Bitcoin vs Leviathan

Moldbug’s prediction: Freedom loses (as usual).

The question is this: Which dominates? The malignancy of Leviathan, or its incompetence? How radically can the metastatic cancer-phase State shape reality in conformity to its vision?

Bitcoin — which is essentially an experiment in Austrian monetary theory — provides the model test-bed in which this question can be lucidly decided. Its current rising fortunes only accelerates the decision. If Bitcoin can’t be stopped, Leviathan is exposed as a paper tiger.

The best way to make the bet, of course, is to buy (or short) BTC. Outside in has been too apathetic to put resources behind its hunches yet, but (for the zilch it’s worth) our intuitions run contra Moldbug on the topic. Compared to Cyberspace, where bitcoin is entrenched, the State is weak, unintelligent, uninformed, parochial, poorly designed, and — in each respect — getting ever more so, in both comparative and absolute terms. The truly stupendous idiocy of Leviathan thoroughly swamps its evil, as is demonstrated every time it tries to get something done.

The digital Outside, in contrast, is already far beyond recall. The germ of a free economy is under construction.

[UF on Bitcoin (June 2011) here]

March 1, 2013admin 107 Comments »
FILED UNDER :Commerce

TAGGED WITH :

107 Responses to this entry

  • northanger Says:

    fyi. 4343 & 6568.
    http://www.newyorker.com/reporting/2011/10/10/111010fa_fact_davis
    seven rays, ultimate chaos and bartholdi.

    [Reply]

    admin Reply:

    Thanks for the link — worth warning readers though, the main article is behind a pay-wall.

    [Reply]

    northanger Reply:

    The Crypto-Currency
    http://pastebin.com/Az2V3z9H

    The Best American Science and Nature Writing 2012
    http://books.google.com/books?id=WVoP48I1Hz8C

    [Reply]

    admin Reply:

    Great — it’s a superb piece. One example (among many):

    [Bitcoin inventor Satoshi] Nakamoto had good reason to hide: people who experiment with currency tend to end up in trouble. In 1998, a Hawaiian resident named Bernard von Notllaus [?] began fabricating silver and gold coins that he dubbed Liberty Dollars. Nine years later, the U.S. government charged Notllaus with “conspiracy against the United States.” He was found guilty and is awaiting sentencing. “It is a violation of federal law for individuals… to create private coin or currency systems to compete with the official coinage and currency of the United States,” the F.B.I, announced at the end of the trial. [edited for weird glitches]

    northanger Reply:

    Bernard von NotHaus
    http://en.wikipedia.org/wiki/Bernard_von_NotHaus

    Bitcoin minor = Devil’s verse (we wander in darkness and are consumed by fire). In Greek, akolasia is 333 and Greek letters for that and verse = 751).

    northanger Reply:

    10458 w/ green Comet Lulin. Corrected — 9982, Crowley’s “own especial demon” & the Elders of Benjamin Rowe.

    Posted on March 1st, 2013 at 4:41 am Reply | Quote
  • northanger Says:

    http://www.theatlanticwire.com/technology/2011/10/race-unmask-bitcoins-inventors/43535/

    Vires in numeris is hyperstitious (with a smidgen of I Ching commentary). And Let the River Run plays during the opening credits of Working Girl.

    [Reply]

    Posted on March 1st, 2013 at 6:37 am Reply | Quote
  • northanger Says:

    [Bartholdi & The Haunter of the Dark]:
    There are lots of ways to make money: You can earn it, find it, counterfeit it, steal it. Or, if you’re Satoshi Nakamoto, you can invent it. That’s what he did on the evening of January 3, 2009, when he pressed a button on his keyboard and created a new currency called bitcoin.

    [Reply]

    Posted on March 1st, 2013 at 7:10 am Reply | Quote
  • Handle Says:

    There’s definite high-octane multidisciplinary geek-appeal to the whole idea of bitcoin. Journalism, Finance, Economics, Politics, Law, etc. It’s perfect, as if it were custom built to fascinate a thin slice of us. And the trial-of-the-century-of-the-week of the first person to go down for using bitcoin to violate the law will be a glorious media sensation. By design.

    Still, the only non-geek-appeal discussions I’ve had about it were with people who, to a man and woman, heard you could use it to buy drugs on the internet and receive them in the mail and were very curious about that. Is the encrypted paypal-ebay for contraband 80% of the market activity in bitcoin? 90%? 99.9? I wouldn’t be surprised by any of these numbers; not like we’ll get them. Am I wrong to conclude that this seriously distorts the whole phenomenon and the discussion of it.

    Also, and I see this a lot, you underestimate Leviathan’s true capabilities a great deal. Evil, stupid, sure. But rich in resources (sequester be damned); and corners of the machine who actually have to perform in reality (because the enemy makes them) are smart and mighty indeed. And discrete. The thing about bitcoin is that it’s not some totally new Phylum of cybersecurity technique. It’s just a new species, and you wouldn’t want to tip off the users of its many, many related Genus cousins that you can crack the whole Family anytime you want. And so you don’t blow your wad on something as inconsequential as bitcoin until it becomes consequential. A true and popular Easy-Exit would indeed be consequential.

    [Reply]

    admin Reply:

    “… you underestimate Leviathan’s true capabilities a great deal.” — This is an extremely significant claim, so I wouldn’t want to rush things here. All of those who reach the frozen wastes of desolated reaction from a libertarian trajectory probably share the basic intuition that the State is radically incompetent, and for some this will be hard to disengage from its delegitimation (nothing this stupid deserves to live, or some such harshness). Moldbug, of course, is generally ‘innocent’ of this, but Outside in is certainly not.
    What, then, would count as evidence for the contrary case, and how would such evidence be distinguished from left-liberal arguments supporting government effectiveness? What is it that the State does well? To escalate these questions by another notch, we need to directly oppose the State to the market in some domain, confident that the State — through its superior capabilities — will win. Alcohol prohibition? The war on drugs? Prostitution? Gambling? Where has the State ever succeeded in suppressing a market sustained by resilient demand? Is the demand for a trustworthy, apolitical currency essentially different to such cases?
    These no doubt sound like rhetorical questions, but they point to a substantial debate that has still to take place in the border-zone where libertarian and reactionary assumptions meet. Are markets merely ‘permitted’ by the State, as some reactionaries seem to believe? Or are markets destined to make a mockery of all merely political ambitions (as libertarians tend to assume)? Anybody who thought the answers to such quandaries were easily found would probably never have entered these border-lands in the first place …

    [Reply]

    Baduin Reply:

    You shouldn’t believe everything you are told by the – always truthful – PR organs of the State.

    The correct question is – did the State, and especially – the ruling elites of the State – grow stronger or weaker fighting drugs, prostitution, gambling etc.

    You can say as well that wolves are not so strong, since they haven’t managed to suppress sheep. The war is the health of the State, and the War on Drugs is the health of our corrupt State.

    There is a book by Strugatsky brothers, called Inhabited Island, or Prisoners of Power.
    http://en.wikipedia.org/wiki/Prisoners_of_Power

    From it i have learned that when the State forbids something, it usually only restricts it to itself. The things most demonized are those the State consider its most important prerogative.

    The elites who rule the State very often like their drugs. Police like their drug-runners, prostitutes etc, provided they stay under control.

    In fact, the criminal underworld is a vital part of the State organisation – provided it is under control, as it usually is. The natural reaction of various police organisations to something like Silk Road would be to infiltrate it – using entirely low-tech methods. Such a brilliant system is not to be damaged, but carefully cultivated. There is a lot of money and promotions in it. And a lot of influence, too.

    In fact, the whole Silk Road thing could be under police control from the beginning. A brilliant system to have drug sellers self-register with you.

    You can buy drugs on internet. Very good. But if you do not know from whom you are buying it, quite possibly you are buying it from someone controlled by the State. Of course, it won’t do to arrest buyers en masse. It would destroy the whole operation. And elites need their drugs. In fact, proles need them too, to keep them calm.

    On the other hand, if the thing grows too notorious, some well publicized busts will be quite useful to prune it back a bit, stop proles from acting out, and to provide some publicity for various police heroes. Some sellers will prove to be police. Well connected people will – accidentally – buy their drugs from “safe” sellers. Some proles will be paraded before cameras.

    So, when the mainstream media start complaining – seriously – about the Silk Road, it will be a good moment to start avoiding the whole Bitcoin thing for some time. BTW, the articles such as: “How terrible it is that anybody can buy drugs on the Internet – here is how to do it- without any fear of punishment.” are promotion, not opposition.

    That is the natural reaction of police. To do something more, a true disruption of the system, would require a really extraordinary pressure from the top. Not from politicians, but from people with true influence and power.

    Do the powerful care about the survival of Bitcoin – more interesting would be to the same question about dollar. How long will dollar survive?

    That is – something called dollar will be used, of course. But it won’t be made of silver from Potosi.

    The current monetary and banking system is collapsing. The people who have real power are busy preparing for this collapse. They need to prepare the alternative system, and they need to ensure that their power and wealth grows. That operation is very difficult. Undoubtedly, many who thought they have real power will learn that they were deluded, or that they have made a mistake at some point and lost it. That is the great game, and that is what the powerful care about. Bitcoin – it is so small a problem it is invisible in the true scale of the things.

    [Reply]

    Baduin Reply:

    BTW, according to the Wikipedia page on Silk Road

    http://en.wikipedia.org/wiki/Silk_Road_%28marketplace%29

    it was promoted by the Economist, THE newspaper of the elite.

    http://www.economist.com/node/21563752

    Monetarists Anonymous
    Sep 29th 2012 |From the print edition

    “GIVE me control of a nation’s money supply, and I care not who makes its laws.” So said Mayer Amschel Rothschild, founder of the Rothschild banking dynasty. What would he make of Bitcoin, an online currency with no issuing authority whatsoever? Despite being written off following a speculative bubble and crash last year, the online cryptocurrency is still going strong, not least thanks to its ability to circumnavigate the law.” (…)

    Tony Gallippi, the boss of Bitpay, which processes Bitcoin payments for retailers, says that his client list has increased from around 100 in March to 1,100 now. These are mostly e-commerce businesses, selling things like domain names and web hosting. But the list also includes a taxi-driver in Chicago and a dentist in Finland. “Credit cards weren’t designed for the internet,” he says. Bitcoin transactions cost less and cannot be reversed in the way credit-card transactions can be. This is important for firms selling to customers in countries known for credit-card fraud, such as Russia or Belarus.

