Our currency in the U.S. (often known in the black community as “Dead Presidents”) honors people who won wars. Andrew Jackson killed a lot of Indians. General Grant killed a lot of Confederates. Franklin Roosevelt killed the economy.
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In Australia, our currency features famous Australians, usually entertainers and early feminists, on our notes. We also put native fauna on the other side, and have different amounts in different colours. Why do American notes have to be green? Tradition?
Benjamin Franklin, with Independence Hall on the reverse. $100 bill.
Huge buy of ink back in 1803. ;^)
While I am no fan of the New Deal and its legacy, the reference to FDR is unfair in a very real sense. Regardless of the wisdom or folly of his economic policies, and I am squarely in the folly camp, he was able to rally the populace in a way very few other Presidents have been able to do, and that inspiration carried through to a war effort beyond anything ever seen in history—a worldwide war in 3 dimensions across all the oceans and many of the continents on earth.
He was wise enough to leave the fighting to the professionals, for the most part, and concentrate on providing the most awesome supply, logistics, and social cohesion, this nation has ever seen, and has never seen since.
The effort killed him as surely as if he had been on the battlefield, as WW1 killed Wilson, and as our other wars have either killed or ended the careers of any succeeding Presidents.
The threats of fascism in Europe and extreme militarism in Asia were existential and immediate in a way few wars in history have ever been.
Capitulation to either, or both, would have left a world swirling down into a nightmare dark age beyond description.
I will gladly join any conversation critical of the progressive policy errors of FDR and his statist colleagues, but, for all his many faults, it is unfair to joke about his war leadership as if it was on a par with his economic follies.
Cue all the doctrinaire huffing and puffing from the good, correct libertarians who cannot tolerate the least bit of disagreement with their views. I’m afraid that’s one lesson they have learned from the collective very, very well—tolerate no heresy, better known as independent thoughts not approved by headquarters.
“as WW1 killed Wilson, and as our other wars have either killed or ended the careers of any succeeding Presidents.”
It’s a shame that Wilson shuffled off his mortal coil after WW1 rather than beforehand. The World and US would have been a far better place as a consequence.
A thoroughly vile character.
FDR didn’t “kill the economy”. It was just about DOA when he took office. His policies have had long-term bad effects – but at the time they probably averted total collapse.
As for Jackson, he probably killed more British soldiers than Indians.
Also Hamilton was not a “war-winner”, though he did serve (with distinction) in the Revolution.
The U.S. has a $2 bill; it has Jefferson on it. (It is still in circulation, though I haven’t seen one in years.) Jefferson did win the Barbary Pirates war though.
The $500 and $1,000 bill remain legal tender, though hardly any are still in circulation. The $500 bears McKinley, who fought in the Civil War and presided over the Spanish-American War and Philippine Insurrection. However, the $1,000 bears Grover Cleveland, who didn’t kill anybody.
Pretty dumb comment, actually.
As Joseph II said to Mozart ‘Too many notes!‘. That’s the main problem with any currency*.
* simplified by assuming that fractional reserve lending is still founded on the monetary base rather than electronic credit.
The Andrew Jackson notes are especially odd – as he was totally opposed to fiat money.
But then both George Washington and Thomas Jefferson are used on American currency which, as it is now entirely fiat, would have disgusted both of them.
Not even Hamilton would have supported a currency that had no connection to a commodity with nonmonetary uses.
The first peace time President who supported that was indeed Franklin Roosevelt – although he never admitted.
Indeed one of the few ways to make the normally genial Franklin Roosevelt visibly angry was to call him out on it – “not true” he would claim, “there are 35 Dollars to an ounce of gold!”
O.K. here are my 35 Dollars, now let me have my ounce of Gold.
Then the vile Paul Krugman’s “men with guns” (a rare moment of honest from Dr Krugman when he admitted that is what the modern American financial system was based upon) would be called.
If a currency represents a commodity then the issuer of that currency must have the commodity they claim the currency represents.
But they tend to start to cheat (to issue more currency than they have of the commodity) – which is why the commodity should be used DIRECTLY as the currency (as with the private gold and silver coins of the American West before Congress banned the practice in the 1850s).
At first the cheating may be small – after all before 1914 most people in Britain never viewed a “white fiver” (a Five Pound note – personally signed by the Governor of the Bank of England) normal money was a solid gold coin (a Pound a “Sovereign”).
In the United States before 1913 normal money was a Five Dollar Gold Piece (which was exactly that – a piece of gold).
As late as the early 1960s high denomination American coins contained a lot of silver – but then the cheating (the monetary inflation) became too extreme for even this to be maintained.
With any currency there are two questions to be asked.
“What commodity does this currency represent?”
And.
“Can you show me this commodity, prove it is really in your possession – if so DO THAT NOW”.
If the answer to either of these questions is unclear (if they do not physically show you the commodity [the copper, the nickel, the silver, the gold – whatever commodity with nonmonetary uses they are claiming to have] to the FULL AMOUNT they claim to have) then run away.
“But some cheating at the margin does not matter” – I would dispute that, but “cheating at the margin” is the United Kingdom of before 1914, the United Kingdom of 1914 (the currency, the gold market, “alternatives” to commodities – everything) is just a giant mountain of fraud (or “deception” if lawyers object to the word “fraud”).
By the way……
“RT” (Russian Television) is busy attacking politicians in the Ukraine as business owners (a very Soviet style attack).
Now (0930 – British time) Max Keiser is on – pushing you-know-what.
Paul, you are almost certainly the best publicist for this Max Keiser guy anyone could ask for. Before you mentioned him, I had never heard of the bloke (and beyond looking at his wikipedia entry I still don’t know a whole lot. I assume his sin is working for roubles).
Since you started obsessing about him in oh so many of your comments, I have asked several of our mutual acquaintances, and without exception their reply was “Who?” This fellow ain’t exactly a household name 😉
So I very much doubt many people in this parish have the slightest idea what the “you-know-what” that he is pushing is. Maybe he is pushing people to read your various articles on the internet by way of thanks for all the unpaid PR work you have been doing for him? 😀
@Paul
Wonderful riff on bullion backed currencies. But totally ignoring the fucking point. Currencies are mediums of exchange. They’re backed by agreement on what you can exchange them for. Each unit is a debt redeemable in goods or services. It’s when governments create the debt, issue money unrelated to provided goods or services, the value is undermined. The artificial scarcity value of bullion is as much a problem as fiat money.
Anyone doesn’t understand the above needs to look at the disasterous effect on the Spanish economy when the Conquistadors dumped a mass of looted S. American gold into it.
How would that differ from the administrators of a fiat currency dumping a mass of brand new QE-created monetary units into it?
This is the unique selling point of Bitcoin, of course. There is a fixed supply, slowly growing now as Bitcoins are “mined”, but ultimately there can never be more than a given number of them in existence.
What’s ultimately very odd about Bitcoin is that it’s neither a fiat currency in the usual sense of the word – no government “backs” it, advocates or mandates its use – nor is it true commodity money in the sense of having some non-monetary use. Paul’s accusation that it’s “air pies” is not unfair or inaccurate. While people are willing to use it as money though, it is undeniably money.
If and when people stop, what then? Is it as dead as a government issued fiat currency? It still possesses that quality of fixed supply, so it could conceivably come back into use I suppose, but it lacks the obvious value conferred by a non-monetary use that true commodity money has.
“How would that differ from the administrators of a fiat currency dumping a mass of brand new QE-created monetary units into it?”
In no way, whatsoever. That’s the point.
Bitcoin, by definition, isn’t a “currency”. It, by intention isn’t “backed” by anything other than its purchasing power in goods or services. It’s created by performing a service. The work involved in the actual creation. The work creates a “debt” owed to the creator of the Bitcoin by all the other Bitcoin users. The Bitcoin itself is the “token” of that debt.
