I have begun work on a new book.
It is called Bitcoin – The Future Of Money? Once again I am funding it with Unbound.
As the more observant will deduce, it is about the new form of digital money known as Bitcoin.
You might of the view that Bitcoin is up there with tulips and South Sea companies in the greatest-ever-bubbles parade.
Alternatively, you might feel that this new digital cash technology is going to change the way we transact. Not only that, it will alter the very nature of money with huge social, political and economic ramifications.
There is also the third possibility – which cannot be ignored – that you couldn’t give a flying #$@*%! either way.
The story of Bitcoin is an amazing one – from its birth amongst the ‘cypherpunk’ revolutionaries, who believed they could change the world through computer hacking and cryptography, to its million-fold rise in price to the mystery surrounding its creator, who may as well have be aboard the Mary Rose for all we know about him.
I’ll tell this story, I’ll take you on a walk along the Silk Road (the Amazon-like website where you can buy what we’ll call ‘black market goods’), I’ll consider how Bitcoin might change the world, if at all, whether you should buy some and how to, and, most of all, I explain what the bloody thing is and how it works.
Unlike Life After The State, I am not planning to solve all the world’s problems this time around, so you should see a comparatively quick return on your money in the form of a book.
Please help make it happen by pledging here.
We only launched last week and we already over 70% funded, thanks to people’s excitement and generosity. It is happening in record time.
Both fame and glory await you when you pledge and get your name in the back of this seminal work*.
The link is here in case you missed it.
With fond regards wherever you are in the world,
* Most of the statements in the sentence are almost certainly not true
Various commodities have been used as money (commodities that had various uses – industrial and ornamental). Gold and silver have both been used as money – but other commodities have also been used.
Fiat money (fiat = government “order”, “command”) money evolved from commodity money, but governments wanted more money than they actually had the commodity – so the link became more and more strained….
Silver stopped being used in coinage in the early 1960s, and even the formal (Central Banks only) link between the U.S. Dollar and gold finally crumpled in 1971 (although the link between the Swiss Franc and gold lasted to the 1990s).
These days money is “pure” fiat – people have the folk memory of when money used to mean a commodity, but legal tender laws and tax demands (as the vile Paul Krugman put it, with approval, “men with guns”) and far more important.
As for Bitcoin…..
Bitcoin is not a commodity (if has no industrial or decretive uses) – strictly speaking there is no such thing as Bit”coin” (it is just numbers – nothing more).
Nor does it represent legal tender laws and tax demands.
By the way I do not like Bit”coin” being compared to tulip bulbs – tulips being my late father’s favourite flower (partly in memory of his murdered relatives in Holland in the 1940s).
It is quite true that tulip bubble burst – but people will still left with bulbs that could grow into real flowers.
There is no such use for Bit”coin” – or any other non monetary use. Not is Bit “coin” a government currency covered by legal tender laws and tax demands.
So it is neither a commodity nor a fiat money.
It is not a currency at all – it is a “crypto” currency, a rather different thing.
Of course the standard statements have to be made.
The economic value of a commodity is subjective – someone may simply not value its uses.
Also money is not wealth – and increasing the amount of money does not increase the amount of wealth.
So when the chief salesman for Bitcoin (Putin’s boy – Max Keiser)produces people on his show who will say (for example) “before Bitcoin people in Africa could not afford to go to collage – now, with Bitcoin, they can” we can reasonably reach the conclusion that we are in the presence of a con.
This is so because if Bitcoin was a currency the students (in Africa or wherever) would have had to paid for it with another currency or with goods and services – so if they were poor to start with creating Bitcoin would not make them not poor.
“Ah but the value of Bitcoin has massively increased – so they did not need to pay much for it, and now they can use the Bitcoin to pay for things (such as a university course) that they could not otherwise have afforded”.
I see – so the utility of Bitcoin relies on the continuation of the speculative increase in its value.
Fair enough – I have no problem with that, as long as people understand what they are getting involved.
As long as bitcoin is purely fiat, and there is no commodity or portfolio of things, or anything else that makes bitcoin valuable for people out of its monetary function, bitcoin cannot be considered a sound money, but an imaginative creation doomed to end up as any other fiat money.
Bitcoin cannot possibly be the future of money. There is no future of money. There is a future in goods suitable for barter: cigarettes, light bulbs, matches, canned foods, whisk(e)y, labor – anything people actually want so much they’ll trade something they value for it. Since it only exists as bits and bytes, bitcoin can never be such. Convert it to something with enough heft that it can be used to stone those what brought about such a fine mess then we’ll talk.
Strictly speaking Bitcoin is NOT a “fiat” currency – as “fiat” means “order” (as in “by fiat”) and Bitcoin does not include any legal tender laws or tax demands.
However, that does not mean that Bitcoin is a “sound money” (indeed I have some sympathy with the opinion that Antonio Pancorbo has expressed), it is not actually a currency at all, it is a CRYPTO currency (the word “crypto” is important).
On the other hand……..
No force or fraud is involved in Bitcoin – the people selling it are quite open that it is a CRYPTO thing, just a string of numbers (the contents of an empty bag).
If I went around calling out “air pies for sale” and people paid me either fiat money (Pounds, Dollars …..) or commodities (gold, silver……) for my air-pies, what am I doing that is wrong?
I submit that a Bitcoin salesman (as long as they are honest and do not come out with “change the world” B.S. as Max Keiser does) is doing NOTHING wrong.
If people want to hand over either fiat money or commodity money for air pies (for the contents of an empty bag) that is their right.
And anyone has the right to sell air pies (the contents of an empty bag) to willing customers.
Interesting to note that a successful Bitcoin speculator (an admitted geek who also speculates in other cryptocurrencies), when asked what he bought with the proceeds, said “I buy gold”
Barney – very good.
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