    But another big reason for the currency’s success is its role in dodgy online markets. Although tracing Bitcoin transactions to real people is not impossible, the currency’s relative anonymity and ease of use makes it a natural conduit for criminal funds. On the website Silk Road, a sort of eBay for drugs hidden in a dark corner of the web known as Tor, Bitcoins are the only means of transaction. Buyers transfer their Bitcoins into an escrow account where they sit until receipt of the goods is confirmed. Bitcoin transactions on Silk Road are now worth $1.9m per month, estimates Nicolas Christin, a researcher at Carnegie Mellon University.

    This may explain why users put up with a big drawback. Bitcoins tend not to be very secure, says Richard Booth, a consultant at RSA, a cyber-security firm. As some users have found to their cost, hackers can sometimes steal Bitcoins from users’ online vaults. In the latest raid, on September 5th, hackers stole $250,000 in Bitcoins from Bitfloor, a large American exchange, causing it to shut down its operation. But although the raid caused a dip in the price of Bitcoins, it soon recovered. It turns out that a currency can thrive even when no one is making laws for it.”

    http://en.wikipedia.org/wiki/Economist_Group

    Governance

    The current members of the board of directors of The Economist Group are: Rupert Pennant-Rea (Chairman), Andrew Rashbass, Sir David Bell, John Elkann, Rona Fairhead, Philip Mengel, John Micklethwait, Sir Simon Robertson, Lynn Forester de Rothschild, Chris Stibbs and Luke Swanson.[6] The current trustees of the Group are: Baroness Bottomley of Nettlestone, Clayton Brendish, Tim Clark and Bryan Sanderson.[7]
    Ownership

    The Economist Group is an associate and not a subsidiary of Pearson PLC. The Financial Times Limited, which is a Pearson subsidiary, owns 50% of the share capital of The Economist Group but does not have a controlling interest. The bulk of the remaining shares are held by individual shareholders including the Cadbury, Rothschild, Schroder, Agnelli and other family interests as well as a number of staff and former staff shareholders. The Economist Group operates as a separate and independent business.”

    Very positive article.

    Practice shows that online trading tends to have one monopoly exchange center – Amazon, eBay etc. Similarly, anyone could start their own drug trading site. But the only one which succeeded was Silk Road. And it was promoted – quite heavily – by the Economist, together with Bitcoin.

    i find it hard to believe that the monopoly world online drug trading system is not under control of the elite – when it is heavily promoted by the Economist.

    admin Reply:

    Lots of excellent points here — thanks. I’m struggling to keep up with the incandescent glory of this comment thread — but as an immediate response to what you say here, your argument that the inside financial elite are prepping for the paper money collapse strikes me as a crucial piece of the jig-saw puzzle. It’s too big a topic to lever into this thread though, so a pretext is needed to run a post+discussion pretty much directly on it — maybe something about the function and boundaries of conspiracy and conspiracy theorizing …

    And, yes, The Economist is fascinatingly evil

    Posted on March 1st, 2013 at 12:01 pm Reply | Quote
  • Nick B. Steves Says:

    Dang, did Moldbug (so far…) miss on that one. Right around the time of Moldbug’s “How Bitcoin Dies” post, I sold a few of mine around 17 thinking this might be the beginning of the end. That was (retrospectively) stupid. I’m pretty much buying the dips now, and selling around each multiple of 10USD.

    Other than busting exchange participants for money laundering, is there ANY OTHER WAY to break bitcoin? I mean short of shutting down the entire internet.

    And how realistic is busting exchange participants for money laundering? The men in black jackets are going to come after me for my tiny $500 bet? And all the other thousands of krill like me in this vast ocean? Look at the amounts being traded at bitcoinity: 0.46@34.276, 8.40@34.25,… Compare this to any stock ticker.

    Current value of all mined bitcoins: ~10^7 * 34.44USD = ~$350 million. What value does that have to be before extraordinary measures are applied to kill it? $3.5 billion, $35billion, $350billion? Certainly one of those numbers is big enough to force their hand… but which one, and what will that forced hand look like when the time comes? Safe to say, however, that the longer USG waits the more extraordinary the measures will have to be…

    [Reply]

    admin Reply:

    MM has to be respected for going out on a limb with this prediction, but there’s nothing that I’d rather see him get wrong. An important part of this (see Handle, above), is that Moldbuggian neo-reaction is in large part predicated upon libertarian error (or at least crippling structural limitation), so there’s a kind of vested intellectual interest in the issue. It would be sad to see that harden to the point that it blocked exultation in the humiliation of the State. Neo-reaction as a defensible posture (IMHO) is a worry that libertarianism has deep problems, not a hope that it has.

    [Reply]

    Posted on March 1st, 2013 at 4:00 pm Reply | Quote
  • asdf Says:

    We already went through this with online poker. They can and will shut it down. There will always be a shell operating somewhere but it will never be a threat.

    [Reply]

    mobile me Reply:

    And intrade too, even though all the economics high priests of the cathedral supported it

    [Reply]

    Posted on March 1st, 2013 at 4:54 pm Reply | Quote
  • Anonymous Rice Alum #4 Says:

    I hate having a reactionary thought, such as “The Cathedral actually hates big government, in its the military and police aspects,” then realizing MM said the same thing years ago.

    But it occurs to me we may have a possible judo throw here. The Cathedral hates the military and police powers it ultimately relies on to maintain its position. Its current strategy is to emasculate these powers. Consider the ad campaigns “America’s Navy: A Global Force for Good” and the one featuring an African-American lieutenant in the Marines performing humanitarian duty. The expansion of combat roles for women is also part of this strategy. Of course, emasculating the US military will make it even less effective at fighting the Cathedral’s enemies (which may someday include armed reactionaries).

    Once we see ads with FBI, DEA, and ETF agents kissing babies and feeding the hungry, then Leviathan’s incompetence will be too settled for its malignancy to triumph.

    [Reply]

    admin Reply:

    Yes, this sounds right. I agree that MM is very insightful on the topic, and part of his analysis is that the Cathedralized state systematically cannibalizes its own ‘hard’ (= traditionally legitimate) organs. An important part of this is achieved by setting these ‘red’ departments impossible missions, such as wars for democracy (armed overseas welfare activities) — and more pertinent to us here — domestic and international ‘wars’ on prohibited substances and activities. A ‘war’ on Bitcoin would be of this kind. They fail, reliably. Since a ‘war’ on free digital currency would not be squandering soldiers and cops, but financial, intelligence, and legal expertise, its expense would register all the more painfully as far as the Cathedral is concerned. Bring it on.

    [Reply]

    vimothy Reply:

    But according to Moldbug, wouldn’t Bitcoin need an interested third party on the inside–i.e., it’s own clique of Cathedral enablers? The Leviathan does badly because most of the wars it fights are civil wars by proxy. When the blue departments are united with the red against the same enemy, it’s a different beast.

    That said, I have no idea why the US government would feel the need to shut down Bitcoin. I’m not particularly au fait with the thing, but I assume that it has a balance sheet with assets on one side and liabilities on the other. I don’t see that there’s anything threatening about this arrangement, just because some people decide to use those liabilities as money. Amazon issues its own money, and I can’t imagine that the US state will be coming after them in the near future either–unless things take a real turn for the worse, at least…

    [Reply]

    vimothy Reply:

    Looking about online, I realise that I don’t actually know the first thing about Bitcoin. Do they, in fact, have a balance sheet? How is the money backed? When you hold a Bitcoin, whose liability do you hold?

    admin Reply:

    You don’t hold a liability, you hold a strictly defined fragment of a limited ‘resource’ — that’s why it’s real Austrian money (even though its high-level of digital abstraction makes it unconvincing to more traditional hard-money types). The only thing supporting the value of BTC is the market operation — supply and demand — there are no (fake) promises of redemption involved.

    vimothy Reply:

    I’m not sure I’m convinced of that. Gold is a commodity. It has an “intrinsic” value, like oil. Money backed with gold has value because gold has value. Bitcoin has no intrinsic value. It has value only as Bitcoin, .i.e. it’s value derives solely from its “moneyness”, and not from any underlying assets that it represents a claim on. But this is really the description of a bubble…

    Handle Reply:

    This opens a complex topic. I’m reminded of Moldbug’s analysis in “The Lightworker Wants Touch Your Junk.” Here’s the absolutely key passage which matches my experience:

    Presented with a daily intelligence brief from the military-industrial complex, even the most idealistic Honolulu stoner will start to take it seriously. If an underwear bomber blows up a plane because nobody touched his junk, and that’s the President’s fault, the President will feel bad. It won’t help his polls, either.

    The Cathedral learns, begrudgingly at first, it’s true, to accept, but then eventually to embrace, it’s security apparatus. In reality, it always really wanted it’s own Red Army. To run it like Bronshtein Trotsky did. It wants it to b;e strong and effective, and even ruthless. To serve its agenda for power, or gain power for its agenda.

    This is not even to mention the fact that they absolutely fall in the love with the idea that here is a sub-society that has no choice to but to immediately obey and implement all kinds of experiments in coercive intervention in every detail of one’s life and utopian social engineering.

    All it really wants it for it to be it’s own. On Side.