Rich Rostrom wrote:
The U.S. has a $2 bill; it has Jefferson on it. (It is still in circulation, though I haven’t seen one in years.) Jefferson did win the Barbary Pirates war though.
I’ve heard (but don’t know from experience) that the $2 bill is in increasing demand — for use at strip clubs, where inflation has rendered $1 tips too little, but putting a $5 under the ladies’ straps is too much.
I wonder what the Canadians do. Throw toonies at the poor ladies?
What governments really want to do is to abolish cash altogether – they got rid of high denomination notes quite some time ago, and the coins will first be made steel and then got rid of altogether.
The government objective is an “electronic only” “money” – and certain “anti government” people (such as Max Keiser) are actually helping with this objective.
Paul, so why the EUR500 note?
Au contraire, Mr. Rostrom.
Unlike most American Currency portraits, Cleveland killed two men personally as Sheriff in Buffalo, acting as the executioner.
When the conservative (some Democrats were conservatives then) was in government in Buffalo (what limited government there was) Buffalo was perhaps the most advanced city on Earth. Now look at it…..
I do not know Nick.
Unless it is to take business away from the 100 Dollar note.
Hatred of America may trump the desire to get rid of cash.
Just remember, Mr. Lincoln is perhaps the most pictured man on American Currency. Both sides of the Penny from 1959-2008, both sides of the $5 bill, and the reverse of the 2003 Illinois side of the quarter.
Ellen
March 4, 2014 at 12:25 am
Benjamin Franklin, with Independence Hall on the reverse. $100 bill.
Known to have killed an astonishing number of French bottles of wine?
They are getting rid of coins in Australia! We did have 1 and 2 cent pieces, made of copper, which were removed from circulation. Prices are rounded up or down to the nearest multiple of 5, because we still have 5 cent pieces. The excuse was that it cost too much to make the smaller coins, and there might be some truth to that.
Still, it’s a worrying sign on the road to fiat money…
“Anyone [who] doesn’t understand the above needs to look at the disasterous effect on the Spanish economy when the Conquistadors dumped a mass of looted S. American gold into it.”
True, that did lead to massive inflation. A similar (but far less disastrous) result followed the California gold rush of 1848. But those were extremely unusual circumstances, “black swan” events events resulting from the unexpected discovery of massive quantities of gold. They are extremely unlikely to ever happen again; there is no undiscovered continent waiting to be exploited. And absent such extremely rare events the world’s supply of gold is remarkably stable. The same cannot be said of fiat currencies, which can be (and are) produced in essentially infinite quantities at the push of a button.
No one has ever said that gold (or any commodity standard) is perfect. Nothing human is. But it is infinitely superior to government-created fiat currencies, which are doomed to inevitable failure.
We’ll need to find an alternative to gold if we ever hit outer space then…
An inflation is not an increase in prices, but an increase in the supply of money. Inflate the money, up go prices, no net gain to the economy, and distortions and winners and losers. If the output of an economy doubles (albeit ‘doubling output’ is a rather nebulous concept as like for like never happens), with a fixed monetary base, prices fall, the dreaded ‘deflation’ (again, the definition is extended to prices, not money supply) that some scribblers write about with mock horror, the sort of thing that has happened continuously with computers etc. for the last 30 years.
Lower prices all round sounds good to me.
True Mr Ed – and it depressing that people are still making the Irving Fisher – Benjamin Strong 1920s mistake “prices are not going up in the shops, so there is no inflation – so our policy of expanding the money supply is not causing any harm”.
Milton Friedman fell for this also – but it is still wrong.
Inflation is an expansion in the money supply – it has got nothing to do with the “price level” on some “price index”,
The only defence for current policy (massively expanding the “monetary base” or “narrow money”) is that they (the Central Banks) are trying to safeguard an ALREADY EXISTING credit bubble (“broad money”) – for fear that the “financial system” (the banks and other such) would collapse if this credit bubble was allowed to collapse.
However, if the banks did what everyone is telling them to do “start lending again” (with the new money) – then all Hell breaks loose.
So there you have – the sum total of the massive increase in the monetary base by the Central Banks is to keep a load of zombie banks in business, in a zombie financial system (which depends on the banks sitting on the extra money – or lending it back to the government).
Bets on how long this can last?
Bloke in Spain (and others).
Oh Gosh – not the “medium of exchange” thing again (I had a full head of hair when I first heart people making this mistake).
Yes money must be a medium of exchange, but it also must be a STORE OF VALUE – if it is not a STORE OF VALUE then it is no good.
So let us can this stuff about “money is debt” (fallacy).
“What this mean in practice?”
It means if one can say “I am saving this for my old age” it is not money.
One can say that about silver.
One can say that about gold.
One can say that about a lot of different things.
Guess what one can NOT (sensibly) say “I am saving this for my old age” about.
Clue – there are a lot posts (and comments) on this site trying to talk up the price of it.
If you can not (sensibly) save something for your old age – then it is no good as money.
That should have read “If one can not (sensibly) say “I am saving this for my old age” it is not money”.
I am very tired of this subject – not because of the people who do not know, but because of the people who do know, and are pretending they do not (such as Max Keiser). The technical word for people like Max is “shyster”,
I am very tired indeed of dealing with this.
can anyone explain bit coins to me?
So a bit like any one of the thousands of gold bug websites then.
Someone whose audience probably consists of you and some babushka who uses it as background noise whilst peeling potatoes in her hovel in Nizhny Novgorod.
The ‘Perfect Storm’ would be Max Keiser buying a copy of the the Economist with bitcoin. Does anyone takes Russia Today seriously, isn’t it just ‘Pravda TV’ without tractor factory production statistics?
I think that Max Headroom still has more influence, and probably more credibility, and reach than Max Keiser.
As for Bitcoin, it is the monetary equivalent of a queue outside a fake Apple store for the latest iPad Air.
Sure Nick.
Actually it is more buying an iPad and then first time you try and use it, the rest of the world’s iPad users know if it is a fake iPad or not.
Max Keiser has a large audience – including among people who call themselves libertarians.
Indeed if it had not been for Max Keiser most people would never have heard of a certain thing that I have agreed not to name – he has been de facto chief salesman for years.
Pretending (or implying) that this is nothing to do with Max is incredibly dishonest.
I never heard of him before you mentioned him and none of the people I know who I have asked have ever heard of him. Tom is a journalist so maybe he had (I have not asked him yet) but I know dozens of people who are interested in or have invested in Bitcoin and none of them said they ever heard of him when I asked. That A-List crypto geek Metzger went “huh?” when you first mentioned him.
@Paul
“Oh Gosh – not the “medium of exchange” thing again (I had a full head of hair when I first heart people making this mistake).”
What the hell do you think gold & silver are?
Both are interesting metals with some useful industrial applications, look attractive made up as jewelry. They’re also, unfortunately, used as a medium of exchange. Gold overwhelmingly so.
Apart from that, what makes them any different from any other commodity?
Look at the stratospheric rise in the price of gold, in the recent past. Did that come from the increased use of gold as a metal? You wish to safeguard your savings in a market bubble?
The advantage of any independent medium of exchange, not tied to any particular commodity, is it would be tied to all commodities. Goods & services included. Thus very difficult to manipulate.
bloke in spain.
I have never said that gold and silver were the only two commodities that could be used as money (i.e. as a store-of-value and medium-of-exchange). Although there are good reasons why these commodities have tended to be picked (and YES this has its downside in denying them from other uses).
By the way – avoid “paper gold” (indeed any commodity investment that is not really the commodity).
Sooner or later the big Western gold markets (and other markets also) are going to collapse – because they just do not have the stuff they say they have.
