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Bitcoin concern

Just quoted at Instapundit, from this report:

According to the study, there is “widespread concern” about the negative impact Bitcoin could have on national currencies and how it could be used to fund criminal operations and tax fraud.

The first half of that is presumably what they are really worried about, and the second half is how they are already selling the story.

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32 comments to Bitcoin concern

  • Edward MJ

    For an alternate take on Bitcoin, check out what Marc Andreessen (co-author of Mosaic, the first widely used Web browser) has to say: http://blog.pmarca.com/2014/01/22/why-bitcoin-matters/

  • Snorri Godhi

    Back in the 1990s, there was an opinion piece in Nature, suggesting that, rather than eliminating all EU currencies, the best solution is to make all of them legal tender in every EU country. In this way, any government trying to devalue its debt will end up with a currency which is used only to pay taxes to them.

    The column was possibly meant as a joke, but over 2 decades i am increasingly inclined to think that it has merits. Which would you trust more, Bitcoins or D-marks backed by the German gov. and whose usage cannot be restricted without the approval of every EU government?

  • I second reading the Marc Andreessen piece – it’s very insightful. (And his CV is a bit longer than that. Co-author of Mosaic, founder of Netscape, and now one of Silicon Valley’s most successful venture capitalists. His career after Mosaic is pretty impressive).

  • Paul Marks

    I agree that the reasons presented are not reasons to be wary of Bitcoin (on the contrary they are reasons to welcome it).

    However, there are reasons to be wary of Bitcoin.

    For example……..

    Both gold and silver have many nonmonetary uses – the “special numbers” that are Bit “coin” have no nonmonetary uses.

    This may not be a vital problem – but it is a reason to be wary of the enterprise.

    “But Paul – that could be said of the Dollar and the Pound and ……”

    Yes I know it could – that is a reason to be wary of them.

  • WWTWM

    This may not be a vital problem – but it is a reason to be wary of the enterprise.

    No, that a monetary instrument is designed to be used as a monetary instrument is no reason at all to be wary of the enterprise. If you don’t like BTC, you will need a much more coherent reason than that.

  • Paul Marks

    Snorri – the D-mark vanished (the third German currency to do so in a century) and I am not even sure what “backed by the German government” physically means (after all one could not go to the German government with a D-mark and ask for a specific weight of a commodity of specific purity.

    It is true that the German government supposedly owned lots of gold – but there was no promise to hand over a specific amount of gold (unlike the Swiss government – till the new Constitution quietly dropped that promise some years ago).

    And it now appears that the German gold was stored in the New York Federal Reserve and (no surprise) it is not there.

    Storing valuables in the United States of America makes about as much sense as storing them in South Sudan or the Central African Republic. At least one can fight back against looters in Africa – when the government comes to steal in America what can one do? Resistance would be suicidal (given the imbalance in forces) when “RICO” or whatever is applied. And if they are prepared to rob the German Central Bank – who would they not be prepared to rob?

    British people should not laugh.

    Since the “deregulation” of “Big Bang” (actually the government take over – with the crushing of the old private companies and clubs by the government courts, with their demented idea that they decide what a “free market” is, and the new government regulators) the City of London has become a den of thieves – seeking to fleece private investors (when I was born most shares will still owned by individuals – now taxes and regulations have concentrated ownership in the hands of institutions) and cheating and bailout seeking at every turn.

    Too harsh?

    A man embittered by the cheating of his own father (Harry Marks) by “Jimmy” Slater long ago?

    Wait and see.

    There is no honour left (just government rules and lawyers – and they leave no room for honour).

    Not even in the commodity markets.

  • Alsadius

    I suspect tax fraud is what they actually care about. Only Austrians and Zimbabweans actually think about the strength of currencies.

  • PeterT

    Is there any way of making it impossible for the authorities to regulate bitcoin?

  • Mr Ed

    ‘Cross my palm with silver’ ‘Worth his weight in gold’ ‘You can count on him like a Bitcoin‘.

    Which is the odd one out?

    Two past currencies are woven into the English language, one possible future one has not yet made it.

    But what do Bitcoin owners do when they have a flat battery? Gold still has lustre if there is ambient light. Think about it, how long is the road to Bitcoin becoming a feature of life that is understood and could be acceptable from the Kyber Pass to Quito? Almost everyone knows that gold and silver are metals, people now accept paper money, but they know that jewellers use gold and silver, but Bitcoin, really?

  • Snorri Godhi

    Paul: what i meant by “backed by the German government” is that the German government decides who rules the Bundesbank, and these people in turn decideD what a D-mark is worth. It seemed to work pretty well for a while.

    Is it as good as gold? maybe not, but i claim that gold is not much better. A gold-backed currency can always become un-backed (as you point out happened in Switzerland, and of course in many other countries). Holding physical gold is safer — until and unless the government decides to confiscate it and/or to fix its price, as happened in that paragon of economic freedom, the US of A.

