Posts Tagged ‘currency’

In response to Gary North’s December 10, 2013 article, “Showdown: Bitcoins vs. Greenbacks and/or Precious Metals“:

First, the primary benefit that libertarian promoters of Bitcoins offer in justification of their theory that Bitcoins will become an alternative currency is this one: Bitcoins offer privacy. Paper money today offers a much greater degree of privacy that Bitcoins do, plus a whole series of other major advantages that Bitcoins do not offer.
– Except for that fact about governments and banks knowing who you are by the card you use to withdrawal your money.

Second, money is the most marketable asset. Paper money is vastly more marketable than Bitcoins.
– Yes, because of government force, not because of any inherent inferiority of Bitcoin.

Third, gold-based and silver-based digital currencies are more likely to become future world digital currency than Bitcoins.
– Yes, mostly because that’s what the international banksters want, for a time.

He has a virtually unlimited number of establishments from whom he can make the purchases.
– Not “unlimited” locally. If by the Internet, Bitcoin can also be widely accepted in time.

Almost nobody knows how to buy Bitcoins.
– More people know how to buy gold, but gold dealers like Bob Chapman estimated that only 1% of Americans even own any gold, let alone have bought any recently.

He has no idea which ones are reliable. He risks getting into a Bitcoins-related Web business like Silk Road, which the government shut down.
– Or with gold, the Ron Paul Liberty Dollar, so there’s nothing special about Bitcoin in that regard.

In other words, there is a huge learning curve involved in gaining access to this privacy money.
– There were a lot of people who didn’t know how to use ATMs at first, but once the banks started pushing them, it lowered the cost of learning to use them.

Conclusion. Here is a fundamental economic rule: as the price of anything increases, less is demanded.
– Only true if the supply is fixed or goes down, but there is still the concept of price inelasticity, where demand doesn’t drop as much, despite a big increase in price.

Therefore, anyone who promotes Bitcoins is a viable alternative to greenbacks is ignoring the following: (1) the low information costs of gaining access to greenbacks;
– A big reason is because of government force, which he is supposedly against.

(2) the complete lack of interest on the part of the government or the bank in withdrawals of a few hundred dollars at the time;
– With real price inflation in the past few years in the double digits, you’ll increasingly need more than a few hundred dollars for meaningful purchases, and cash is being increasingly phased out.

(3) a market for this currency that is essentially the same as the market for digital currency;
How? Digital dollars account for over 95% of the money supply. They are far more in demand than paper dollars, just by the numbers.

“(4) the possibility of negotiating discounts for purchases with this currency.”
– Mostly to avoid government taxes, and not because it’s more efficient.

But, with respect to buying with this currency, there are no transaction costs.
– False. The “hidden” transaction costs are borne by the stores, and passed on to the customer. There are handling and storage costs involved in facilitating these transactions.

There are no search costs. You do not have to search for which companies are willing to sell you something for your paper money. They all are.
– Actually, they’re not. A gym I went to didn’t accept paper dollars, just like an increasing number of businesses.

Because there are no restrictions on the use of paper money, no question is asked at a retail establishment regarding the use of paper money to make a purchase.
There are restrictions. Try buying something for one dollar at a dollar store with a $100 bill, and see if they will accept it.

Bitcoins. You cannot use Bitcoins to buy anything in approximately 99.9% of American retail establishments.
– You also can’t buy anything in 99.9% of American retail establishments with actual legal tender gold coins, since they won’t recognize them, and may even call the police if you walk off with the merchandise after tendering your coin in payment.

You cannot buy what you want, when you want, where you want with Bitcoins.
– You also can’t do that with paper currency for most Internet purchases.

There are search costs involved in locating anybody who will sell you anything with Bitcoins.
– They are relatively low, with an Internet connection.

There is no checkout counter that converts Bitcoins into digital dollars, and then issues you a receipt for whatever it is you just purchased Therefore, Bitcoins have close to zero marketability.
– Perhaps not, but there already is the world’s first Bitcoin ATM in Vancouver.

The only way you can buy anything with Bitcoins is because the seller is going to convert the Bitcoins immediately into dollars.
– Is the Mises Institute immediately converting Bitcoins into dollars? Their 501©(3) records will soon show us.

Bitcoins do not have a separate market that is not tied to the banking system.
– Gold, which he promotes, is even more tied into the banking system, directly, and Gold Eagle coins are lawful tender in the United States.

Bitcoins all over the world fell by one-third within a day.
– Gold plummeted by over 70% in 21 years from 1980 to 2001, and dropped around 30% in just a year and a half, from 2012 to 2013.
– In gold bug circles, this is portrayed as a “buying opportunity”, so what makes it any different for Bitcoin?

The risk of holding Bitcoins more than a few seconds is way too high for any retail establishment.
– This won’t prevent them from accepting Bitcoin, so long as they can convert the Bitcoins to dollars or something more stable at the time.