People (especially in Asia – but increasingly here also) want PHYSICAL DELIVERY – so if you do not have the stuff….
“But we just deal in futures contracts….”
Eventually “the future” becomes the present.
Max Keiser is someone that Paul Marks goes on about, as far as I can tell; he doesn’t show up in ANY of my other news feeds.
But I am rather avid about bitcoins, and still haven’t gotten why they are air pies. If I accept bitcoin payments for my services, then turn around and pay someone in bitcoins for services they provide me, I am getting pie, not air, and someone else wrote all the difficult software parts of that book-keeping. For free.
Darryl I study the left – including the “libertarian” left.
Some people study diseases, other people (such as me) study leftists. It is much the same.
And I assure you that there are a lot about – and a lot of people (some of whom do not consider himself leftists indeed are not) use disinformation terms that Max and co pushe (RT is quite an effective operation).
[and your claim that Max has no importance indicates how I should weigh the rest of what you say Darryl].
The truth is that he reminds me of the old days (when I was young) – Soviet disinformation people.
I rather like him.
Of course, if it was legal-honest-decent-and-truthful, I would execute him without a second thought – but it would not be personal.
Why would canucks have to throw toonies—there’s a slot to insert them. (Don’t really want to think about the coin return chute though)
RT average daily reach in the UK 106,000 people, how many of those are Russians anyway or Russian speakers (e.g. Baltic State EU citizens), wonks or media studies students? For comparison, the turgid BBC Parliament gets 107,000 a day. I have to wonder how accurate these figures are. In any event, very much a niche, or, more bluntly, a total irrelevance. More watch Eurosport and almost double watch the Horror Channel.
Can we discuss more relevant matters?
Ed – one finds memes first pushed by RT popping up everywhere.
For example, as I was watching a guest of Max (a Russian-American who “lives in Costa Rica” obviously an expert on the Ukrainian) denouncing the Ukrainian Parliament as a bunch of “Neo Nazi” anti-Semites (this from a television station “RT” that broadcasts anti-Semitic propaganda every day – pot meet kettle) so I was reading a post on the “Libertarian Alliance” website saying the same thing (basically word-for-word) as if they were both working from the same FSB script.
Give it time – then it will pop up on the BBC. The out-of-context telephone conversation between the Finnish Foreign Minister and C. Ashton is already doing the rounds on international television (including Al Jazeera).
Soon it will be “neo Nazis” who opened fire on the protestors (even though I WATCHED snipers standing next to the police, right next to them, do it) – as part of a Jewish plot by Goldman Sachs to loot the Ukraine with “fake privatisations” and “fake free trade” that “only benefit oligarchs and multi national corporations”
“Neo Nazis” working for the “bankster” Jews?
Someone Max and his friends at RT will make all seem plausible – at least plausible to some “libertarians”.
Remember these are the people who claim that fracking for oil and gas is a plot against the NHS (if only…..).
Short version……
It does not matter if only a hundred thousand people are watching – it is which hundred thousand people.
So it is very relevant indeed.
As those people watching the Horror Channel or Euro Sport get their opinions (second or third hand) from people who are not.
Remember how the “Hitler’s Pope” meme was spread.
Hardly anyone actually bought the books (produced by the KGB – behind front people).
Yet now most people have the dim idea the Vatican was pro Nazi during World War II.
The real Pius the XII personally saved the lives of thousands of Jews by hiding them on Church property in Italy (including in the Vatican itself).
Yet the real Pius the XII is utterly forgotten – only “Hitler’s Pope” (a KGB disinformation campaign) remains.
Because too many people were watching horror movies or sport.
The same will be done with the Ukraine.
And it will be done with Estonia, Latvia and Lithuania (and so on).
Any opposition to the Kremlin will be spun as “Neo Nazi”, “Pro Hitler” – by RT (which ironically is anti-Semitic itself) and by those who get their opinions (second or third hand) from FSB disinformation campaigns.
Anyone who takes RT seriously doesn’t deserve to be taken seriously.
Who watches RT? I suspect people with no jobs or no economic function, time on their hands, fools who are dumb enough to believe RT or who simply want to laugh at nonsense. They do not believe things because they watch RT, they watch RT because they are already ill-disposed to reality. If our function is anything, it is to mock nonsense, not to complain about it as if it were an unstoppable tide. The claims of Neo-Nazis and anti-Semites are simply laughable, so mock these scoundrels if you will, but don’t worry about them, you might as well fret about mosquitos.
It is an unfortunate fact of life that the vast majority of people simply don’t care, and from their inertia comes another inertia, the unstoppable momentum of the State. RT or not RT, Aljazeera or no Aljazeera, the State blunders on regardless. RT is simply light relief, a Lord Haw Haw for the 21st Century.
Paul has a very good point regarding RT. I don’t watch their TV channel, but I do occasionally read their articles on the web, and it fits Paul’s profile of the outfit at least superficially. When one keeps in mind that Putin is a KGB person in his way of thinking and functioning, and that he made very concerted efforts to bring all significant Russian media outlets under his control, Paul’s point makes even more sense.
That said, one has to be carful not to get carried away by associating anything that may be supported by RT or even Putin himself as a Bad Thing, the case in point being BC. Personally, as I understand it (admittedly not yet well enough), BC is largely a good thing – albeit, like many if not all good things, with some serious downsides. There is much misunderstanding around as to what BC is and what it is not, and much of that misunderstanding may well be due to deliberate misinformation pushed by RT or similar outfits. Such misinformation may well include raising or enhancing unfounded expectations by making BC seem something which it is not, and which its creators and honest promoters never intended it or claim it to be. IOW, it may well be entirely sensible for people to avoid BC on the basis of its actual downsides (which are unquestionably there), but it would be a mistake to throw the baby out with the water by claiming that BC is Putin’s plot to ruin the West (I am not saying that Paul is claiming that, but that may be the impression that some people could draw from his comments).
If you do watch RT, and I did for about an hour the other day as an experiment whilst in a hotel, remember two things:
1. They are in competition for viewers, they have to fill air time. They need content just as any broadcaster does. Bitcoin is topical, it might be that one of their presenters (or editors) is actually genuinely interested in it.
2. A stopped clock is right twice a day. They may have incorrect working, but they might be in possession of the right answer some of the time.
Our problem is not Russia’s strength, but our weakness. Whether Russia is strong or weak, the West is weak.
I don’t think there’s a shortage of content when you’re a Russian media outlet, at least not this year or even this decade. Nah, make it this century:-P I do agree about clocks and weaknesses.
Alisa,
“all the news that’s fit to print’
Or ‘broadcast’
Why is Putin wasting money broadcasting Lefty propaganda to the UK when the BBC has cornered the ‘market’? He doesn’t send snow to Greenland, does he?
He does, but the packaging is important, as you know. From what I’ve seen, a lot of RT’s audience are various useful idiots in the Occupy crowd – kids who think of BBC and CNN as part of the Evil Capitalist Empire. To them RT may well seem as an irreverent “indie” type of outlet that speaks truth to the power etc. So it’s not what is being said by either outfit, but who says it and how. A bit like a flip side of Paul’s take on these things, in fact:-/
Like me, I think Darryl’s point about this Max bloke is that hardly anyone has even heard of the guy. Even less people in the UK listen to Russian media than read the Independent (*snicker*)
I read a reasonable amount of stuff about bitcoin and other such crypto instruments, and I have never… ever… not once… encountered the name “Max Keiser” unless it was being written by one Paul Marks. I rarely watch or listen to Russian media (I assume you do so we don’t have to), so… 😀
I repeat what I have already said – what RT pushes today, the “libertarian left” and the “mainstream” (such as the BBC) tend to push some time afterwards.
This is how (back in Soviet times) such things as Pius XII (who saved thousands of Jewish lives) getting changed into “Hitler’s Pope” happened.