    The Nature scheme would have provided an additional incentive for the German government to maintain the value of the D-mark. I don’t see how that can hurt.
    Of course, people could still buy gold if they wanted; and EU governments could still back their currencies with gold if they thought it opportune, or if their citizens pressured them.

  • Edward MJ

    I was admittedly quite skeptical of Bitcoin for some time, and the lack of intrinsic value was one of the reasons.

    However, what has swung me around recently is the realisation of how useful it can be, not simply thinking of it as an alternative to fiat currency, but as a platform for enabling a wide range of applications.

    Instead of thinking of it as a direct competitor for gold or silver as a store of value, think of it as a the basis for a new verifiable, decentralised financial infrastructure.

    As an example, take a look at: http://blog.oleganza.com/post/58240549599/contracts-without-trust-or-third-parties

    @PeterT: Oleg’s FAQ is a good overview for those new to Bitcoin, and covers regulation: http://blog.oleganza.com/post/32725987418/bitcoin-non-technical-faq

  • Patrick Crozier

    @EdwardMJ

    Me too.

  • Andy Dwelly

    If you think Bitcoin is strange, you should take a look at Dogecoin (1 of several similar alternatives) , launched late last year and branded with a particularly silly internet meme it’s shown substantial growth in capitalisation and has managed to send the Jamaican Bobsled team to Sochi.

    I rather admire it, and in the interests of full disclosure I must reveal that I’m the proud owner of several hundred, worth around a dollar.

  • DP

    Dear Mr Micklethwaite

    So the world’s largest organised crime syndicate, money launderer and bunch of terrorists arrests one man on charges of money laundering …

    I can’t see US cash dollars being used for such purposes, so it must be alright.

    DP

  • Andrew

    If you don’t like BTC, you will need a much more coherent reason than that.

    I’d advise understanding the argument before dismissing it, the regression theorem is perfectly coherent.

  • Richard Thomas

    In fact, there have been two hearings, (one federal, one New York) and the outcome was quite favorable for Bitcoin. I believe they are available for viewing on the web.

  • Paul Marks

    Snorri – I agree that lots of fiat currencies (such as the D.Mark) are better than one fiat currency (for example the Euro) – it is possible that one Central Bank (somewhere) might obey its own rules (the rules governing the European Central Bank were ripped up by the national bailouts) – peaceful competition is good.

    As for random strings of letters who (in insulting terms) tell me that I should not worry about a non-existent “coin” having no nonmonetary uses – well I would not buy a used car from such a person (if it is a person – rather than some form of spambot for selling the “special numbers” of astrology or whatever Bit”Coin” is supposed to be).

    If the choice is between “special (magical?) numbers” of Bit”Coin” – and the currencies backed by the tax demands and legal tender laws of governments……..

    Well it is not a good choice.

    Still Bitcoin is having a major P.R. impact.

    For example, I was watching a computer security company chief (who, boo-hiss, used to work for the NSA) talk about the massive breach to the security of Target and other American retailers in relation to debit cards and so on….

    The Fox News interviewer asked him “well do you use debit cards and credit cards – or do you always pay cash?”.

    “Actually I try to use Bitcoin” came the reply.

  • PeterT

    EdwardMJ

    Thanks for the link; it was very helpful.

    Still not sure if I understand it well enough to buy it though. I guess I’ll have to wait for the ETF to arrive. I know the main iShares developer at BlackRock so maybe I’ll bug him about it.

    I have no reservations about Bitcoin – just one paper currency among others. And whilst gold does have practical uses most of its value comes from its use as a store of value. So no different in that respect. My main concern is that the government might ban it or otherwise engineer a collapse in value.

    Peter

  • Andrew Duffin

    @PeterT: No, there is not.

    In fact the Telegraph was reporting last week on a conference of the financial great-and-good in the US at which the issue being discussed was how Bitcoin could be (read will be) regulated.

    The fight-back has begun.

    It won’t end well for Bitcoin imho.

  • bloke in spain

    @Paul
    “Both gold and silver have many nonmonetary uses – the “special numbers” that are Bit “coin” have no nonmonetary uses.”
    Which is the strength of a “pure” currency. It’s value is exactly the value of the goods & services it can be exchanged for*. Having a currency that’s valued against any particular commodities leaves it open to be manipulated by the manipulation of the supply of those commodities.
    It’s a reason to wary of bullion backed currencies, not Bitcoin.

    *That value also describing the confidence users have in the currency.

    For pendants**: Yes I know Bitcoin etc aren’t literally currencies. They’re tokens or promissory notes. But then “currencies” are, by definition, never “pure”.
    ** Polly Toynbee (TM) (See @TimWorstall)

  • Bitcoins are valuable as long as people believe in their value, which can also be said of fiat government monies. And gold.
    If people didn’t believe in gold as money and only as a raw material it would probably be worth lot less, in tins of beans or whatever you wanted to swap it for.
    Bitcoins could well take off as their usefulness makes them more popular, and the more they get used the more they will inspire confidence in those who use or consider using them.

