To argue that bitcoins are not “real money” because they have no central-bank regulation or central issuer is like arguing that a prepaid disposable cell phone is not a “real phone” because its number doesn’t appear in the directory and you don’t get a bill. That’s the point, or at least part of the point. 

I am skeptical of the Bitcoin model, but it has in no small part been a victim of its own popularity, with speculative investments in bitcoins overwhelming their use in commercial transactions. But this phenomenon is not unknown among traditional currencies. Consider the lengths to which the Swiss have had to go in recent years to stabilize the value of the franc as euros (and, to a lesser extent, dollars) bounced about. 

But that misses the broader point in a couple of ways. The first is that bitcoins and other private currencies are intended as replacements for greenbacks in approximately the same way that the Internet was intended to be a replacement for the printing press: They may do that, sure, but they will have other uses as well. Wresting control of currencies away from politicians is the only way to let money evolve. Twenty years ago, you didn’t know that you’d want to take photos with your telephone or use it as a boarding pass at the airport. Now you do. Nobody planned that. Nobody knows what “real money” is going to mean in twenty years. 

As for price instability, that is of course a fundamental issue, and … the fact that most of the world’s governments have made counterfeit currency (which is what fiat money is) legal tender complicates the environment. … A financial asset may decline in value; a U.S. dollar is practically guaranteed to, if history is any guide. Very wealthy people and institutions already have access to de facto private money in the form of various financial instruments; private currencies promise to make similar benefits available to general consumers — and, critically, to move that market beyond the reach of central bankers and regulators, and probably tax-collectors, too, in the long run.

We can probably expect a robust, competitive market in private currencies to develop, and Bitcoin may or may not be a part of the long-term picture. It may turn out to be the Packard of private currencies. We’ll know the market has arrived when people have as many choices of currency provider as they do of cell-phone provider. And that will be a critical moment in the shifting balance of power between politics and markets, another way for us to stop asking permission to engage in commerce.

This is in part why I object to … the Wall Street Journal’s characterization of the natural theater for bitcoin use as “the black market.” A better phrase for “the black market”  is “the market.” 

(I confess to being quite awestruck by the amount of incisive analysis packed into these few short paragraphs.)

Quickly following upon the recommendation to readers here that the Archdruid Report contained some highly intelligent discussion of historical models (or ‘time shapes’), Left Troll turned up, in a slightly less deranged fury than usual, to denounce ‘our’ flirtation with druidic villainy. After scolding ‘us’ for the “ignorance displayed in this thread about the latest happenings in fusion research … [which] is just astounding”  (remedial education here), he noted that “No one has mentioned methane hydrate.”

Insofar as it can be unscrambled from the snark, this is not actually an unreasonable point — and nor it it one that I think the druidic hordes here would disagree with. The world is awash with hydrocarbon deposits, whose magnitude is most probably vastly greater than even the most optimistic estimates anticipate. If anyone has been vindicated by recent energy economics, it is the much-derided market fundamentalists (such as Daniel Yergin), who have persistently argued that price signals matter far more than geology when it comes to the unlocking of resources. When geophysics ventures into this territory, it is typically blind to the perspective constraints set by existing price conditions. What is ‘really’ there depends hugely upon the incentives to find it. The idea that scientific experts enjoy superior insight to market actors is a classical example of academic hubris.

Peak Oil is an intriguing theory, because — when strictly defined — it has to be true. It is near-impossible to refuse its claim, when it is abstracted to something like: Fossil fuel reserves are finite, and the consumption of any particular type of hydrocarbon deposit will tend to accelerate to a peak, followed by decline, characterized by rising extraction costs, and approximately described by a bell-shaped curve. Such a claim tells us much less than its most enthusiastic proponents pretend, however, since hydrocarbon resources are immensely heterogeneous, in chemical type and mode of geological confinement. A Hubbert production curve for Texas petroleum tells us almost nothing about the global prospects for hydrocarbon exploitation, in which the nature of ‘reserves’ can undergo sporadic, revolutionary revision.

Beyond denial, dismissal, and under-estimation of market dynamics, Peak Oil promoters have resorted to two main lines of argument, in order to keep their favored narrative on a rising curve. Firstly, they have incorporated Global Warming Weirding scares into their models, hoping perhaps to substitute a loosely-coupled moral panic for resource depletion concerns. (I’m going to bracket this topic for now, due in part to its fundamental irrelevance.)

Secondly, they have turned to the concept of EROEI (Energy Returned On Energy Invested), in an attempt to over-ride market dynamics with a second-order geophysical argument. The beauty of EROEI, from the Peak Oil perspective, is that it calculates hydrocarbon extraction in purely energetic — rather than economic — terms. A declining EROEI, even given extreme price incentives, still describes a collapsing energy economy. Alberta oil sands, for example, have a dismal EROEI that can be as low as 3:1 (you can’t get fuel out of the muck without heating the dirt). Unfortunately, for those binding their case to this type of calculation, the EROEI of hydrocarbon fracking is in the region of 85:1 (!). There’s no continuing trend (of EROEI-deterioration) to hang on to.

No surprise, then, to learn that central Peak Oil discussion hub The Oil Drum is being shuttered. The very last reason to read Greer is to bask in the wisdom of his Peak Oil analysis (whose principal merit is its comparative sobriety and moderation). In his sharply comical description of financial boom-and-bust, Greer ruthlessly skewers the “This time it’s different” mentality of band-wagon climbers. Peak Oil, too, is a “This time it’s different” story, and there’s no fracking reason to believe it.

As for methane hydrate, the principal point right now is that we don’t even need it yet. There’s still a lot of gas left in the tank.

ADDED: Greer contra fracking (and technological fixes in general). Money quote: “The current fracking phenomenon, in other words, doesn’t disprove peak oil theory.  It was predicted by peak oil theory. As the price of oil rises, petroleum reserves that weren’t economical to produce when the price was lower get brought into production, and efforts to find new petroleum reserves go into overdrive; that’s all part of the theory.  Since oil fields found earlier are depleting all the while, in turn, the rush to discover and produce new fields doesn’t boost overall petroleum production more than a little, or for more than a short time; the role of these new additions to productive capacity is simply to stretch out the curve, yielding the long tail of declining production Hubbert showed in his graph, and preventing the end of the age of oil from turning into the sort of sudden apocalyptic collapse imagined by one end of the conventional wisdom. ”
More here.

ADDED: A brief hydrocarbons extraction technology update.