So, for a retail establishment to be willing to sell you anything for Bitcoins, it must have a computer program tied to its bank in order to convert Bitcoins into dollars instantaneously.
– Computing power relative to price is increasing exponentially, so it’s not a big issue.

A joint announcement of the Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan would complete the destruction. They could simply threaten expulsion from their respective banking systems for member banks that offered Bitcoins services. “Bitcoins, R.I.P.”
– They could do this with any private, non-coercive currency, so does that mean no non-gold private currencies should be created and promoted?

Therefore, with respect to marketability, Bitcoins are an extension of the central banking system.
– Gold is far more an extension of the central bank system.

Conclusion. There is virtually no possibility that the Federal Reserve System is going to outlaw the use of Federal Reserve notes.
– They will, once they no longer want to have paper currency.

There is always a possibility of the Federal Reserve System will prohibit banks from dealing with any retail company that uses Bitcoins in its transactions.
– Applies to any non-government currency, so is he saying we should not bother trying fighting the system?

Proponents of Bitcoins are necessarily arguing that the unbacked fiat money that is produced by the Bitcoins system will be preferable to the vast majority of people who are attempting to escape the digital currencies of their central banks. Bitcoins will be favored, and digital currencies based on either gold or silver will be bypassed.
– If gold and silver currencies are so good, why aren’t more people transacting in them now?

This is an argument that says that Bitcoins, which nobody understands, are preferable to gold and silver, for which there is a long-established tradition in the Far East, the Middle East, and the West.
– Nobody understands them? Gary North is apparently speaking for himself.

We are expected to believe that Bitcoins, which were invented by a team of anonymous Japanese programmers, and which are promoted mainly by libertarians who do not have much money, and by programmers who do not have much money, will become the money of the future, whereas gold and silver digital currencies and coins will never come into widespread use in exchange.
– A laughable contradiction with a previous article, since North laughably said “The promoters creators are now very rich, as measured in dollars.”

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Gary NorthIn response to Gary North’s November 29, 2013 article, “Bitcoins: The Second Biggest Ponzi Scheme in History“:

I hereby make a prediction: Bitcoins will go down in history as the most spectacular private Ponzi scheme in history
– If it were a private Ponzi scheme, it’d be illegal, and would already be prosecuted, just like the Ron Paul Liberty Dollar founder, because of its threat to international banking hegemony.

The coins will never be the money of the future.
– Just like his failed Y2K prediction, that it would be a big civilizational disaster, and wasn’t? Or his prediction that Apple stock was going down after the departure of Steve Jobs, only for it to increase by over 50% in just 5 months?

The best definition of money was first offered by Austrian economist Carl Menger in 1892. He said that money is the most marketable commodity.
– Implies that there can only be one form of money at any time. Currently, the U.S. dollar is the most marketable commodity, meaning that gold isn’t the most marketable commodity, currently, by consequence, isn’t money.

In that book, Mises argued, as Menger had before him, that money arises out of market transactions.
– Yes, and through government fiat, which results in the market transactions.

Now let us look at bitcoins. The market value of one bitcoin has gone from about $2 to $1,000 in a year. This is not money. This commodity is not being bought for its services as money. It is unpredictable to a fault.
– By that measure, gold also isn’t money, since it had an embarrassing 21-year performance, in dropping from $850 USD an ounce in 1980 to below $250 USD by 2001.

Here is the Austrian school’s theory of money. People buy money because it has not fallen in price. But it has also not gone up in price much, either. It is predictable.
– By that measure, gold hasn’t been money since at least 1980

In other words, Bitcoins are not money; dollars are money.
An amazing statement from a gold-as-money promoter.

There has been no challenge from Bitcoins to the reign of the dollar.
– And this is surprising, how? It started in January 2009, so why should anyone expect otherwise?

This Ponzi scheme is not illegal
– An internal contradiction, since a Ponzi scheme, by definition, is illegal.

But the fundamental characteristic of money is its relatively stable purchasing power.
– No, the primary characteristic of money is its ability to function as a medium of exchange

Bitcoins have to have stable purchasing power if they are to serve as money, and they will never, ever achieve stable purchasing power.
– Why not? With the growth of the supply decreasing with over half of a fixed total of Bitcoins mined, the math points to an eventual relatively stable purchasing power in the absence of major government interference.

There has to be an economic justification for a capital investment, and there is no economic justification of buying Bitcoins as an alternative currency.
– Then why is fellow Mises Institute associate, Tom Woods, accepting Bitcoin as payment for his goods and services provided through his Liberty Classroom?

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Winged Lion AwardsFrom monetary reformer Tom J. Kennedy’s site:

The Winged Lion Awards are in honour of the ‘Winged Lion’ – which is the historical symbol of usuryfree money. The Winged Lion Awards are presented to the winners from the nominated usuryfree creatives on behalf of the UsuryFree Network during the Annual UsuryFree Week scheduled from November 13th, until November 19th, each year.

Nominations are commonly accepted from local, national and international usuryfree creatives.

The winners of the Winged Lion Awards are honoured at a special event each year during the celebration of UsuryFree Week.