    [Reply]

    Posted on March 1st, 2013 at 6:52 pm Reply | Quote
  • northanger Says:

    With The Napster of Banking Round The Corner, Bring Out Your Popcorn
    http://falkvinge.net/2011/05/11/with-the-napster-of-banking-round-the-corner-bring-out-your-popcorn/

    “History so far tells us that it takes about ten years from conception of a technology, or an application of technology, until somebody hits the magic recipe in how to make that technology easy enough to use that it catches on. And when it does, boy, does it catch on.”

    [Reply]

    Posted on March 2nd, 2013 at 2:12 am Reply | Quote
  • northanger Says:

    in this sense…

    http://www.telegraph.co.uk/technology/steve-jobs/8811311/Steve-Jobs-single-handedly-created-the-digital-music-market.html
    Mark Mulligan, digital music expert and former senior Forrester analyst, said: “Steve Jobs single-handedly pulled the music industry into the digital age. Until he created iTunes, there was no legal digital music service which was fit for purpose.

    “When Jobs convinced the record labels to put their collections in his store online – it change everything. Up until that point, if you bought a track online, you could only access it on the PC you had bought it on – something inconceivable nowadays…Without Jobs’s intervention the digital music market would not be where it is today.”

    [Reply]

    Posted on March 2nd, 2013 at 2:17 am Reply | Quote
  • northanger Says:

    I don’t think the issue is whether Bitcoin survives but what Leviathan determines is “fit for purpose”.

    [Reply]

    Posted on March 2nd, 2013 at 2:21 am Reply | Quote
  • vimothy Says:

    @Anonymous Rice Alum #4

    Imagine that I start a fund. I announce that I will issue liabilities at a fixed rate over time, and that I will hold no assets against these liabilities. Okay, so my fund would be instantly bankrupt. But say that for whatever reason, I was allowed to continue operating. People might still buy my paper. After all, perhaps there is a market for it. Then, as its price rises, it seems like an even better investment, prompting greater interest, higher prices and on and on. But there’s nothing of value backing the liabilities. They are a pure bubble. And so as soon as the music stops and people want out, they become worthless again, solids into air. They can’t be redeemed. There’s no there there to redeem them for.

    [Reply]

    admin Reply:

    Austrians think the very idea of ‘intrinsic value’ is economic nonsense. Oil and gold have value because they occupy slots in subjective preference schedules, not because there is anything ‘in’ them either physically (‘energy’) or metaphysically (‘incarnated labor power’, ‘utility’). Of course, people are free to dispute this (subjective value), but there is no serious school of contemporary economics that does.
    BTC have value to (some) people because they work well as currency, they’re no less ‘solid’ than state fiat scrip, and because they trust the Bitcoin algorithm to restrict supply. It’s basically sheer financial exit: the value is anti-government in digital form, and every BTC you hold is a splinter of pain for the state. I don’t find the attraction difficult to understand.

    [Reply]

    vimothy Reply:

    In principle, anything can be used as money. Say that we reach out across the spectrum of possibilities and decide on oil as our numeraire: the blob standard. Oil is already an asset, so now it has two sources of value: its value as an input to production, which you might call its “fundamental” or “intrinsic” value (perhaps these are not ideal phrases), and its value as money, or what economists call its “liquidity premium”. Bitcoin is all of (b) and none of (a).

    If we go off the blob standard at any point, oil will revert to its fundamental value, which will generally be non-zero. If people want to dump their bit coin, the price will go to zero. The only reason to hold it is that you think other people will as well, which is the same reason that anyone might want to hold any asset of inflated value: the price is still be going up. But the price might go anywhere, because it’s unrelated to the value of any underlying asset.

    That’s why, when you look at successful money, you don’t see anything like Bitcoin. You see banks.

    [Reply]

    admin Reply:

    There isn’t any kind of ‘standard’ today (‘blob’, ‘gold’, or other) — just unbacked ‘credibility’ of USG (or, more specifically, the Federal Reserve). Bitcoin has no less intrinsic value, or redemption prospect, than USD. Neither have any. It comes down, absolutely, to this: who (or what) do you trust? The State, or the algorithm? At least now there is a choice …

    vimothy Reply:

    We have what you might call a “CPI standard” today. The standard is a basket of consumption goods. But there’s no necessary reason why the standard shouldn’t be a basket of commodities, or even a single commodity like gold or oil.

    The idea with a commodity standard is that there is a fixed relationship between the basket of commodities and money. With a CPI standard, there is a fixed relationship between the basket of consumer goods and money. But the principle is very similar in both cases.

    Further, all money has value in the same way that any kind of corporate liability has value: it’s a call option on the underlying assets. If Apple goes bust, its creditors (i.e. the holders of its liabilities) can sell off its assets. Thus quite apart from whatever craziness is going in the markets, Apple’s stock and debt has a bottom line > 0 value derived from its stock of assets.

    A bank has the same basic capital structure as any corporation. If a banks assets turn out to be worthless, then its liabilities are too. Bitcoin aside, there are no “unbacked” monies. USD, for example, can be redeemed for the assets on the Fed’s balance sheet. In fact, redeeming dollars for bills is exactly how the Fed conducts monetary operations. Absent this channel, monetary policy would have to be conducted via reserve requirements.

    Problem with Bitcoin, it seems to me, is not that it is outside the state. The problem with Bitcoin is that whoever created it doesn’t know anything about money, banking, or corporate finance. You shouldn’t even short Bitcoin, because it’s value is completely unrelated to any underlying series of cashflows that can be appraised objectively. There’s no sense in which you could “buy low”, because Bitcoin is _all_ bubble. It has no low or high. Its price is a completely random process. You might as just well go to the casino–at least they tend to give you free cocktails while they take your money….

    admin Reply:

    To call any of this a ‘standard’ seems deeply misleading to me, When the gold standard was in effect, it was possible to redeem dollars in precious metal, at a formal rate. Nothing like this applies to the CPI. Try going into a bank and demanding that they redeem a bundle of notes in a ‘basket of consumer goods’. The same applies to Federal Reserve ‘assets’, which don’t have any greater ‘ontological depth’ than USD itself, consisting principally of bonds and other circular USD-denominated debt instruments. If you ask for gold, you get laughed at. That’s what 1971 was about. The only thing ‘behind’ the USD that isn’t ‘behind’ Bitcoin is state power — but Bitcoin has the algorithm (which is better than a promise from proven chronic liars), and Satoshi Nakamoto understands money much better than Ben Bernanke.

    vimothy Reply:

    The basket of consumption goods defines the price at which money trades. It’s the numeraire. It doesn’t “back” the money. Backing is achieved via the standard route of holding assets against liabilities. Money is redeemed for bank assets on a regular basis. Bitcoin has never been redeemed for an asset of value, because it is a financial asset that is apparently no one’s liability–which doesn’t make any sense to me, but it’s obvious that not everyone feels that way.

    Here’s some questions for you or anyone else who is convinced by Bitcoin:

    Is Bitcoin a good investment? If the answer is yes, this implies that the price is going to go up over time. But *why* should the price be going up over time? “Because people want to buy it” is circular. Why would they want to buy it? if the only reason is that /other/ people want to buy it, how is this any different from any other bubble asset–Bear stock circa 2006, say?

    Is Bitcoin generally superior to bank money? If yes, bankers and capitalism have had the money thing completely wrong for hundreds of years. Is that feasible? What’s the reason that Bitcoin is superior to bank money?

    sviga lae Reply:

    You will find that all of your questions are answered here:

    http://unqualified-reservations.blogspot.co.nz/2008/02/return-to-castle-goldenstein-gold.html

    Quoth Moldbug: ‘money is the bubble that doesn’t pop’

    Posted on March 2nd, 2013 at 3:45 am Reply | Quote
  • northanger Says:

    Bitcoin value… abstractions &c

    27 July Die Venus
    Hail unto Kheph-Ra!

    12.25 a.m. Notes on XI. The Magus is [IH] providing the Energy & the Substance of the Pantacle.
    The Virgin is [HV] receiving & interpreting & also expressing it intellectually & impressing that idea upon the Coin.
    Aiwass is of course [Sh] harmonizing all four, & inspiring the whole conception & execution.

    —The Magickal Diaries of Aleister Crowley: Tunisia 1923
    http://books.google.com/books?id=iw4BG8TVzQUC&pg=PA102

    [Reply]

    Posted on March 2nd, 2013 at 4:49 am Reply | Quote
  • spandrell Says:

    Well, I’d think that China might be an even bigger market for Bitcoin. As bad as the USD is the RMB is way worse as a store of value. And the Chinese really want pretty badly to use a stable currency. There are huge currency smuggling networks that people use tu dump their RMB for ‘better’ currency, i.e. anything else.

    So what’s stopping Bitcoin from outsmarting the Chinese leviathan?

    [Reply]

    admin Reply:

    “There are huge currency smuggling networks that people use to dump their RMB for ‘better’ currency, i.e. anything else.”
    This seems odd, given the performance of the RMB on forex markets.

    “… what’s stopping Bitcoin from outsmarting the Chinese leviathan?” Nothing, eventually. It will come later though, due to:
    (1) Less ‘developed’ private economic liberty and anti-state traditions.
    (2) Secular trend to rising RMB viz other major currencies.
    (3) Comparative financial isolation, especially relative to USD, the international reserve currency.
    (4) Widespread availability of gold as a currency hedge (seemingly encouraged by the gov’t — which is shockingly responsible)

    [Reply]

    Handle Reply:

    I think the question could be reframed, “What’s stopping your average Chinese citizen who wants to swap out of RMB from going Bitcoin?” (Is this the new “Going Galt?” Maybe the whole Outside-In idea is the bestiary of Galt-Goings.)

    There’s three major explanations that immediately come to my mind. First, it’s still new. It just hasn’t reached viral popular adoption, Gangnam-Style Youtube-Breakout (1.4 Billion Views!) yet. Second, it’s not trusted – most people feel they don’t understand it or know if it’s a scam or stable. It seems like a confusing gamble. And Third, fear of government crackdown for violation of capital controls, tax evasion, money laundering, contraband dealing, aiding and abetting, or whatever else the powers that be want to call it.