Free trade – “just for the benefit of the trans national corporations and the oligarchs – it is not REALY free trade”.
The poor could have X, Y, Z, if only it was not for the “banksters”.
Money from nothing (without paying the “banksters”) – of course, money does not have to be a commodity, or from the “oligarchy” “1%” supporting government. Money can come up “from the people” (money can just be numbers – produced by “the people”).
Israel = “apartheid”.
And on and on….
RT has been pushing all this for years and years – and helped a lot of it go “mainstream”.
The latest game is to smear the Ukrainians as all “neo Nazis” who are “pro Hitler” whilst (at the same time) being pawns of Israel.
Do not laugh – the “libertarian” left is repeating this line already.
Although I was gratified by the RT employee (two and half years service) who denounced the whole thing as a pack of lies, live on air in the United States – before managing to get out.
Not bad.
Although our dear friends already have an disinformation story being put out – it is all a plot by Fox News and the CIA (which they treat as if they were one organisation).
Yes Alisa – one way they are effective (very effective) is they take libertarian lines and twist them round.
For example, I have been attacking credit bubble banking (lending that is not from real savings) and government monetary expansion for years – so I know the key lines.
And up they pop with dear old Max (and have done for years now) – sometimes word-for-word.
But then comes the twist – the people could have X, Y, Z, if only it was not for the “banksters” and government monetary expansion.
No they bleeping could not.
But for lots of people (including the “libertarian” left) it sounds wonderful.
Whereas all someone like me can offer them is blood, tears and sweat – which sounds awful (because it is awful).
So the opinion formers (not just the young kids) hear perfectly CORRECT economics (much better than the old Soviet Union ever put out) but with a fatal class-war twist put in.
And also the wonderful promise of something-for-nothing (money from the people, special numbers meaning that the people in Africa can all go to university and ……) – if only the “1%” was got rid of.
Paul, get a grip. RT is a comic station for wannabee presenters, no one cares what they say, those that watch it either don’t believe it or are beyond help anyway, you have no evidence, nor even a hypothesis for a mechanism, for how it influences Western media – Russia does not export snow to Greenland.
Meanwhile, my enemy is on the march:
Putin makes no such threat cum boast, let that crocodile roam his swamp, but keep the circling hyenas from my door.
Yes Ed – it is sad that the Ukrainians (like the Baltic peoples) have been convinced that the E.U. can defend them against Putin (what is it going to do – through butter mountains at him?).
By the way I repeat that RT is a much more interesting foe than the BBC and the American leftists (ABC, CBS, NBC and CNN) – as many people involved in RT actually understand Austrian School economics (understand it well enough to lie about it effectively).
However, I must admit, that the effectiveness of RT has taken a bit of a hit – due to its presenters crying out (live on air) “everything here is lies and propaganda” and escaping down drain pipes.
It is a bit difficult to come back from that.
Something about Maxie…:
Go read the whole thing at WikiFootia. It’s not too long, but it’s interesting. (He was a drama major, and started out doing stand-up comedy, saith the article.)
He’s also a proponent of Bitcoin, and there’s a “celebrity altcoin” that’s “inspired by” him. Coindesk.com has an article it, with a 25-minute video of Max on RT explaining it:
http://www.coindesk.com/max-keiser-altcoin-maxcoin-makes-debut/
Then the video, then the bulk of the article.
Oh FFS… ENOUGH.
Can we please have a great many less comments about this irrelevant Max Keiser character on Samizdata!
Perry, I disagree. I think what we really need to is to convince Max Keiser to start promoting gold as the People’s Commodity. That would be a lot more entertaining.
There is actually a lot of Austrian School on RT (it is not just on one show) – but, as I said, there is always the “twist in the tail” (transforming it into an down with the rich, down with the corporations thing).
It is far more effective that the BBC or any of the American leftist networks – as they do not know enough Austrian School stuff to twist it.
And they do not invite lots of libertarians and Free Bankers on to their shows – who are only to happy to go on (day after day) “we are finally on television – we must be getting our message across” (no they are USING you).
As for gold and silver sales – they are both pushed on RT (after all Russia is a big producer of both, not that this is the reason they give of course……).
90% (or so) of the economic analysis on a typical RT show will be correct (it will be just about 0% on a mainstream Western station) – but the lying 10% (or so – the “twist in the tail”) will make it all worthless (indeed harmful).
Paul, in that case I think your rhetoric would be a lot more effective (and comprehensible) if you concentrated on the “twist in the tail” rather than going on and on about Max Keiser. I honestly thought that your whole argument against Bitcoin was that Max Keiser promotes it therefore it must be bad.
Anomenat – I do concentrate on the twist in the tail. I use Max (who regularly has libertarian guests and clearly knows Austrian School economics very well) as a classic example of the twist in the tail.
As for BC – I have already said I will not comment on it on this site.
An there is nothing to comment on.
Economic value is indeed subjective – that does not mean that nothing has economic value. That people have no reasons for valuing something. Let alone that it can produce wealth where there is none (“poor people in Africa can go to university now because of…..”).
I find the whole subject tragic – and I certainly do not gloat over the bankruptcy (and actual death) of some of the people involved, as the vile “Financial Times” does.
Picking up on Paul’s point about Austrian School people on [censored’s] RT show, one notable example is Peter Schiff.
It’s amazing in general how naïve smart people who know their subject deeply can be. Amazing who all shows up on Alex Jones. Amazing that an intelligent “Objectivist” (who really is conservative-minded, a huge Glenn Beck fan, and not a leftie/librul/Prog of any sort, that I can see) could see the Billy Ayers-Dinesh D’Souza debate on UT and comment that Master Billy seems a nice guy, engaging, serious about trying to do good, I think I’d enjoy having a beer with him (another idiot “libertarian/Objectivist” on another board said the same thing about Bill Clinton, yecch!); and get responses like “he’s not an important guy anyway, just a retired Prof. at a third-rate University. (That would be the University of Illinois in Chicago.) –This on Objectivist Living dot com, yet.
You surprise me Julie – I thought that Objectivists tended to have more common sense (indeed more Common Sense – hat tip to Thomas Reid) than that.
Getting fooled by “nice” Bill Ayers…..
The loud THUD you heard a couple of weeks ago was my jaw hitting the floor.
Well…he’s trying to find the balance between being a Rational Person and being a Benevolent Person himself, but he’s no spring chicken (more of a Midsummer rooster ), and I expected more, what, familiarity with Young Billy’s Communist-terrorist-nihilist history, and a better nose for BS.
Julie, sorry, but I lost you there after you mentioned Peter Schiff…Could you please help me out there?
Alisa – Julie was just giving an example of an intelligent (and conservative minded – in the good sense of “conservative”) minded man, being taken in by the “charm” the collectivist terrorist Bill Ayers.
Such people (such as RT staff) can often be charming. The point is to accept that they are charming – but remain evil.
Money’s only intrinsic value is that someone else will take it from you in the future in exchange for their goods and services. There are two presumptions there: a) that money won’t be devalued (much), and that there will be people to trade with. The current global economic crisis is a crisis of demography. The last person alive could have all the money in the world and it wouldn’t do them any good. Think of Childhood’s End, only in a smaller scale it’s what’s actually happened. Silver, gold, and so on, are not really any better than fiat currencies for they are still subject to money creation via fractional reserve lending… their only benefit -and a marginal one at that- is to take some freedom of action from the central bankers.