Nominations are currently open for the following 15 categories – ideas for additional categories are welcomed:

Here are the top three categories. See the announcement for the other 12 categories.

1. A community that has launched new paper notes of usuryfree community currency during the current year. This community must have done something unique for their launch of paper notes of usuryfree community currency. Samples of the paper notes and details of this unique activity must be submitted with the nomination.

2. An individual usuryfree creative who has authored a unique article about the design flaw of usury during the current year. A copy of the article must be submitted with the nomination.

3. An individual usuryfree creative who has authored a unique article about the usuryfree community currency movement during the current year. A copy of the article must be submitted with the nomination.

For more on the Winged Lion Awards, see my article, My nominee for the 2013 Winged Lion Awards for usury-free money: George Whitehurst-Berry.

For more on Tom J. Kennedy, see my interviews with him here and here.

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Tom Woods

Tom Woods

Anthony Migchels

Anthony Migchels

That is the question I have subsequent to my public and private offer to Tom Woods to moderate a debate between himself and Anthony Migchels of Real Currencies.

As I disclosed at the start of my March 31, 2013 interview with Anthony Migchels, Tom Woods didn’t accept, and the reasons weren’t because he was concerned I wasn’t a worthy moderator, or that Anthony Migchels wasn’t a worthy debater, or that he wasn’t available at the proposed time.

Tom Woods supports a debate between fellow Austrian School supporter Bob Murphy and Paul Krugman.

Just as Paul Krugman may not be interested in giving a platform to his critics in the Austrian School, perhaps Tom Woods is also not interested in giving a platform to a well-researched, voluntary, interest-free currency reformer such as Anthony Migchels.

For more on Tom Woods, see my articles:

Tom Woods responded to my comments on his article, The Greenbackers’ Fake Quote Industry and Austrian School supporter Tom Woods admits gold has no intrinsic value

For more on Anthony Migchels, see my most popular interview ever, with Anthony Migchels, about the elite origins of the Austrian School.

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On the May 19, 2013 episode of Exposing Faux Capitalism with Jason Erb on Truth Frequency Radio, I covered the following articles. Unfortunately, there was another show that aired on top of mine in the second hour.

Jason Erb interviewed by Dr. Stan Monteith on Canada now more free than the United States, May 7, 2013

Congress’ exclusive power to coin money doesn’t prevent private individuals from coining currency

The gold standard doesn’t necessitate 100% reserves

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Image of Lew RockwellLewRockwell.com claims to be “anti-state”, yet on March 28, 2013, Lew Rockwell wrote on his blog:

John Carney writes about what Cypriot banksterism has done for Bitcoins. However, they are not money, but a (we hope) private way to transfer funds. Money is what you can take to Kroger’s and exchange for groceries.

This is an amazing admission from a man who has made a career out of blasting government, and it’s also bizarre for him to be calling government-issued currency money in the same sentence as claiming Bitcoin isn’t money, despite it being non-coercively issued and exchanged.

I have pointed out several times on my radio program that the primary function of money is as a medium of exchange, and Bitcoin meets that test. If one were to question Bitcoin as a store of value, then one must also question gold as a medium of exchange, since it has more use as a store of value than as a medium exchange, and therefore doesn’t primarily function as the primary characteristic of money.

For more on Lew Rockwell, see my articles:

1) Lew Rockwell “banned” this Paul Craig Roberts article — we think you have the right to see it

2) Tom Woods had no time for a Bitcoin conference, yet had time to misrepresent government-issued currencies

3) Lew Rockwell.com’s latest pro-state article

4) Lew Rockwell entered into a voluntary agreement with the same government he regards as “far worse than the mafia”

5) Lew Rockwell says MSNBC is blocking their regular contributor, Pat Buchanan, from discussing his new book, but what about LewRockwell.com keeping certain articles by its regular contributors from its readers?

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speaking at CPAC in Washington D.C. on Februar...

Austrian School supporter Tom Woods apparently had no time to attend a 2012 Bitcoin conference, as this post reveals:

Here was Tom Woods’ response to an invitation to attend Bitcoin 2012:

“Dear [redacted] (if I may),

I am mortified at how long it’s taken me to get back to you. I am getting so much email these days I can’t possibly keep on top of it.

While I genuinely appreciate the invitation, I’ll have to decline. The whole Bitcoin issue is something I need to read about and give some thought to, and in the near future, with major projects and deadlines all over the place, I won’t be in the proper frame of mind to do so.

Tom Woods”

Yet he apparently had time to engage in a false gold standard dialectic, as I wrote about in my article, The Huffington Post-Tom Woods controlled opposition gold standard debate, and to misrepresent the record of government-issued currencies, as most recently demonstrated by his article, Why the Greenbackers are Wrong. I most recently discussed such misrepresentation in my appearance on Doug Newberry’s Crisis of Reality on January 24, 2013.

Even Lew Rockwell has gotten with the times and embraced donations to his website, through his secret paywall, with a privately-created currency not backed by some precious metal.

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