    It’s possible for all these things to be overcome with time. More people get recruited in as they see someone they know who’s used it for a while, prospered, and “gotten away with it,” (especially if they see the government trying and failing to stop it.) If nothing else, people (I think especially in East Asia) start to feel like “chumps and suckers” for being zombie rule-followers and not getting in on the scam everybody rich is getting in on when they could easily choose to do so.

    In a way, I think Bitcoin’s volatility instead of real-purchasing-power-stability works against it in terms of persuading people to switch. It feels more like a risky stock than a currency. Now many Economists would say that all currency, indeed everything, should feel that way, and all sorts of problems arise from trying artificially to satisfy this unreasonable demand for ultimate safety. But demand it people do.

    [Reply]

    admin Reply:

    Yes, on the volatility point. If (when?) private Chinese citizens jump in (to add ‘in significant numbers’ seems redundant) it goes berserk — which shouldn’t really matter from a coldly economic point of view, but from a human one it predicts raw chaos.

    [Reply]

    Posted on March 2nd, 2013 at 6:51 am Reply | Quote
  • admin Says:

    @ Vimothy (reply-space exhausted above)

    “The basket of consumption goods defines the price at which money trades. It’s the numeraire. It doesn’t “back” the money.”
    — same with BTC

    “Backing is achieved via the standard route of holding assets against liabilities. Money is redeemed for bank assets on a regular basis. Bitcoin has never been redeemed for an asset of value, because it is a financial asset that is apparently no one’s liability–which doesn’t make any sense to me, but it’s obvious that not everyone feels that way.”
    — this is how fiat works. It’s only necessary under conditions of money printing. Gold doesn’t require corresponding ‘assets’ because it’s no one’s liability (like BTC)

    “Is Bitcoin a good investment? If the answer is yes, this implies that the price is going to go up over time. But *why* should the price be going up over time? “Because people want to buy it” is circular. Why would they want to buy it? if the only reason is that /other/ people want to buy it, how is this any different from any other bubble asset–Bear stock circa 2006, say?”
    — same with all speculative assets. People have to store wealth somewhere, and nothing is really ‘secure’ (because it rests on subjective value, which never resolves into anything else.) Handle says this above. It’s right.

    “Is Bitcoin generally superior to bank money? If yes, bankers and capitalism have had the money thing completely wrong for hundreds of years. Is that feasible? What’s the reason that Bitcoin is superior to bank money?”
    — Like all other socio-political phenomena under conditions of democratic statism, banking has radically degenerated. Gold (and other PMs) used to be money, and at that time banking provided monetary services. Today it is part of a giant anti-capitalist fraudulent machine accelerating towards collapse (all fiat money systems in history have collapsed eventually). Bitcoin is a cyberspace simulacrum of gold. That explains how it works, and of course it couldn’t have existed before cyberspace did — before that we only had ‘real’ PMs, which are course still around, although their monetary potentials are politically suppressed. Bitcoin is superior to fiat because it closely simulates PM-money, as indicated by the fact that it’s no one’s liability. It is stateless, closed to political manipulation, and operates as quasi-anonymous cash.

    I can see this is just the beginning of some serious conceptual thrashing on the topic of money. Great.

    [Reply]

    vimothy Reply:

    Ironically Nick, you are probably the person most responsible for sending me off on this mad jaunt into the realms of monetary theory and the economics of banking over the last five or six years…

    [Reply]

    admin Reply:

    … and we’re just getting started.

    [Reply]

    vimothy Reply:

    “– Like all other socio-political phenomena under conditions of democratic statism, banking has radically degenerated.”

    Bitcoin exacerbates that degeneration. You can’t throw away the basic principles of double entry bookkeeping and corporate finance and call that a restoration. It represents the exact opposite of restoration, as far as I can see.

    “Gold (and other PMs) used to be money, and at that time banking provided monetary services.”

    I think that gold is still money, to some extent. Anything can in principle be money: deposit accounts, MMMFs, credit card balances, t-bills, oil… money is a property of degrees, a spectrum, dipolar.

    “Today it is part of a giant anti-capitalist fraudulent machine accelerating towards collapse (all fiat money systems in history have collapsed eventually).”

    All empires have collapsed eventually. Even the universe itself is going to end up there one day. Banking and money are ancient institutions whose complex structures reflect years of development and evolution. Their core principles are as immutable as anything you’d care to imagine: death, taxes, Lucy moving the football just before Charlie Brown’s foot connects…

    “Bitcoin is a cyberspace simulacrum of gold.”

    I think it’s a cyberspace caricature of gold. It’s what you get if you ask libertarian computer scientists and software engineers to come up with an alternative money. Outside its undoubted allure as the currency of sci-fi frontier capitalism, the only thing it has going for it is its anonymity. But that looks to me to be strictly dominated by its retarded design. Since it has no “intrinsic” value, its value in the market will bounce all over the place–because it’s completely indeterminate. And indeed, that’s exactly what we see.

    “That explains how it works, and of course it couldn’t have existed before cyberspace did — before that we only had ‘real’ PMs, which are course still around, although their monetary potentials are politically suppressed. Bitcoin is superior to fiat because it closely simulates PM-money, as indicated by the fact that it’s no one’s liability. It is stateless, closed to political manipulation, and operates as quasi-anonymous cash.”

    PMs were the liability of whichever private institution issued them, same as any other type of corporate liability. Gold has no corresponding liability on anyone’s balance sheet, because it’s not a financial asset. PMs can be backed with gold, as well as with other bank assets like the bank’s tangible capital stock and its loan book.

    If Bitcoins were backed with gold, then it would be different. We would expect the value of outstanding Bitcoins to reflect changes in the value of BTC’s gold portfolio. Bitcoins being, in this scenario, claims on a stock of gold. At present, Bitcoins are claims on nothing at all, which is exactly what they are worth.

    [Reply]

    fotrkd Reply:

    Forgive the oxymoron (and any following muddle – I’m hoping the puzzle can be opened up by someone else if it proves useful), but can you manufacture or imbue intrinsic value? I’m thinking specifically of Manzoni’s Merda d’artsta (possibly in response to your ‘throwing stuff at the wall to see what sticks’). In this case the ‘intrinsic value’ of the tin cans lies somehow outside – in their link to Manzoni and, more pertinently, to our social valuation of ‘art’. The product itself is shit. Yet equally the value remains intrinsic (internal) to the extent that the artist quite literally has to deposit himself into the product, and only in its creation do we have an ‘asset’ – as art shit is worth something (though it might not be his shit at all… there’s lots that could be teased out… possibly linked to UF’s much earlier can-kicking post?!). You could argue this (and art in general) is one big bubble – a tin was sold for €124,000 in 2007 (http://en.wikipedia.org/wiki/Artist's_shit) – the artwork lends itself to that interpretation, but ultimately you would be hard pressed to find anyone arguing Manzoni’s shit will ever be considered worth-less(/zero). The question would then be do state-backed fiat currencies do this (even if it’s an illusion, does the standing/power/magic/art (etc) of the state guarantee the ‘intrinsic value’ of its currency?) in a way that Bitcoin cannot? Does Bitcoin or currency in general always have to appeal to something outside of itself to preserve its ‘intrinsic’ value? Isn’t that also the point with gold (hardly the most useful of precious metals, but culturally/historically the most significant?) And then a further question, if Bitcoin doesn’t get this backing from the state, can it (or has it already) derive(d) it from elsewhere?

    vimothy Reply:

    I dunno, this all seems a bit metaphysical to a lump-head like me.

    Let me try to put it like this. Suppose I were to say to you, “US sov debt is massively over-valued at the moment–dump it like a bag of hot rocks”. In response to this statement, you might think, “er, I have considerably more faith in the market’s valuation than yours, oh anonymous sock puppet,” or you might think, “yeah, I agree–the US is clearly massively underwater and it’s only a matter of time before it wakes up to this fact and drowns.”

    What I don’t think you’d say is, “that’s a meaningless statement”. But that’s what you’re committed to if you can’t relate the value of US debt to any sort of set of economic fundamentals, it seems to me.

    So call the value of US public debt resulting from assessment of economic fundamentals its “intrinsic value”, and call its current price its “market value”. Well, the market price can obviously diverge and trade at a wide spread from whatever the net present value of the underlying stream of future payoffs turns out to be. I think it’s self-evident (if you think it through, perhaps even if you don’t) that this process is not sustainable. Since it’s not sustainable, at some point, it’s going to stop, and start travelling in the other direction.

    fotrkd Reply:

    I agree that there appears to be a problem – what makes bitcoin a good digital simulation of gold as opposed to pebbles? Who would accept payment in pebbles? 10 pebbles for your cow? 30? 2? I think what I was suggesting, without really knowing how helpful it would be, is rather than relating bitcoin to ‘economic fundamentals’ and thinking of its intrinsic value as something that will eventually become clear or quantifiable (as zero), is it useful to think of its value in the same way as art or antiques? You accept anything can in principle be used as money, and most artists have a story of paying for a meal/taxi with a drawing on a napkin etc.. but how do you ever reach the ‘underlying stream of future payoffs’ of an artwork? (how) does art have an intrinsic value? What you can’t deny is that art has always had a significant financial value. How? Why? And can bitcoin gain/does it have analogous value (and therefore some non-specifiable but present market stability)?

    vimothy Reply:

    is it useful to think of its value in the same way as art or antiques?

    I think that it’s a very good analogy.

    vimothy Reply:

    Sorry, that’s a not very good answer to a good question.

    The issue is that we can think of the price of an asset as deriving from two separate components: the liquidity of the asset, which represents how easy it is to sell; and the value of the asset qua asset. I think you described the liquidity premium pretty well.

