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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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From the October 7, 2013 Economic Policy Journal article, Is Bitcoin Money: What Economists Have To Say, Tom Woods said:

Tom Woods: Bitcoin is a medium of exchange but not money. This isn’t an insult to or a value judgment about Bitcoin. Austrians sometimes describe money as the most widely accepted medium of exchange in society. Clearly Bitcoin does not satisfy this requirement.

Mises, for his part, describes money as a medium of exchange in common use: “A medium of exchange which is commonly used as such is called money. The notion of money is vague, as its definition refers to the vague term ‘commonly used.’ There are borderline cases in which it cannot decided whether a medium of exchange is or is not ‘commonly’ used and should be called money.”

I don’t think Bitcoin is in common enough use to be called money.

Yet, only two weeks later, Tom Woods announced that Bitcoin would be accepted as payment for his Liberty Classroom courses.

What will you believe more? Tom Woods’ words, or his actions? — in actually accepting Bitcoin for payment of his goods and services two weeks later.

For more on Tom Woods’ ever-shifting position on Bitcoin, see my article, Tom Woods had no time for a Bitcoin conference, yet had time to misrepresent government-issued currencies.

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The Power HourHere is my summary of my December 16, 2013 interview on the Power Hour with Joyce Riley:

9m – Iceland was able to have the reform they did because of a severe shock — 80% drop in their currency in just 4 months, and because of their relatively small population
10m – Challenge with banking reform in U.S. at national level is second-worst representation in the popular legislature of any nation in the world, and the Federal Reserve has been acting as the world’s bank
11m – Three big private banks in Iceland, with liabilities around 5 times their Gross Domestic Product
12m – Not even economically possible for the icelanders to shore up their banking system by backing up debts
12m – U.S. has world’s reserve currency, but if iceland issued so much currency, it would result in massive hyperinflation
13m – Iceland’s choice was between massive hyperinflation or more austerity than Greece
13m – Despite no prosecutions for financial crimes of 2008 besides insider trading, the Justice Department didn’t say there was no fraud — they said the banks were too big to prosecute
15m – Similarities between U.S. and Greece
15m – The Canadian dollar, for the first time in over 20 years, became worth more than the USD, in 2007
16m – The USD would be so much less than the Canadian dollar, if it wasn’t the world’s reserve currency
16m – Over 50% of all the world’s currency reserves are held in USDs
16m – Over 30% of the economy is government in the U.S.
17m – A challenge to the USD’s world reserve currency status could blow up its value
18m – Bitcoin the most significant privately-issued currency since the global financial crisis of 2008
18m – Came out in January 2009 by a group of anonymous Japanese programmers
18m – Went from $20 USD earlier in the year to $1000 in late 2013, starting to rival gold, which was almost $1300 an ounce
25m – All currencies backed up by productivity
26m – Bitcoin transaction costs are nearly infinitesimally small, compared to Paypal’s cut of around 2%
26m – Unlike gold, Bitcoin can be feasibly divided down to one millionth of a unit, so you can still use it to buy a loaf of bread
27m – Given the choice between gold, Apple stock and Bitcoin, I would take Bitcoin for now
28m – Speculation that there could be some intelligence involvement with Bitcoin, because all transactions are public, and the people transacting are private only to the extent that they keep their IDs private
29m – Silk Road operation got shut down because they were using Bitcoins to transact in illegal drugs
37m – Looking ahead for more problems in the Eurozone – because of past history, with Iceland, Ireland and Cyprus
38m – Bail-in provisions to force bank depositors to buy bank stock if banks run into problems
39m – Real reform involves privately issued currencies free from government control, except for those regulations that government imposes, appropriately, or otherwise
40m – Growing interest in local, interest-free currencies
41m – Usury-free currencies essential, because people cannot exponentially increase their production to pay off compounding debt
41m – German scholar Margrit Kennedy calculated that around 40% of all money is used to service usury
42m – Plan to pay sheriffs in local currency, because if they are paid in Federal currency, they are beholden to the Feds
43m – I don’t see a solution to our financial and economic problems at the federal or international level — only at the local and state levels
43m – The Bank of North Dakota run by bankers, in the public interest
44m – Question: Is Bitcoin considered a commodity yet? – I say yes, because 1) The units are 100% similar to each other, 2) One million of one millionths of a Bitcoin is equal to a single Bitcoin 3) They are traded on international markets
45m – Ron Paul Liberty Dollar – over-the-top claim by the federal prosecutor that the founders’ efforts represented a unique form of domestic terrorism, but there was a grain of truth, because they are afraid of a cascading effect that would undermine the USD
46m – They were specifically concerned about it being tied to Ron Paul’s campaign for limited government
47m – Caller talking about website saying bankers plan to move to an international currency backed by gold
48m – Tom “UsuryFree” Kennedy called in, about Community Currencies, saying mtnHours appeal to average people because they are used for bread, beer and marijuana
49m – Ithaca Hours continually operating successfully since early 90s
50m – Founder of mtnHours got started after hearing a former GCN radio host, George Whitehurst-Berry talk about how bankers push a gold standard as a confidence measure, while having no intention for a stable currency to serve the people
54m – Exposing Faux Capitalism radio, every Sunday from 8 to 10 PM Eastern, can be found at fauxcapitalist.com
56m – CoinMarketCap.com showing a variety of crypto currencies
56m – Competition in privately-issued currencies like Bitcoin a great thing, in case some see deficiencies in a particular currency
56m – Crypto-currencies like Bitcoin could be a new dot-com boom, and even if there’s a bust in most of them, it’s a great investment and educational opportunity in the meantime, leading to a transformed economy
57m – Caller suggests having Byron Dale on the show, about monetary history

