics to assume that these arguments are widely disseminated, assimilated, or even that they are conclusive. At this stage, after some explanation that the topic has been researched by Nobel prizewinners and that some historical studies have offered grounds for accepting the principle that private money could exist, in possibly atypical circumstances, the victim of my experiment may recoil at the notion of one of his or her standards for gauging reality being shattered. The response may then become: “It’s unnatural!”

By now emotional objections will have come into play; privatisation of the Bank of England is at least credible but the abolition of legal tender restrictions is – in appearance at any rate – the end of civilisation as we know it.

Having reassured the listener of the seriousness of my case and having suggested that civilisation might not end because the monarch’s head is not on every bank note the problem turns to the consequences of such radical reform: “It isn’t safe!”

This response is often considered awkward because anyone with the faintest understanding of economics, and banking especially, will feel inclined to agree …

This problem is therefore of crucial importance: are private currencies less secure than ‘junk bonds’ as well as non-inflationary? Those who answer glibly “No” to the former and “Yes” to the latter are probably not the sort of people that I will take private scrip from.

Scepticism about privatising currency is not merely understandable, in keeping with the view that the ‘masses don’t know where their true interests lie’, but is rather a healthy indication that people are wary of panaceae, immiment miracles and ‘leave it all to the market: everyone’s a winner’. Those who propounded the decimal calendar, lunar colonies before 1985 and the revival of British Lawn Tennis due imminently – since 1936 – are today on a par with those who promise the abolition of inflation and monetary stability.

The credibility problem is compounded by the additional correlation of forces supporting or opposing change. The basic list of opponents to change is more powerful than for any privatisation to date. The list of supporters of currency privatisation is the flimsiest for any privatisation to date.The opponents come in four categories: interest groups in favour of less choice in currency exchanges than exists at present (i.e. Socialists, certain sections of bureaucracy); interest groups in favour of the status quo (i.e. the Bank of England, H.M. Treasury); some financial institutions that would benefit in a marketplace, issuing currency, but with more to lose (in terms of market share to new operators and in faster clearing of credit) than seems prudent to stake on change (i.e. some banks and building societies, particularly the larger ones); those potential users of private currencies who would prefer to keep ‘safe’ state currency because it’s the known quantity and because it is ‘guaranteed’ (i.e. the entire population of the United Kingdom).


Those whose interests lie with greater state control are of little concern to this study: its purpose is not to convert Socialists, nor bureaucrats. This study is more interested in the reasons why money privatisation is not in prospect in the UK, what the weaknesses are in the argument for free currencies, and whether or how the enterprise might succeed.

To read on: download the paper.