    But a bond represents a sequence of fixed pay-outs over time. Assuming that these pay-outs are made, its trivially easy to compute the net present value of this income stream. That then is the “fundamental” or “intrinsic” value of the bond. At any time, the market value of the bond might exceed the NPV of the income stream. Some bonds, for example, are useful in exchange, or as collateral in repo lending markets, and so might trade at a premium because of this.

    Well, the value of Bitcoin obviously cannot be derived in this way. But how do bank liabilities derive their value when they pay out no interest? The asset side of the banks balance sheet is, effectively, all stuff like the bond: it’s a huge loan book (with some non-fin assets like real estate, etc). The bank’s loan book can be valued in exactly the same way that the bond can be valued. If the banks assets are worthless, then (absent massive state intervention) the bank’s liabilities also become worthless. They are claims on non-existent sources of revenue.

    For any bank, including a central bank, monetary liabilities are matched with assets on the other side of the balance sheet. If those assets turn out to be worthless–if the loans never get repaid, etc.–then the claims on those assets (i.e., the money) should logically be worthless as well.

    Bitcoin cannot circumvent this logic, as far as I can see. This is not to say that a project like Bitcoin could not be successful, but Bitcoin as it is presently appears to be a mess and I would certainly not hold any of my wealth in it.

    fotrkd Reply:

    As I haven’t been able to stop thinking about the topic, I’ll just plough on with my previous thoughts… (correction welcomed)

    Manzoni made shit valuable. WTF?! I think you could explore this in all sorts of directions. But what happens when you manage to give shit, commonly considered to have zero value (scatology and fertiliser aside), a value? Surely one of the really essential transformations is that which results in two shits becoming more valuable than one. Before Manzoni Shit (MS) came along shit, like pebbles, didn’t gain value through increases in quantity. 100 pebbles were no more likely to buy your cow than one pebble (100 multiplied by a value of 0 is still 0). Regular shit still doesn’t possess this property. MS on the other hand has this shared quality with currency – doubling the quantity also doubles the value (irrelevant of the particular, temporary value of one MS). How does it achieve this? Simply by making shit worth ever so slightly more than zero. Even 0.00000001 can be doubled. And that is all the value you need to insert (manufacture/imbue) into an object to provide it with some inherent stability (the ability to say 1 is followed by 2; 3 is worth more than 2 etc.). What happens when 0 becomes 0.00000001? How do you make nothing into something? Isn’t that creation? (‘The void animates. Sten Odenwald quotes UCSB physicist Frank Wilczyk: “The reason that there is something instead of nothing is that nothing is unstable”’ (www.xenosystems.net/big-bang-an-appreciation)). This value becomes intrinsic because it cannot be extracted again (and if something cannot be extracted it is by definition extremely stable) – just as MS can never again be reduced to mere shit an artwork cannot cease to be ‘art’ (regardless of whether its artistic value can fluctuate and severely diminish) so long as we value ‘art’ (so long as ‘art’ exists); state-backed legal tender cannot cease to be ‘currency’ so long as we value the state (even in the Weimar Germany of wheelbarrow loads of paper money, legal tender diminished ‘only’ to a value as good as zero, not zero itself (zero comes after suspension and implies death and then (possibly) reset)); Bitcoin cannot cease to be ‘currency’ so long as we value ??? This is the transformation Bitcoin needs to achieve. Most likely it has already happened (it is already operational). Inherent aesthetic value? The value of internal conceptual coherency? Gold has allure. It’s shiny; solid; weighty. You can’t extract this. But shiny is only intrinsically valuable to the extent that it is intrinsically valuable to us, just as food is only intrinsically valuable to something that requires feeding. So can you found a global currency on aesthetic value? On freedom?

    vimothy Reply:

    “– same with BTC”

    I don’t see how that follows. The Fed targets a particular price for the consumption bundle. BTC has no such target. It doesn’t have any kind of standard to anchor its value.

    “– this is how fiat works. It’s only necessary under conditions of money printing. Gold doesn’t require corresponding ‘assets’ because it’s no one’s liability (like BTC)”

    I’m not sure I understand your argument.

    Gold is not a financial asset. Hence, it has no corresponding liability, by definition. It has a value independent of its value as a money, which derives from its use as an input in production. BTC has no such value as a production input. It’s value is *solely* derived from a liquidity premium. In other words, BTC is pure bubble.

    In 1971, the value of gold didn’t go to zero. It has an intrinsic value beyond its whatever degree of “moneyness” it possesses at any given time. When BTC is no longer used as money, it’s value will be zero.

    BTC’s mistake is to think (or posit) that, since fiat money is a Ponzi scheme, any Ponzi scheme is therefore fiat money. But no. In this case, it’s just a Ponzi scheme.

    “– same with all speculative assets. People have to store wealth somewhere, and nothing is really ‘secure’ (because it rests on subjective value, which never resolves into anything else.) Handle says this above. It’s right.”

    It’s definitely not right. Look, the only reason that there is any point to investing _at all_ is that you think that you can say X is worth Y. If all you can say is X might be worth Y, but it might also be worth a countably infinite number of other values, all with equal probability, then investing is dead. Capitalism is dead. You’re just throwing stuff at the wall to see what sticks: there can be no intelligent allocation of capital.

    I think we’re probably getting distracted by my rather inept attempts to come up with terms that divide the value of an asset into the value it derives from being “money-like”–the liquidity premium–and whatever else remains. If you can think of a term that is less likely to irritate than “intrinsic”, I’d be happy to use it.

    And, again, the idea that it’s all subjective man is not very helpful when it comes to asset valuation. In practice, how *do* people value corporate liabilities? At a bare minimum, they relate those liabilities to a profile of cash-flows over time. Only then we can talk about whether the liability is over or under-valued.

    [cont.]

    [Reply]

    Posted on March 2nd, 2013 at 4:13 pm Reply | Quote
  • Nick B. Steves Says:

    @vimothy

    Moldbug has covered monetization in with his usual prolixity. I think the best introduction to money is Nick Szabo’s Shelling Out–The Origins of Money. Read that. Then read Moldbug. Then discuss. Vimothy in particular seems quite confused. Gold has little to no intrinsic value… that is WHY it is money. Imagine dropping two barrels of oil for a fine Manhattan dinner. Even if you don’t hold the oil, you gotta pay someone to carry it. You get contango. Currencies don’t have contango. And why the hell would anyone want to carry such a lovely useful thing like oil? Like oil and platinum and palladium, silver has magnificent industrial value. Therefore it is consumed. Therefore there isn’t very much of it around to soak up stored wealth. Therefore it makes for very bad money. (Better than USD or oil or donkey dung, but nothing like gold… or… wait for it… bitcoin).

    Fact is, that the folks involved in creating crypto-currency new exactly what they were doing. And if they keep doing it, or more properly keep getting away with it, fiat currencies may fall away by sheer force of nature. Monetization is a market event, wherein the players of the game win by being among the first to choose the eventual winner.

    Yes, bitcoin is a bubble. All currencies are bubbles. That’s how you know they’re currencies. If markets are left free, or (importantly) cannot ultimately be centrally controlled, which currency is going to win? My big bet is still on gold, but it would be foolish not to risk a little on bitcoin.

    [Reply]

    fotrkd Reply:

    I think one of the things vimothy has been asking about, and one of the things I’ve since been trying to understand is what makes bitcoin (or gold for that matter) “better” as a currency than donkey dung? Why would you accept my bitcoins as payment but not my donkey dung?

    [Reply]

    admin Reply:

    Scarcity, first of all. Then durability, extreme (electronic) portability, and intrinsic perfectly fungible quantity (no measuring equipment or quality control required). Bitcoin exactly conforms to the Austrian understanding of money. Its only weakness (political suppression issues aside), is a lack of traditional validation by the market, and with every day that passes this weakness is reduced.
    I agree with Nick B. Steves that gold is still the front-runner for hard money — it has many millennia of general market acceptance supporting it. As a matter of abstract monetary principle, though, it is difficult — perhaps impossible — to identify any properties of precious metals that make them inherently superior to their digital simulation.

    [Reply]

    fotrkd Reply:

    I accept all of those on a practical level (obviously donkey dung isn’t going to make a good currency). But in principle donkey dung could be a functional currency. What I was wondering about was whether there is a prior non-practical objection (I’m not talking about whether it smells or not); whether it is necessary to ‘do something’ to bitcoins/donkey dung (anything at all) to make them viable currencies (see my earlier 10.42pm reply to Vimothy – ‘Manzoni made shit valuable’ i.e. he made 0 = something (alchemy?)). I think I’ve tied myself up in knots though – I was just about to post the following before heading to bed:

    I just worked out where I’ve been heading (to the start): all ‘currencies’ in order to succeed must in some sense be ‘fiat currencies’. If no currency has an initial intrinsic value and instead this value must be imbued during the creative process (the transformation of a selected material into a currency as a creative act) then a currency always already exceeds the value of the material it is created from. That’s probably ridiculously basic and obvious (or confused and off course), but quite what the ramifications of it are… certainly it opens up the door for donkey dung… but does it in addition mean the currency creator (think Manzoni again as much as the State) becomes the beneficiary of this created value (am I suggesting a fundamental inbalance between assets and liabilities at the heart of currency which the creator profits from?)… which if you extend this to pure, modern fiat currency with unbound(? imagine Manzoni pumping out can after can after can) currency creation demonstrates why centralised banking is, what, horrifying/evil genius (these things are not obvious to me)? And this, in turn, shows why switching to an unowned currency with a decentralised structure such as bitcoin is so advantageous?

    fotrkd Reply:

    Last attempt (to get it clear in my own head): I’m arguing all currency carries a ‘signature’ which is written into it during its creation. This signature (be it of e.g. the artist or the state) gives currency stability by making it impossible for the currency to = 0 – it will always have some value as it is the product of the the artist (and therefore valued intrinsically as ‘art’); the state (‘legal tender’) and so on. If a currency could = 0 then it would be possible for 3 to be worth no more than 1, 44 no more than 12 etc; if a currency can only approximate to 0 then 3 is always worth more than 1 (hence ‘stability’). I’m suggesting this is essential for a currency to succeed – a crash to 0 would be an insurmountable error or failure within a currency which makes trust and recovery impossible – every denomination loses all value (someone with 500x becomes no wealthier than someone with 5 – that doesn’t make any sense) and the whole system would need resetting every time. So I was also speculating on what the signature written into bitcoins might be? And if there isn’t a signature would that mean bitcoins are worth no more than wholly unartistic excrement?

    admin Reply:

    The ‘signature’ is the algorithm, open to public scrutiny, and guaranteeing total immunity to political interference. For anybody with even minimally libertarian impulses, that’s truly golden. (Given this basis in an anti-political constituency, I’m quite certain that BTC can never go to zero — unless the algorithm itself was found to be intrinsically insecure.)

    fotrkd Reply:

    The ‘signature’ is the algorithm, open to public scrutiny, and guaranteeing total immunity to political interference. For anybody with even minimally libertarian impulses, that’s truly golden.