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Here is a summary of my November 17, 2013 interview on Erskine Overnight, on the Genesis Communications Network:

2m – Usury redefined from any amount of interest to an arbitrary amount set by law
3m – Actual U.S. federal debt exceeds world’s annual economic production, and derivatives estimated to be over 1000 trillion dollars
4m – Derivatives brought down Wall Street banks, unregulated credit default swaps
6m – States getting around their constitutionally mandated balanced budget requirements
7m – States and federal government should be issuing their own interest-free credit
7m – interest-free United States Greenbacks
8m – Despite more seeming competition in U.S., relative to Canada, top 6 U.S. commercial banks have over 70% of commercial deposits
9m – Bank for International Settlements in Switzerland, founded in 1930, as a bank for central bankers, with around 60 countries as members
15m – Money is supposed to primarily serve as a medium of exchange between producers
15m – Money is actually functioning primarily as a medium of power
18m – 1933 gold confiscation, 1934 silver confiscation, 40% backing by gold, confiscated gold may have been pledged to international interests
19m – Canada’s largest gold bank, Scotiabank, caught not having enough physical gold in their vaults
20m – China and India’s interest in gold
21m – Platinum also a great micro investment
26m – Bitcoins – started in January 2009, don’t know who was behind it, all transactions are public
27m – government plans to tax Bitcoin transactions – income and capital gains
27m – $150 million in total Bitcoins at start of 2013, up to $4.5 billion as of mid-November 2013
29m – Ron Paul Liberty Dollar success, and subsequent government crackdown
31m – Success of the Bank of North Dakota
31m – Bill to study state bank, passed by California’s House and Senate, but vetoed by supposed man of the people, Democratic Governor, Jerry Brown
32m – Local currencies
32m – States prohibited from coining their own currency
33m – States can issue their own interest-free credit
38m – New bail-in provisions, even worse than bailouts
39m – Difference between capitalism and free enterprise
40m – Over 95% of money today is numbers in a computer
41m – Coins are only debt-free money put into circulation by government, currently
41m – Compound interest, compounding the debt exponentially, mathematically doomed to fail, because producers cannot exponentially increase their value to debtors in the long-run
42m – Banks can charge a fee instead of charging usury
43m – Need to cut back unsustainable federal programs, because tax revenues don’t match up with spending obligations
49m – Estimated $16 trillion given to banks by TARP bailout, and $1 trillion went to European banks alone at the hands of the so-called United States Federal Reserve
50m – Out of around 190 countries in the world, only around 30-40 countries had no net debt, or there was no information for them

For more on Erskine, see my articles here.

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The Facebook page for my talk at the 9th annual Usuryfree week event in Toronto on November 16, 2013 from 7 to 9:30 PM EST can be found here.

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The Conspiracy ShowI’m pleased to be Richard Syrett‘s guest on his Sunday night to Monday morning show, The Conspiracy Show, airing from Toronto, Canada, on November 4 at midnight EST, on Zoomer Radio AM 740 and 25 U.S. affiliates.

Here is the announcement from his site:

12AM EXPOSING FAUX CAPITALISM
Richard speaks with a researcher and blogger about the suppressed history of successful government-issued, interest-free currencies and local currencies, from the 1700s up until today, and how they have been deliberately misrepresented by mainstream and even alternative sources. Richard’s guest will also discuss fractional reserve banking, gold, gold confiscation, Bitcoins and much more.
Guest: Jason Erb has been actively involved in the alternative research community since 2006 and has been writing for his blog, Exposing Faux Capitalism, since the start of the global financial collapse of 2008, and since 2009, has guest hosted other radio programs and has been hosting his own weekly radio show since 2012. Jason endeavours to provide a truly alternative perspective within the independent media in analyzing today’s economic, political and social challenges.

The free podcast will be available within a few days after the interview here.

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