I don’t think maturity matching is a decent answer to fractional reserve lending either… Think about it: the banks could still have systemic losses, and people would still demand (and via Leviathan, likely get) their money back early. The problem isn’t fiat currencies, the problem is capital controls: as long as you’re free to trade and move your money around, you can flee mismanaged currencies. There is nothing special to metallic currencies that would prevent capital controls and financial repression — we know what happens when push comes to shove, just look at… all of modern history. But we had a fairly good run of freedom to trade between the final U.S. move off the gold standard and the 2008 crisis, and big fiat currencies weren’t that mismanaged. But that’s over, the problem isn’t just too much money, but too few young people to invest in, and that means the crisis will last a long time: until we figure out how to grow economically with less or negative population growth, or until we get back to population replacement (we can’t grow forever) and get past the social security hump.
I thought the Wikipedia article on [censored’s] doings was informative. RT, Press TV, Al-Jazeera; a 2010 special AND a 10-episode series on BBC. Also writes for HuffPo. More from the article:
“He also produced and hosted the weekly talk show Buy, Sell, Hold for CBS radio’s KLSX in Los Angeles, CA. Currently, he presents The Truth About Markets on Resonance 104.4 FM in London.”
A scion of Westchester (upper-crust NYC exurbia).
. . .
Alisa — I assume you’re familiar with Ayers’s history, but if not there’s a profile which is reasonably concrete and, from all I’ve read, accurate, at
http://www.discoverthenetworks.org/individualProfile.asp?indid=2169
Many articles in the left sidebar, written over the last 10-15 years.
With all that as background, you can see the Dartmouth debate between Dinesh D’Souza (a Dartmouth alum) and Mr. Ayers at
YooToob, dot, com/watch?v=SqZQCCMmNnY
For the sake of brevity, I’ll skip Mr. D’Souza’s CV, just saying he’s a Conservative (not a libertarian) and a Christian and not nuts, an immigrant and proud American from India, and I’m a fan.
For the posting to which I referred, see Comment #5, maybe 1/3 of the way down the page:
Objectivist Living, dot, com/forums/index.php?showtopic=14067
It’s interesting, I think. But that last-sentence summary…!
Many thanks Julie.
Nico – for most of recorded human history what you say was WRONG.
What actually happened is that something would be considered useful or attractive BEFORE it was used as money (salt, silver and gold being three such commodities – but there were others).
See Carl Menger “Principles of Economics” 1871.
Government money is valuable for three reasons (none of which you mention).
It used to be a commodity (and the name, such as “Pound” or “Dollar”, has been kept) so the folk memory (the habit) of using it remains – even though it is no longer a commodity (the last link between the Dollar and gold being broken in 1971 – for the Swiss Franc it was only a few years ago.
Legal tender laws – accept X or GO TO PRISON.
And. Tax demands – we want X OF ELSE.
A “crypto” currency is not a commodity that is considered useful or attractive in-its-own-right before being used as medium of exchange (i.e. it is not a store-of-value – yes economic value is subjective, but subjective does not mean “anything will do”).
And a “crypto” currency is not fiat (government) money either – it has no legal tender laws or tax demands backing it.
These two reasons are why a “crypto currency” is not really a currency.
This is not an “attack” on any particular “crypto currency” (there are, of course, many such things – including the “local currencies” introduced by some local councils and “peoples groups”) it is simply reminding people that a “crypto currency” is not a currency.
It clearly is. I can buy it, I can sell it, much like I can buy or sell a painting, or any other unique item that I can exchange with someone else in return for other valuables (which means ‘things people value’). Anything will do provided that particular anything is something others will be willing to give me other things of value for… and that is demonstrably the case for bitcoin.
Turning to the matter of fractional reserve banking….
This is not a matter of “crypto currency” (a crypto currency is not a currency, it is neither a commodity that people value in-its-self not is it a fiat money [backed by legal tender laws and tax demands], but crypto currencies are NOT to blame for fractional reserve banking).
Fractional reserve banking is often misunderstood – it is often assumed that this means that a “fraction” of real savings (say nine tenths – 90%) is lent out, with the rest (say one tenth – 10%) kept as a “reserve”.
In reality the “fraction” of real savings of cash-money lent out by the complex interactions between banks (and so on) is more like a 100 tenths (1000%) of real savings of cash-money – or more.
This is why the antics of banks are not just a concern for those who invest in them – they are of wider concern.
By expanding credit beyond real savings the banking system (by its complicated interactions) expands “broad money” (bank credit) at least till the inevitable crash occurs.
For example, Milton Friedman (and all other “mainstream” economist – Keynesian or Friedmanite) complain of the “collapse of the money supply” in the United States between 1929 and 1933.
What happened? Did evil “deflation elves” break into the bank vaults and burn Dollar bills and melt down coins?
Of course not – in reality the “money” that collapsed in 1929 NEVER REALLY EXISTED IN THE FIRST PLACE – it was bank credit (a massive credit bubble).
Those who deny this (those who pretend that the banking system does not expand credit – that it just “puts savings to work”) have to explain what collapsed between 1929 and 1933 (and they can not – other than by admitting what the system really does).
The whole system of accounting is wrong (fundamentally wrong) – for example people who put money into banks are called “depositors” (they are not “depositing” anything – a bank is not a grain silo, they are INVESTING putting in money that is going to be lent out, otherwise they should PAY THE BANK for looking after their money for them, just as farmers pay the owners of grain silos when they deposit grain in them).
So “depositors” (who are not really depositors at all) get the idea that they have “money in the bank” (they do not) at the same time that it is lent out (which would make the money like the Devil – in two, or more, places at the same time).
Also bankers do not even tend to talk of “lending out money” they talk of “crediting to the account” (and on and on), the whole language used is wildly misleading (a total mess really).
There is nothing wrong with usury (lending out money on interest) – as long as you really have the money you are lending out (your own cash savings, or the cash savings of others entrusted to you TO BE LENT OUT) this can not create a boom-bust.
An ordinary “loan shark” or even vast numbers of “loan sharks” (an unkind name for a traditional money lender) can not create a boom-bust, they do NOT expand credit beyond real savings. Even when they are acting for third parties (say Mr Capone has given Mr Brakelegs some cash-money to be lent out neither Mr Capone or Mr Breaklegs can create a massive boom-bust and put millions of people out of work).
From a general point of view “loan sharking” (traditional money lending) is not a problem – it can not (repeat – can not) create a boom-bust.
All the above must not be confused with Central Banking.
Central Banking makes things MUCH WORSE (even as a child it astonished me that Milton Friedman admired Benjamin Strong of the New York Federal Reserve – even when I was at junior school it was obvious to me that what Mr Strong had done in the late 1920s was madness).
However, the problem can occur even without Central Banking.
For example, Mr J.P. Morgan (the leading fractional reserve banking in the United States in his day) used to lend out 3 “Dollars” for every one Dollar (cash) he actually had.
This is a “fraction” of some 30 tenths (300%).
Other “National Banks” (i.e. the big New York Banks protected by the National Banking Acts of the Civil War era) followed suit.
This led to the boom-busts (for example that of 1907) that gave rise to demands for the Federal Reserve to be created (with the full support of the leading bankers of the day).
Even Scottish banking in the 18th century (supposedly the best example of “Free Banking”) was deeply dubious – someone who put gold (i.e. cash) into a Scottish bank was quite unlikely to see it again (especially in hard times – when they really needed it).
“Going to law” was essentially pointless as the Scots courts were pro banker. Courts still are pro banker – what an ordinary person would consider “fraud” is NOT considered fraud in a technical legal sense.
I repeat….
This has got nothing to do with “crypto currencies” – “crypto currencies” (“Bristol Money”, “Bitcoin” – whatever) are essentially irrelevant to this matter, and they are irrelevant to all other serous matters.
“Crypto currencies” are not real currencies (that is what the word “crypto” is for) no one saves “Bristol money” (and so on) for their old age – it is not a store-of-value.
With crypto currencies one “buys it low and sells it high” as Perry says.
One does not save it for one’s old age – crypto currencies, are not real currencies.