    I think this is right. It’s what makes bitcoin like gold not dung (the shiny part that we perceive and which makes bitcoin valuable to us). Bitcoin didn’t have to have this (and most likely it wouldn’t have got as far as it has), but now it’s there it cannot be extracted (granted as you say appropriate intrinsic security). I find that pretty fascinating.

    vimothy Reply:

    The point of Bitcoin, as I understand it, is to synthesize hard money. But if the best argument that can be put forward for it is that, just like art, nothing is worth anything in any objective sense so what does it matter, then the whole Bitcoin project would seem to be self-refuting.

    Art could never be money, because by its very nature it is completely illiquid. Art is more or less the exact opposite of what you want money to look like. On the other hand, people seem to value it for reasons that are subjective and hard to parse. It has “bubble-like” properties. The difference between art and Bitcoin is that art has value *as art*, as well as whatever value it might have in exchange, whereas Bitcoin has no value as Bitcoin (e.g., we can conceive of a piece of art as something that supplies a future stream of consumption services, just like a house).

    Bitcoin is not really much of an asset. It cannot be valued in any meaningful, objective sense. Therefore it’s a bad substitute for money. What Bitcoin has going for it is anonymity, and its appeal to the teenage, William Gibson-reading boy inside. If you dial down this signal in your brain and look at it again with some steely-eyed realism, it’s quite obvious what’s gong on. Some hacker created a pile of computer game money ex nihilo. This pile of computer game money literally corresponds to _no real wealth_ whatsoever. It’s the exact opposite of Austrian money under any reasonable definition of the term. But most people don’t understand how this sort of stuff works on either the software or finance side, so they get taken with the idea. Journalists start writing articles about it. It’s the future, it’s totally digital, it’s open source, etc, etc.

    But it’s still just computer game money so it’s all bubble and it’s not hard to predict how this ends. When thinking and theorising about money, an intrinsically worthless “bubble that does not pop” makes an a priori kind of sense. In fact, it can be quite a productive way to go about it. But in practice, monetary systems do not work like that. Money is always some asset that happens to be the most liquid, most useful in exchange. In other words, the value of money does not solely derive from its liquidity. It has a logically prior fundamental value, and it derives its liquidity from that, not vice versa. So the value of bank money derives from the assets on the bank’s books, not simply the fact that its easy to trade bank money. If bank assets were all worthless, bank liabilities would not be liquid. If Apple stock traded as money (and why not?), Apple stock would acquire a liquidity premium, but it would also have a fundamental value related to expected future cash-flows etc.

    fotrkd Reply:

    What I’m suggesting is that it is precisely because bitcoin is not worth nothing that it is worth something. As soon as something has a value (I.e. is more than zero) then it’s value can be speculated on (as with art). This lends stability to bitcoin as a currency. As long as you know it’s value cannot be zero you don’t have to worry about losing ‘everything’. The guarantee for this (irreducibility to zero) is the algorithm and its real guarantee against political interference and (i would argue) symbolic value (aesthetic; pagan – gold as the sun; the algorithm as freedom). We insert this into bitcoin, it is created (it is the intrinsic value of the algorithm to us), but it cannot be extracted.

    vimothy Reply:

    What you seem to be saying is that Bitcoin can only go to zero asymptotically. I don’t accept that, but even if it’s true, it looks to be a distinction without a difference. If my BTC stock goes to $1*10^-10000, or whatever, then it’s gone to zero for all intents and purposes.

    If you want to say that Bitcoins have value based on their aesthetic or symbolic appeal, sure. That’s clearly true to some extent. It’s not a good argument for Bitcoin qua “money”, though. In fact, it’s as squishy and feel-good an argument that could be found. Where money is concerned I prefer things to be a little more terse and severe. Although, if I could get people to accept “Vimothy dollars” based on their symbolic appeal, I’m sure that I’d be singing a rather different tune–in public, at least….

    fotrkd Reply:

    If my BTC stock goes to $1*10^-10000, or whatever, then it’s gone to zero for all intents and purposes.

    But the relative value of your ‘stock’ remains the same – if I have two bit coins and you have one I’m twice as rich as you. As the market recovers this difference regains its significance.

    If you want to say that Bitcoins have value based on their aesthetic or symbolic appeal, sure. That’s clearly true to some extent. It’s not a good argument for Bitcoin qua “money”, though

    Which is more enduring, the state (which I take would count as a severe basis for value), or squishy art?

    vimothy Reply:

    1, You are twice as wealthy as me *in terms of Bitcoins*, which are now worthless. In terms of dollars, or in real terms, we have within epsilon of the same amount of wealth

    2, The state is not the source of money’s value, but as pitches go, “which is more enduring, the state or art–now can I have $350 million?” definitely has its own kind of charm.

    fotrkd Reply:

    1 you’re not treating bitcoins as a currency. If a commodity ceases to have a significant value (Edison light bulbs; asbestos) and we’ve got a large investment in them we’re both screwed because we have to convert our stock to get money out. The stock is useless in any currency/by any measure. In the case of currency I can sit tight (and struggle, admittedly – i might be financially better off to trade, but most citizens don’t) either wait for recovery or reset so long as that currency is still supported by (art; state; freedom; religion..) look at Weimar – the reset involved converting the papiermark to the rentenmark ‘at’ 1 trillion to 1 – my relative wealth would have been preserved.

    2. I disagree (and I think if I haven’t shown why by now I’m never going to – that’s not to say I’m right)

    vimothy Reply:

    Your wealth relative its pre-rest value has been preserved. In *real* terms, your wealth has already been destroyed by the collapse in the value of Bitcoin _regardless_ of the reset. The reset is inconsequential in real terms. That’s the whole point of the rest. It just drops a few zeroes off the *nominal* value of your wealth.

    I know from experience that this stuff is kind of hard to get your head round. Here’s a (slightly tangential) comment from a smart blog commenter that once helped me to pierce through a veil a bit. Maybe it will make sense to you too, or maybe you will find it completely obscure.

    * * * * *

    However, I’d just like to end with a neat explanation of the problems of nominalism from Mises which he gives in “The Theory of Money and Credit” and “Nation, State and Economy”.

    During the first world war the value of German and Austrian currency lost a great deal of value. According to the Chartalists of the time this was *beneficial*. They explained that the fall of the mark versus other world currencies meant that the value of foreign investments rose. Suppose the mark goes down 5% against the pound (I don’t know the magnitude of the actual fall). In that case German businessmen who have assets in places where the pound is used find that their assets are worth more in terms of German marks. So we have:

    Nominal value of capital stock owned by Germans = Nominal value of domestic German capital stock + Nominal value of foreign capital owned by Germans

    Chartalists pointed out that the second component rises as the price of German marks falls. Mises called this “the lowest depth to which monetary theory can fall”.

    But, this analysis in terms of nominals tells us nothing about real magnitudes. The fact was that the currencies of Austria and Germany fell *because they were probably going to lose the war*. The market estimated, quite correctly, that the destruction of productive capacities brought about by the war would mean that there would be fewer German goods to buy, and hence less demand for German money. (The market may also have estimated that it was likely that the Germans would resort to large scale money creation causing inflation, which was what happened though a few years later).

    The fall in the price of the German and Austrian currencies was in fact a marking-down of the capital stock of their entire economies. That represented a market estimate of what the effects of the destruction of the war would be. Foreign investments rose when valued in marks only because they were not affected by this, as domestic investments were.

    In reality we have:

    Real value of capital stock owned by Germans = Real value of domestic German capital stock + Real value of foreign capital owned by Germans

    This total has fallen because the first component (which is of course much larger) has fallen. The second component has remained similar to before.

    That there is a nominal inward flow that will produce a higher nominal GDP is irrelevant.

    fotrkd Reply:

    I don’t disagree with any of this – of course my real terms wealth has fallen, the currency I use has just collapsed (clearly something is majorly wrong in my realm (artistic; nation state; religious world view). But such that I exist within that realm I maintain my economic (class?) position. But I accept the rich in china are going in real terms to be richer than me in my nation on the verge of collapse.

    admin Reply:

    That Szabo article is good — I notice that its main idea (the significance of ‘collectibles’ to a realistic understanding of money) has been made by fotrkd on this thread, in relation to artworks. The trouble with art as money is liquidity. (Money is definitionally the most liquid commodity in social circulation).

    [Reply]

    vimothy Reply:

    Nick B Steves,

    Gold doesn’t make a great money, as far as I’m concerned. For a start, it’s heavy, and you wouldn’t want to have to carry it around everywhere that you go. Instead, it would be better to have some kind of deed of ownership of the gold. That’s something that could be written on a piece of paper, folded up and put in your pocket.

    Well, that arrangement is what people some people would call “hard money”. What Bitcoin is, on the other hand, is a (digital) piece of paper that corresponds to the ownership of no gold–in fact, it confers ownership of nothing whatsoever. It is a claim on nothing.