  • Mr Ed

    wh00ps is ‘on the money’ as it were. The challenge for Bitcoin is that gold and silver have been there and have a track record of millennia. Money is, ultimately, what we all make it, not unlike a language, a collaborative effort and one of the great engines of humanity’s success. Money should no more be regulated by a State than language.

  • Money should no more be regulated by a State than language.

    oh dear.

  • Mr Ed

    Pray say why ‘oh dear’ wh00ps.

  • Julie near Chicago

    Echoing Wh00ps…: Oh dear.

    Solution is left as an exercises for the reader. :>)

    . . .

    bloke, re your **, this would appear to have some personal applicability to YrsTrly:

    “The eternal pendant held my coat, and snickered.”

    LOL!

  • bloke in spain

    @ Mr Ed
    Gold & silver have not always been regarded with great value. Tha Aztecs regarded it as a useful metal, but not as particularly valuable. Depends what you want to do with it & how much you’ve got.
    It’s a shame it’s so cherished for its price. I trained as a goldsmith & it’s lovely stuff to work with. But one notices this with jewelry. What I see & appreciate is the design & workmanship. Regrettably, so much is just tat. Enormous hunks of metal, bashed into shape, just for the sake of walking around carrying heavy weights. If they think gravity’s too weak, why not use lead.

  • Paul Marks

    whOOps.

    Government fiat money is valuable partly because “Dollars” and “Pounds” (and so on) did NOT use to be fiat (they used to be a weight of a commodity of a certain purity – see Carl Menger on the evolution of money).

    Now its value also depends on legal tender laws and tax demands.

    None of the above applies to Bit”coin”.

    bloke in spain.

    Interesting that you trained as a gold smith – so you are man with a “real trade” as the saying used to be (good).

    Jewellery is indeed one use of both gold and silver (and, yes, not all the jewellery is well made).

    However, there are many other uses for both gold and silver.

    Bit”coin” appears to have no nonmonetary uses.

    And as “money” it is not backed by legal tender laws or tax demands.

    What it actually is a successful (an astonishingly successful) P.R. campaign.

    Of which Max Keiser is the central salesman.

    “You are saying that Max Keiser is ……..” (some fake Japanese name).

    No I am not – because ……….. is not important.

    Bit”coin” is the P.R. campaign – that is what it is.

    And the P.R. campaign is Max Keiser.

    However, they are not using force.

    And it is not even fraud – as if you listen carefully they actually tell you that there is no such thing as Bit “Coin”.

    They are selling air pies (openly saying they are air pies) to willing customers.

    Good luck to them.

    They deserve their private island in the sun.

  • Paul Marks

    James Mill and John Stuart Mill (and the rest of the Westminster Review crowd) despised the opinions of ordinary people – they had no faith at all in the opinions (the judgement)of ordinary people.

    Yet these intellectuals supported democracy – universal voting and so on.

    It is not a paradox.

    Mill and co wanted to break the power of the “landed interest” (the land owners) and give the vote to everyone BECAUSE they despised ordinary people.

    They thought ordinary people would be less-hard-manipulate than the old landed families.

    Actually there are plenty of dumb squires and smart ordinary people – but the average squire has a long term interest and if actually owns a seat in Parliament he is going to really think about who he puts in Parliament.

    One vote out of millions?

    Who really thinks about that? RATIONAL ignorance (“I have not got time to really study this – and my vote will not make any difference anyway”) is the norm.

    So a mass electorate is, in some ways, easy to manipulate (at least till things go wrong – and even then the intellectuals can find some scape goat to blame).

    “What has this got to do with Bitcoin?”

    Think about it.

    It is something produced by intellectuals (“special numbers” – which no ordinary person understands) – and it is going up and up in value.

    Best vote for that then.

    And the more people “vote” for it – the more the value will go up.

    As that computer security expert I listened to a few days ago (on television) said “members of the Tech Elite, such as myself, are going for Bitcoin”

    “Tech elite”.

    Well these clever people must know much more about this than I do.

  • Snorri Godhi

    It looks like someone has decided to implement the Nature multi-currency scheme after all:
    http://www.bbc.co.uk/news/world-africa-26034078

    Better late than never.

  • bloke in spain

    @paul
    Bitcoin aren’t selling anything to anyone. A Bitcoin has no intrinsic value. It’s purely a token representing units of wealth in exchange, so the only thing can be bought & sold are the units of wealth. It’s just a marker.

  • bloke in spain

    By the way:
    “Interesting that you trained as a gold smith – so you are man with a “real trade” as the saying used to be (good).”
    Not the only one. I’ve actually mastered several trades. Each one takes at least the same effort & presents at least the same challenge as obtaining a university degree*. Don’t believe me, try it. Hence, sometimes a certain lack of respect for those who only managed the one.

    *Once tried working with a lass who supposedly had some sort of degree in jewelry design & manufacture. Supposedly. Once was enough.