Are “crypto currencies” a scam? Not if one keeps in mind the word “crypto” i.e. that one is NOT dealing with real money (World of Warcraft “gold”, Bristol “money” and so on are not really money) – one “buys them low and sells them high”.
Or one keeps away from them.
Those who treat pretend (“crypto”) money as if it was real money, end badly. But that is not the fault of those who create them – after all the word “crypto” is a clear warning (such as “do not ingest” on a bottle of cleaning fluid).
It is astonishing just how many people do not understand that the “collapse in the American money supply” between 1929 and 1933 was not a collapse in real money at all (there were no “deflation elves” going around bank vaults burning Dollar bills and melting down coins) – it was a collapse of bank CREDIT, a credit bubble (which the bankers had pretended was money – and they had been encouraged to do this every-step-of-the-way by government).
It should also be understood that whilst ordinary people might call this “fraud” – legally it is NOT fraud.
For the legal cases that made the various things that ordinary people would think of as fraud, NOT fraud – see de Soto “Money, Bank Credit and Economic Cycles”.
Again – “economic value is subjective” does not mean that physical reality does not exist, or is unimportant. Even though bankers (and other such) act as-if physical reality did not exist (or is unimportant) and government encourages them to behave like this (again every-step-of-the-way). For example that it does not matter if lending is ten times (or one hundred times) larger than real savings of cash-money.
I suggest that those who hold to this position (that physical reality does not matter) conduct the following experiment…….
Deny the law of gravity. And get the government (the Central Bank and so on) to agree with you that there is no such thing as gravity.
Think really-really-hard that “economic value is subjective – “therefore” [this is the fallacy – to “reactionaries” such as myself] physical reality does not matter, therefore gravity does not exist”.
Then go to the top of a tall building – and jump off.
If you survive it is likely that you will adjust your opinions.
Or – you may just ask for a bailout, and carry on.
Chewing on gold is also inadvisable. Like everything else you have ever written about crypto-currencies, such notions apply really quite well to far more ‘respectable’ metals as well as exceeding difficult to forge sequences. I know people who have their speculations on gold and silver end very badly too.
Yes, physical reality exists. It is often also completely unimportant.
I suggest that those who hold to this position (that physical reality is actually relevant to the discussion) conduct the following experiment…
Purchase an insurance policy. Then try to use that policy to hammer nails into a wall. If you cannot, presumably you think that your insurance policy is fictitious?
Perry – a crypto currency is not a currency. That is what the word “crypto” is for.
So just “buy low and sell high” (which is what you stated your plan was) and leave it at that. I wish you good fortune – i.e. that you make good profits when you sell. You are NOT planning to save any crypto currency (“Bristol Money”, World Of Warcraft thing – or anything else) for your old age. Because you know it is not money. You see it (crypto currency) as a way of making a profit (by buying low, talking it up, and then selling high) – and that is fine, absolutely fine.
As for an insurance policy – no good if the insurance enterprise has no money to pay out with.
The “Names” of Lloyds insurance syndicates found that physical reality mattered – it mattered (and still matters) very much indeed.
@Paul Marks, I was speaking generally. As i said, the late 70s to just about now is one of the few periods of relatively free trade and flow of investments — i say relatively because in fact there are great problems, such as the non-settlement of trade (i.e., persistent, enormous trade inbalances), and the fact that governments have more and more knowledge over where people park their money (i.e., bail-ins are possible, as possible as ever). Historically governments mandate what is legal tender, but the concept of money depends onlyy on others being willing to give you something of value for your money. And look, even though we’ve been mostly free (in the West anyways) for a few decades to buy and use and hold foreign currencies, invest abroad, and so on, in practice people stuck with the dollar and the euro, and i claim that it is because in spite of being fiat currencies, people were willing to use them, and will continue to be for as long as they are [apparently] managed well enough relative to the rest (which, i know, isn’t saying all that much). Now, you and i know that in fact these currencies are all hardly being managed well, and there will be a price to pay in time, but mismanagement could happen with harder currencies too (import -and settle- to goose consumption until the treasury runs dry, for example). Even when the crisis comes, as in the thirties, there will be no place for the masses to hide, we’ll all be in it mostly together. The problem isn’t that a currency is fiat or not, the problem is the power held and [ab]used by governments. The problem is institutions — their type, strength, history, use. Roosevelt banned gold, remember? Nothing stopped him. Everywhere the institutions that could protect property rights (financial included) and so on are in retreat or non existent. Gold cannot help in such an environment; in a better world gold wouldn’t matter that much either as it’s not really that useful in an online world (imagine going to the stars… we wouldn’t carry gold for money!).
Pardon me for not splitting up that long paragraph 🙁
I’m always amazed by how much Americans complied with the gold ban. Those were different times… Anyways, my prediction: as many lean/crisis years as it takes to adjust to shrinking populations. China will be hit very hard. The U.S. will turn out OK, but it will be an interesting next twenty years.
Short of a new tech revolution that’s how long i think this will last: twenty years. Assuming no new FDRs — a big if. The great depression needn’t have lasted long at all if only Hoover had heeded Mellon’s advice to liquidate everything. Now we’d need the will (popular) to cut back the welfare state and admit that it’s not possible to (and a very bad idea) to guarantee retirement pensions to all (spoiler: it won’t happen for at least another decade). Now it’s much harder.
Nico – no need for me to go into detail into money again (I have already flogged that one to death – money must either be something that people value BEFORE they use it as money, OR be backed up by government power, legal tender laws and tax demands).
I agree with you on the conformism of the 1930s – it was deeply scary. I suspect that it was the result of many decades of government education (after all the “Father of American Public Education”, Mr H. Mann, openly admitted that he wanted to imitate Prussia – that this statist tradition had inspired him).
The social chaos of today is bad – but it is better than the conformism of the 1930s, were (for example) someone could be castrated simply because the government said they were “inferior”.
If you do not care that the government is castrating your neighbour (“well they must have good reasons…..”) then are you going to care if the government just steals their gold? After all that is a far more moderate policy.
By the way Texans often boast that their State did not have eugenics laws – and that is true. But they sometimes fail to mention that this was because the Texas State Legislature only sits for a few days a year (so it did not have time to pass them).
On China?
A baffling place – I do not pretend to understand China.
The latest news to come out of China is bad, so you may be correct.
I just do not know.
a crypto currency is not a currency. That is what the word “crypto” is for.
No it isn’t. The word “crypto” signifies that the currency is based on the mathematical principles of cryptography. Neither World of Warcraft game money nor Bristol Pounds are crypto-currencies. I am not sure that you understand what Bitcoin actually is. Are you labouring under the illusion that WoW money and Bitcoin are the same sort of thing?
Anomenat – this is indeed one use of the word “crypto”, it is not the only use of this word.
Nor is the thing you describe a currency, It is neither a commodity currency or a fiat currency.
If you enjoy this sort of thing, have fun.
I mean that quite sincerely – mathematics is a subject that many people enjoy, especially code breaking (cryptography).
Dude, yeah it has other meanings, but when used in conjunction with bitcoin, it only has one meaning.
Absolutely. I have been following the technology of cryptography as a means of carrying out transactions since one of the earliest papers on it, published in CACM back in the seventies. If anyone is interested I can dig it up. I was also involved with a venture run by Jim Bennett where my company was implementing an entire cryptographic economic system. Unfortunately the Dot Com Crash followed less than a year later by 9/11 killed that off.
But crypto basically means hidden in the way any one in this field has ever used it or intended it to be used. I do not think Paul is familiar with what are known as trapdoor functions, knapsack algorithms, elliptic curves, Public key cryptography and other technologies which are based not on the difficulties of old style encryption, but on things which are protected because it would take a computer longer than the age of the universe to compute the inverse. Now admittedly, some of those algorithms may need to be replaced or adjusted when Quantum Computing becomes mainstream, but I have heard there are people working out algorithms which are computationally hard even with that technology.