    “But,” the argument proceeds, “gold isn’t worth anything either.” Okay, but even if that’s true, it doesn’t mean that Bitcoins becomes a sensible investment. It means that claims on gold aren’t worth anything.

    [Reply]

    Nick B. Steves Reply:

    Okay, well one gram is worth about 50 USD… How much does a General Grant weigh?

    You seem to be missing the notion that monetization iss (is and always is) a market event–one that may be influenced by overwhelming force by a government insistent upon one money over another–but a market event nonetheless. Mugabe pretended to force everyone to use his crap money, but really only forced real money underground (and the entire Zimbabwean economy with it)–real money being defined here as USD.

    The key aspect to money is that it is whatever everyone thinks it is… and it is to almost everyone’s advantage to have a single winner. (I mean sure, it would be great for me if my rugged good looks and flannel shirts could be monetized, but not so great for everyone else… and in the long run that not so great for everyone else would turn out to be not so great for me either.) Money is a social and psychological thing–but one that every sufficiently advanced civilization has to have… therefore something has to be it, and once it is it, it won’t really matter WHAT that thing is…. because it will just be money, and money is always and everywhere the thing (usually the ONLY thing) that is worth a 100 or a jillion times more than its “intrinsic” (or industrial) value.

    Bitcoin has several advantages over gold as money: much harder to counterfeit, easier to store securely, much more subdividable, and has an absolute hard limit in the amount that will ever be mined. Objectively it makes a better money. But it lacks a 4000 year history of being money and thus is falls well outside the subjective experience of most people wanting money. That is a huge strike against it. We shall see if it is insurmountable. As the size of the bitcoin economy continues to grow, it chips away at its psychological handicap.

    [Reply]

    Posted on March 4th, 2013 at 2:03 am Reply | Quote
  • spandrell Says:

    “https://www.google.com/search?q=%E6%AF%94%E7%89%B9%E5%B8%81&aq=f&oq=%E6%AF%94%E7%89%B9%E5%B8%81&aqs=chrome.0.57j60l2j59j61l2.6435&sourceid=chrome&ie=UTF-8”

    3 million entries… not too shabby.
    China has plenty talented programmers who could understand if Bitcoin is reliable.
    And it if isn’t, it will probably be a Chinese hacker the first to prove it.

    What if George Soros buys them all though? Or Stanley Ho. Good deeds never go unpunished.

    [Reply]

    Posted on March 4th, 2013 at 5:01 am Reply | Quote
  • vimothy Says:

    Let’s also remember some basic economic theory. The purpose of banks is to intermediate between borrowers and lenders. I put my savings in a bank. The bank lends them out to firms, home buyers, and so on. In this way, the economic significance of my deposit account is that my savings finance investment.

    When you put your wealth into Bitcoin, what happens? Nothing happens. Your wealth becomes inert, dead savings. It is not invested into the economy. It does not help to grow the capital stock. You might as well just bury the money in your back garden.

    [Reply]

    fotrkd Reply:

    The purpose of banks is to intermediate between borrowers and lenders

    I think for many people here this is precisely the problem…

    I put my savings in a bank. The bank lends them out to firms, home buyers, and so on.

    And one of the reasons for this objection is because this is precisely what doesn’t happen to your savings.

    [Reply]

    fotrkd Reply:

    Have a look at this: http://www.golemxiv.co.uk/2012/11/money-makes-our-heads-go-round-guest-post-by-hawkeye/

    [Reply]

    vimothy Reply:

    Have a look at this: http://www.golemxiv.co.uk/2012/11/money-makes-our-heads-go-round-guest-post-by-hawkeye/

    I’m familiar with that guy–he’s a UK journalist / author / broadcaster who is pretty clueless about this sort of stuff and comes from a position that I would describe as naive post Keynesianism.

    vimothy Reply:

    So what *does* happen to my savings?

    [Reply]

    fotrkd Reply:

    I wouldi imagine, to the extent they exist and are yours, your savings sit in a bank. And your bank is one almighty abyssal hole in the ground. That’s how the argument goes anyway 🙂

    vimothy Reply:

    A bank has liabilities, which include deposit accounts, on one side of its balance sheet, and assets, which include loans, on the other, so it’s not really a hole in ground.

    BTC, on the other hand, has Bitcoins on one side of its balance sheet, and nothing at all on the other side, so it does seem to fit the description of a hole in the ground.

    What I want to reiterate though is that any argument premised on the idea that banks are holes in the ground needs to establish what’s so great about being a hole in the ground that makes it a desirable property for BTC as well.

    fotrkd Reply:

    Hmm, I think we’re going in circles/at cross purposes… A currency (dollars; btcs; MS) doesn’t have assets or liabilities; it doesn’t have balance sheets either – a state economy might (should)..

    vimothy Reply:

    In practifce, money is *always* somebody’s liability. A bank deposit is a liability of the bank who issued it. A MMMF deposit is the liability of the fund who issued it. Cash is the liability of the central bank that issued it. In fact, any financial asset of any kind is by definition somebody else’s liability.

    fotrkd Reply:

    This still doesn’t mean currency has liabilities, assets etc…

    vimothy Reply:

    It can’t possibly mean that because currency is not an entity that can have assets or liabilities, like a corporation or a person.

    Currency *is* both an asset and a liability.

    fotrkd Reply:

    I’m going to retire, but do you not mean money – money is both a liability and an asset? That’s not the same as a currency being these things (except presumably at the foreign exchange level, where I would say you’re again looking at a currency as a commodity not a currency per se).

    vimothy Reply:

    Perhaps you could say what you mean by “currency”?

    La Wik:

    “A currency (from Middle English curraunt, meaning in circulation) in the most specific use of the word refers to money in any form when in actual use or circulation, as a medium of exchange, _especially circulating paper money_. This use is synonymous with banknotes, or (sometimes) with banknotes plus coins, meaning the physical tokens used for money by a government.”

    Nick B. Steves Reply:

    My BTC are stored at Mt Gox. That’s probably foolish of me, but that’s *where* they are, and when my encrypted password got published, it was apparently uncrackable in the time between the hack and when I changed it (to something even stronger). If Mt. Gox was a BTC bank, then “my” BTC would be a liability to them, and the fraction which they lent out would be to Mt. Gox an asset. So, for now, store your BTC at Mt. Gox is economically the same as storing them on your own PC, i.e., in your wallet. It’s just cash either way.

    Now if someone starts a BTC bank (and who knows, maybe they have?), maybe I’ll think about depositing my BTC there to get some sort of return–over and above the natural growth of the currency vis-a-vis fiat USD. However this would be a bank largely unregulated, perhaps unregulatable except by user feedback, so I’d have to be much more careful. There’d have to be some iron-fisted way of dealing with maturity mismatch before I ventured in…

    So for most folks owning BTC, it is just like having cash. There is no counterparty. I suspect most BTC speculators are in this boat, and so are most of the silk road druggies. The most principled BTC advocates (hardcore libertarians all) may experiment with real BTC banking. But I am not that principled.

    Posted on March 4th, 2013 at 2:05 pm Reply | Quote
  • admin Says:

    At 83 comments this thread has officially passed from being fabulously inspiring to utterly terrifying. (Just saying. Please continue talking among yourselves …)

    [Reply]

    fotrkd Reply:

    If you accept the idea of a signature (the algorithm) providing bitcoin with intrinsic value haven’t you conceded to some degree of centralisation? The algorithm becomes the chief social driver (and our god) – with ‘protect the algorithm’ as our imperative anti-hackers and miners (or their companies) would become the most valuable members of society and security and bureaucracy forces would build up around them – everything flowing out from here..? Ahh… Society then becomes focused on working towards AI singularity (‘mine quicker; protect better’)

    [Reply]

    fotrkd Reply:

    Society becomes xenos-y-stems? Can you do an intro to your blog like on UF? What is xenosystems?

    [Reply]

    admin Reply:

    If I told you what xenosystems are, the poly-tendrilled abominations from the Outside would have to kill you.
    [OK, I will, but there’s bound to be a time-lag]

    Nick B. Steves Reply:

    Perhaps I am missing here a tacit point, fotrkd (pronunciation please?), but the “centralization” of bitcoin is precisely an absence of centralization: just hundreds of effectively random computers managing to agree (over the course of a few seconds) on the ownership of particular bitcoins. It is no more centralizing than any conceivable agreement among market actors about what will or will not constitute an acceptable medium of exchange. Far less so than virtually all such imaginable arrangements.

    And I really don’t see how that makes any algorithm into a god… unless we are willing to ascribe deity to all sorts of algorithms that make things work better. Those deities were still designed by humans, even if 99.9999% of all humans wouldn’t have the foggiest notion how they work, much less how to design them. If they work, they just work–like my car (most of the time).

    Probably, the original pre-columbian collectible shell creator was well compensated for his efforts, but that didn’t make him ultimate owner of all purchases made with his “money”… and it certainly didn’t make him a god.

    [Reply]

    Posted on March 4th, 2013 at 4:31 pm Reply | Quote
  • fotrkd Says:

    @admin. Manzoni created 90 cans. If you fancied exercising an ounce of centralised power you could stop it there 🙂

    [Reply]

    Posted on March 4th, 2013 at 4:40 pm Reply | Quote
  • fotrkd Says:

    @admin @ Nick B. Steves We’ll have to stop posting after my response otherwise you’ll ruin my tribute to Manzoni (kidding btw (half kidding at least – hell someone else may already have posted – maybe I’ll destroy it…)), but no other algorithm controls the economy (and therefore social organisation) as the bitcoin one potentially does. I don’t even know if my obsession with signatures matters. Protecting (and indeed hacking) the algorithm becomes the fundamental that drives market competition. How do you hack the algorithm (and in the interim how do you mine the most bitcoins)? By being more intelligent than the other miners and anti-hackers/hackers. Intelligence becomes the supremely desirable economic quality. So the company with the most intelligence gets the most bitcoins. To stay ahead this company needs to invest these coins into more intelligence… more intelligence begets more coins begets more intelligence… what’s more intelligent than humans? i.e. what do you need to gain a competitive edge? AI. So more and more money goes into AI – all the mining companies trying to outcompete each other to get the most intelligence… where are we heading (are we at a positive feedback loop yet?)? AI Singularity. It’s ridiculously clever (I had a minor breakdown earlier (well, not really – I got interruped) at the formal organisation of all this… the cosmists and the terrans… hyperstition… the inevitability (‘it’s already here’) etc…) – xenosystems (‘xenos’ and then I’m not sure about y (y combinator?)… stems (literal?) – ’cause xenos’? i.e. bring (let) the outside in; xenos stems from y?…) is an attempt to order society such that AI Singularity can be brought about… bitcoin appears to be integral to such an effort….

