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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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