While I find Paul’s understanding of economics fairly broad, I do not think his expertise extends very deeply into this area.
Agreed, crypto currency means crypto as in cryptographic, nothing else.
I believe crypto currencies could work as well as fiat ones, but not likely the current crop of crypto currencies. You might say “as poorly”, but given that hundreds of millions of people in the West have been free to flee their currencies for decades now but haven’t, I have to say that it’s not at all clear that fiat currencies can’t work. Gold is hardly convenient, so we could only end up with gold-backed paper (well, not even, it’s almost all electronic now) at most, and we’ve seen how that movie ended.
Gold isn’t an institution, it can’t protect the people from themselves. If that is and continues to be so, i don’t see the value in gold (which isn’t to say that central banks shouldn’t accumulate it just in case, or that individuals shouldn’t have a few ounces at hand around also just in case, just not even a lot of their savings).
As for China, predictions of lots of things are difficult, but some things are easier to predict. Their awful one-child policy has built-in a halving (not as bad, because not enforced strictly enough, thank goodness) of their population. China is already butting up against an unavailability of enough young people. Youth is important because it is the young that take the most risks, have the most energy, and consume the most (because they have the most needs, to raise the next generation). Add to that the awful gender inbalance they’ve built up as well and… demographic disaster is coming up next, and it will take a long time to recover. Their culture has adapted to having fewer than replacement-rate children per-woman, so once they drop that self-destructive rule it will take a long time for birth rates to tick up enough.
We’re looking at very signiificant declines in population in China in the next forty years, starting seriously in the next fifteen. Japan, Russian, Spain, Italy — they’re already in decline in absolute numbers, though they don’t have such steep declines built-in. But then, population growth and shrinkage are both exponential in the short-term (both are asymptotic in the long term, for obvious reasons). Even in the U.S. birth rates have fallen far below replacement since 2008.
Monetary, impositive, fiscal, and social policies throughout the world have certainly had a lot to do with blunting birth rates, but higher standards of living also tend to have the same effect. Meanwhile we have soon-to-be unbearable loads in paying for the old’s care.
On the plus side, in twenty years’ time the relative youth of our populations will improve, which is why I predict that this global crisis will last not much longer than another twenty years, and not much less than another ten without a new tech revolution (which might well be happening, in the form of fracking!). I’m hardly ecstatic with this prediction: I probably will never get to retire; my children will have a harder time than myself or my parents. But it’s an easy prediction to make: it’s in the numbers.
Anyone who might think that crypto-currencies could provide a means of concealing transactions from the State on a meaningful scale might wish to consider the difficultiies inherent in concealing the transaction and the assets traded, and the power of the State tax authorities to simply make an assessment of the value of income e.g. a ‘lifestyle assessment’ and put the burden on the taxpayer to show otherwise, and criminal sanctions for non-declaration, non-filing etc.
I fear that Bitcoin is a fantasy ‘currency’ for fantasists. The real need is to shrink and weaken the State(s).
Mr Ed and others.
For legal reasons I have always been careful to indicate that this is a GAME (NOT the same game as World of Warcraft – but very much an entertainment, for example the leading player in the game in Japan was actually Magic the Gathering, recently this player ran into some difficulties).
There is no intent to deceive here, no attempt to maintain that any CRYPTO “currency” is really a currency.
Where there is no intent to deceive (for monetary gain) there is NO FRAUD.
Some other people on this site have not been quite so careful with their language as I have been – but this does NOT mean they are engaged in fraud. It just means that they have been a bit loose with their language – nothing more (no criminal intent).
No one is pretending that a certain crypto currency (which I have agreed not to name) is really a currency – that one can use it to pay one’s taxes or as legal tender. Nor is anyone pretending that a certain crypto currency is a commodity money (something that is valuable BEFORE it is used as a “medium of exchange” – a “medium of exchange” NOT being the same as “a currency”).
There is no fraud here – it is just a GAME.
I repeat, to any person reading this or any other thread on this site, this is a GAME – there is no intent to deceive for monetary gain (no fraud).
I am prepared to testify (on oath) in DEFENCE of anyone who has commented on this thread on this matter.
There is no intent to deceive in order to achieve monetary gain. There is no attempt to pretend that a CRYPTO currency, is a real one.
Any language to the contrary is simply people getting over excited – NOT criminal intent.
True, but no such claims have been made by anyone serious who knows anything about the matter (and no, He whose Name shall not be uttered from a TV station most people do not watch does not count). The crypto thing is not about concealment of transactions, it’s about the prevention of meddling with the currency itself. Think about it as the prevention of meddling in the atomic structure of lead with the aim of turning it into gold.
Sorry for botching Ed’s quote – should have read:
Serious the people may be, but as a currency it is a joke. They laughed, and how they laughed, when some said Bitcoin would not be a currency, they are not laughing now.
Seriously? I actually see people using it as currency, which by definition makes it so. Whether it is a “good” or “bad” currency, is a different matter.
We must be listening to very different people.
Yes Alisa, seriously. Well, to my ears anyway, the ones that keep dropping a ‘the’, the term ‘currency’ imputes a sense of widespread acceptance, even the Macau Pataca could meet that within that peninsula.
With Bitcoin, the idea seems to be that you swap it for something valuable.
Yes, in the same way you swap dollars or yens for something valuable – like goods and services. Why does this make BC a non-currency?
Acceptance does not need to be widespread outside of a defined community. Cigarettes are known to serve as currency in prisons, which implies that their use is widespread inside said prisons, while not outside of them. Same with Shekels being widespread in Israel but not outside it. Etc. Likewise, the use of BC is widespread within certain communities, not all of them residing in the same geographic area. What am I missing?
I am quite happy to claim that a crypto-currency is really a currency. People are paid salaries in bitcoin. People buy goods and services using bitcoin. Whether or not you think it is a good one, bitcoin quite obviously is a medium of exchange. That is the definition of the word ‘currency’, both in general English usage and according to my dictionary.
Paul Marks uses his own definition of the word ‘currency’, according to which no extant crypto-currency is really a currency. That is fine. He has made it clear what he means by the word. However, he shouldn’t go around making claims on other people’s behalf: according to the commonly accepted definition of ‘currency’, some extant crypto-currencies most certainly are currencies.
I think a lot of the disagreements on the topic come from misunderstandings and terminological confusion.
Indeed, Anomenat.
Right, a currency is any thing (literally, though to be practical it has to be divisible into small enough units and portable in large quantities) that we agree by convention to use as a value transfer medium. This, combined with future expectations produces a currency’s value storage capability.
The key is “agree by convention” (or force, but given that in recent decades it’s been by convention, and that BTC and such exist peacefully because the state is not forbidding them, convention clearly does work, at least for now!). And “future expectations”.
I submit that if future expectations are of sizable population shrinkage then money loses purchasing power: there will be fewer services to purchase with it, and fewer goods too (because fewer workers and less demand).
I submit that this is true regardless of the currency type (fiat, metallic, crypto).
I also submit that systemic (and smaller) crises are as likely/feasible regardless of currency type (though I expect gold bugs to argue otherwise at least as to likelihood, but I believe they are wrong).
Even without those assertions, gold is already inconvenient: it’s not easy to carry either sufficiently small units (which would be physically too small at today’s prevailing exchange rates. or even at one tenth) and it’s not easy to carry large enough amounts (it’s heavy, easily stolen). The attributes that once made gold such an excellent basis for a currency no longer do, and this is largely due to the great increase in wealth and transaction volume since the pre-WWI days, which in turn was facilitated by having paper money, whether backed by gold or not.