    [Reply]

    Nick B. Steves Reply:

    Smarter gold miners get richer too. How does AI solve computationally difficult encryption chains? Just like stupid AMD GPUs do it… only slower because they have to remember to say please and thank you in a convincing voice.

    [Reply]

    fotrkd Reply:

    Read this: http://www.theverge.com/2013/2/1/3941768/new-chips-mine-bitcoins-50-times-faster

    Now what happens when the value of bitcoins keeps going up? The cottage industry transforms into big business – it’s the next gold rush (potentially).

    Next go here:

    http://www.terransys.com/
    http://www.xenosystems.co.uk/

    Do they look suspicious to you? If not you’re probably ‘OK’.

    [Reply]

    fotrkd Reply:

    What’s going on? Is this moderation a manzoni joke (91) or do you not like something?

    admin Reply:

    Sometimes random comments get caught up in the screen, but I approve them ASAP. You haven’t had one go missing, I hope?

    Posted on March 4th, 2013 at 8:07 pm Reply | Quote
  • northanger Says:

    Guns & Butter
    Lawyers Guns & Money
    Guns Germs & Steel

    philosophy money and guns?

    [Reply]

    Posted on March 4th, 2013 at 10:18 pm Reply | Quote
  • northanger Says:

    93!

    [Reply]

    Posted on March 4th, 2013 at 10:19 pm Reply | Quote
  • vimothy Says:

    fotrkd,

    It seems that we’ve exhausted our subject, our host and each other, so
    I’ll try to respond to your last post by summing up what I think I’m
    arguing about. I’m no doubt missing some subtle point here, and the
    appropriately labyrinthine–for a Nick Land blog–comment nesting
    probably isn’t helping either.

    Let’s say that we have a country which uses a particular currency, so
    that most wealth held domestically is denominated in it. It could be
    Bitcoin or dollars or marks or anything else. Say further that this
    country experiences hyperinflation, or a crash in the value of its
    currency. What happens–does everyone have the same amount of wealth
    as before, relative to one another? No, definitely not. For one thing,
    the magnitude of everyone’s losses are different. If I have 100 units
    of wealth, and this is reduced to 1 units of wealth, that’s a much
    bigger loss than someone who only has one unit of wealth being reduced
    to one one hundredth. Why this changes relative wealth and not just
    relative losses is that wealth is transferred from the holders of net
    assets denominated in the crashing currency to holders of net
    liabilities. The loss to the holder of the dollar or mark or euro
    asset is equal to the gain to the holder of the liability. Only in the
    case where there is no net position anywhere can there be no real
    redistribution of wealth. But this is the case where there is no
    financial wealth period, so hyperinflations would be impossible.

    What I have tried to argue in the comments is that money has value for
    two reasons: one, because it is “easy to sell”, i.e., it is the most
    liquid asset available, which provides to the holder a non-pecuniary
    yield or “liquidity premium”; and two, because money is a claim on the
    assets of the issuing bank or fund, where those assets represent
    future cash-flows (so that ultimately the bank liability is a
    claim over future output).

    Because Bitcoin is nobody’s liability, it is a claim over no future
    streams of revenue. It’s not an asset at all, apart from in the
    sense of its liquidity. Increases in the stock of Bitcoin
    correspond to no investment in the capital stock of any
    economy. Bitcoin do not represent real savings, from a macroeconomic
    point of view. Just an abyssic black hole of capital. A chain of
    financial intermediation that terminates, not with a borrower
    financing the acquisition of some asset, but out in the void of
    cyberspace somewhere–by design. And since the price of Bitcoin is
    related to no underlying process that can be understood or predicted,
    its price is indeterminate (although the money-supply growth rule
    would prevent any attempt to stabilise the value of Bitcoin, even if
    that were possible).

    That is, Bitcoin might have the first property of money (to an
    extent). But it doesn’t have any of the second property. (Any asset
    can have the first property.) Not having any of the second
    property, the degree to which it can possess the first property is
    impaired.

    To the charge that it is conceivable that money is more like art and
    so the second property does not matter, well maybe, but I say two
    things. Firstly, that there are no banks who operate in such a way,
    there are no central banks who operate in such a way, there are no
    funds and no financial intermediaries who operate in such a way. Any
    bank or non-bank intermediary operates in the following way: it has
    liabilities and it has assets. So there is no other money that
    resembles Bitcoin. Secondly, that when we look at historical examples
    of hyperinflations, what we see is the monetazation of government
    deficits. When the central bank monetizes deficits, it backs its
    currency with worthless assets, which causes the holders of
    liabilities denominated in that currency to dump them. This is largely
    the story of the Weimar hyperinflation, for example.

    From the point of view money as art, none of this makes any sense. I
    don’t think that’s totally decisive–as I said, I think the
    money as bubble that doesn’t pop view is conceptually coherent–but it
    does seem like strong evidence against it.

    [Reply]

    Posted on March 4th, 2013 at 11:40 pm Reply | Quote
  • northanger Says:

    Babylon doesn’t want anything that doesn’t serve their cup (btw, “The Foundations of Newton’s Alchemy” notes the “power of our chalybs which is found in the belly of Aries” — a conundrum the society for the proliferation of visceral realism might appreciate). Something about knowing fantasy and reality are much closer together. So looking at Azoth in Latin, Greek and Hebrew — it takes a special kind of skycrane to get you to Mars. And Bitcoin’s something like that, because M-C-M (which becomes for Marx the general formula for Capital) points (imho (at least all these numbers tell me)) to something that never fails to do what’s right since 405 B.C.

    [Reply]

    fotrkd Reply:

    Thanks. Ever so slowly you’re starting to make a bit more sense (no offence intended).

    [Reply]

    Posted on March 5th, 2013 at 1:51 am Reply | Quote
  • vimothy Says:

    I found a good article by JP Koning, which elaborates on Moldbug’s Bitcoin prediction by making the functional differences between Bitcoin and central bank money explicit: http://jpkoning.blogspot.co.uk/2013/01/bitcoin-is-amoeba-central-banks-are.html

    [Reply]

    admin Reply:

    Thanks, that inspired the next installment.

    [Reply]

    Nick B. Steves Reply:

    I would have replied over there, but it seems the discussion dried up over a month ago. (Although it was quite informative to find MM’s real name.) It is I think a serious mistake to conflate or contrast bitcoin and central banks:

    1) Holding bitcoin is not like holding cash in a bank. It is like holding cash. Measurements of BTC are BTC M0 and not at all reflective of M1 or higher.

    2) BTC trade 24 hours/day on several exchanges on at least 3 continents, so there is no “night” during which hypothetical speculators must come to market to buy to prop up the price.

    3) BTC spenders, like cash dollar spenders, may or may not hold BTC for only the few seconds it takes to make payments. This seems even less likely given its recent stratospheric rise (crossed $40 earlier today). Even if BTC/USD starts to go down, then you’ll have more spenders buying only what they need to get their pot, but that irreducible demand to hold BTC even if only for few minute intervals, makes a savage beatdown all the more difficult… and of course encourages long speculators.

    So in the extant BTC market we find speculators not selling during the “day”, spenders holding over “night”, and few (if any) banks clearing accounts each “day”, which doesn’t really exist anyway. It seems as though the analysis almost doesn’t apply at all.

    [Reply]

    Posted on March 5th, 2013 at 3:19 am Reply | Quote
  • northanger Says:

    bow down & worship bitcoin, &c &c…

    Bitcoins at the British Museum
    https://bitcointalk.org/index.php?topic=122274.0

    http://www.britishmuseum.org/research/search_the_collection_database/search_object_details.aspx?objectId=3451294&partId=1&searchText=g68%2f18&orig=%2fresearch%2fsearch_the_collection_database.aspx&numpages=10&currentPage=1

    [Reply]

    admin Reply:

    It’s rather ominous that the money laundering function is presented as a principal feature. (The very notion of un-laundered money is beginning to creep me out.)

    [Reply]

    Nick B. Steves Reply:

    That’s always the mainstream take on bitcoin. It can be used for money laundering! (Augmented 5th!!!) What they don’t tell you, what they forget to tell you, is that cash is used 1000 times more often for money laundering–real official, ya know, cash–which is even LESS traceable than BTC. Ever spend cash, especially when you could’ve used credit or debit or check (cheque)? Are you sometimes forced (FORCED!) to use cash? Well then you may have provided remote material cooperation with money launderers… with my delicate scrupulosity I lose sleep over this almost every night.

    [Reply]

    Posted on March 5th, 2013 at 4:02 am Reply | Quote
  • northanger Says:

    Snowcrash – simultaneously drug, virus, and religion
    http://www.xenosystems.net/the-royalist-imperative/#comment-115
    – loops digital semiotics back into the cuneiform data bank of ancient sumeria, exploiting affinities between electronic culture and the Old Sumerian language, a lost agglutinative tongue without decendents, associated with glossolalia, xenoglossy, meme-plagues, and ‘nam shubs’ or incantations

    [Reply]

    Posted on March 5th, 2013 at 4:29 am Reply | Quote

Leave a comment