Money is either something that people value BEFORE it is used as money (such as salt – as in “worth your salt”) or it is backed by state power (legal tender laws and tax demands). Remember money must be a store-of-value, not just a medium-of-exchange.
This does not mean that a crypto “currency” does not have uses – it does, for example to force down transaction costs (by competition).
For example, if it is cheaper to buy crypto and then resell it for a currency (rather than, for example, buy Dollars directly with Pounds) that is exactly what people will do.
Paul, correct me if I’m wrong, but the first banknotes (Bank Notes) were not backed by state power, but were privately issued IOUs. The paper on which they were written/printed was as worthy or worthless as the BC strings of numbers.
Paul,
You are not being careful in your use of terminology. ‘Currency’, i.e. medium of exchange, is one of the functions of ‘money’. Store of value is another function of ‘money’.
If you admit that a crypto-currency is used as a medium of exchange then you admit that it is, by definition, a currency. Whether or not it is money is a separate issue. We need to be careful with our terminology as it seems to be causing a lot of confusion on this issue.
Money is generally (though not universally, as economists love to disagree) considered to have three main functions: medium of exchange, store of value and unit of account.
Bitcoin clearly fulfils the first function, i.e. a medium of exchange. That is not a matter for debate as it is enough to make the simple observation that people use it as such.
Whether or not bitcoin functions as an effective store of value could be debated. Many people think it makes a good store of value – since it is unperishable and immune to inflation – but you have to believe that it will still be liquid in the future. There is no government forcing people to accept it as legal tender, nor does any government accept taxes denominated in bitcoin. You have to weigh the pros and cons: it lacks the government backing of fiat money but equally is immune to the deleterious effects of central banking. As I say, a matter for debate.
Thirdly, there is the unit of account. There are a limited number of online traders who currently use bitcoin in this way. Some salaries are paid, usually only in part, in bitcoin. So it certainly can be used as a unit of account, and is used as such by a few people, but it is hardly widespread. This function tends to follow the other two.
Finally, you define ‘money’ as “something that people value BEFORE it is used as money” or as something “backed by state power”, i.e. fiat money. Well, you can use that definition if you like. I do not see its utility. It differs from the definition used by most other people and fails to capture the functions of money. It seems a bit ad hoc, really.
Alisa agreed – and the thing that makes cryptos NOT fraud is that they are NOT IOUs.
There is no claim (none) that a crypto has any money backing it, no “I promise to pay….” on demand.
That is why when people compare cryptos to “credit cards” or “insurance polices” they are totally wrong.
A credit card company has to have money (to pay for the stuff that people buy with their credit cards), and insurance company has to have money (in order to pay the insurance policies), and a bank that issues bank notes saying “we promise to pay X” has to have X (or eventually fail – or be bailed out).
A crypto issuer (or inventor) does NOT have to have money.
That is why a crypto is NOT fraud – because there is no claim there is money behind it.
This is a game – NOT a fraud.
There is no claim (none) of money behind a crypto.
Where there is no false claim – there CAN NOT be fraud.
Anonemat
We’ve gone on about this before, but money is not an economic ‘battery’. If it were, Tsarist roubles would have kept their value into Soviet times.
Of course if someone selling a crypto went around, to potential buyers, saying “this is like a credit card” or “this is like an insurance policy” or “this is like the bank notes issued by private banks in past centuries”, then they are making false claims for monetary gain (trying to get people to pay them money for a crypto on the basis of giving these buyers FALSE information about that crypto).
That would be a criminal offence. But (as far as I know) no one is doing this.
We’ve gone on about this before, but money is not an economic ‘battery’.
I have no idea what you mean. I’m talking about the basic functions of money: http://en.wikipedia.org/wiki/Money#Functions
On Tsarist Roubles.
A useful reminder that even legal tender laws and tax demands can not (in the end) safeguard the store-of-value function. In the end a currency has to be (or at least be based upon) something is attractive for nonmonetary (nonmonetary) reasons.
Some value will be retained by these means – but it is unnatural and the value will decline as the amount is increased (however, contrary to Irving Fisher and Milton Friedman, there is NOT an exact mathematical equation here – MV=PT does not work, or one can only make it “work” by rigging the “V” [“velocity of circulation”] number)
Mathematics has many uses – but Irving Fisher (like Alfred Marshall and Leon Walras before him) took it too far into economics.
The modern alliance between Marxism and Keynesianism is odd.
Karl Marx mocked what we now call “Keynesianism” (see Hunter Lewes – “Where Keynes Went Wrong”) before Keynes as even born.
Neither Stalin or Mao were Keynesians.
Yet the Marxist advisers of the governments of Argentina and Venezuela try to mix Keynesianism into the mix.
It may go back to P. Straffa (the Italian Marxist) trying to mix the ideas of Marx and Keynes. Straffa may have been influenced by his Cambridge friends (although Maurice Dobb was a Ricardian, of sorts, so he should have known that Lord Keynes was talking nonsense – money is one that David Ricardo got right).
There was a great fad after World War II of mixing together false thinkers – as if one wrong, plus another wrong, equals a right.
As for what Mr Ed is talking about – no mystery there.
If you are promising someone something – then the value is in what you are promising them, NOT in the bit of paper (or computer record) your promise is on.
For example if I promise someone gold – I better have the gold, ditto salt (and so on).
“Paul that is so old fashioned – modern City people ignore all that”.
I know they do…..
A bit like 19th century bankers “getting confused” between the bits of paper (the “Bank Notes”) they issued, and the promises written on those notes.
Governments tend to “get confused” as well, but they have vile Paul Krugman’s “men with guns” to help them face down those who get angry with such “confusion”.
City traders who really think they can act in this way (that they are “Masters Of The Universe”) should read Tom Wolfe’s novel “Bonfire of the Vanities”.
In the end a City person is not powerful – they are rich, but that is NOT the same thing.
When the mob arrives with their burning torches, and the NOOSE, saying “we want our stuff and we want it NOW”. The City person has to rely on the government to protect them (protect them from the consequences of their own lies – sorry “confusions”).
And government, in the near future, is quite likely to betray their “friends”.
It is actually BETTER to be selling a crypto – rather than making people promises for things you do not have (and have no chance to get).
“I promise to deliver to you one tonne of salt on April 1st 2014”.
Then on a April the 1st 2014…..
“It was only a joke (I spent your money on cocaine – and sniffed it) – it is April Fools Day! Why are you not laughing? What are you doing with that AXE? It is only a civil tort, you can not hurt me, PLEASE…”
Much safer (than this) to sell a crypto.
Then in April one can say.
“You have got exactly what I promised you”.
Because one has not really promised them anything much.
I can think of situations where a lot of “gold traders” (who do not really have any gold) in various parts of the world end up hanging by the neck from lamp posts.
Crypto trading (as long as one is open about it) is actually a lot less dangerous than this.
Anomemat. You asserted that money is a store of value, and I look forward to an explanation as to how that might be, I say it does not, whereas by my analogy, a battery stores chemical energy for later use, until discharged.
1,000,000 Tsarist roubles become, if paper, curiosities at best after the Revolution(s). If gold roubles, the gold has a value, as do the coins. That is my summary.
You put a link to Wikipedia, Jevons was wrong about money as a store of value. But he may not have known of Franz Čuhel and other economists.
Money might retain its value in the future, but that would depend on what happens in the economy with which it is intertwined, e.g. recent Zimbabwe dollars, Venezuela today, where money’s value drains away.
Paul, my point was not that BC is an IOU (although it can certainly be used as one), but rather that a medium of exchange (currency) does not have to have a non-monetary value. As I pointed out, the paper on which banknotes are printed have no such value, whether they are backed by government coercion or not. The IOU element is not material to this specific point – although like I just said, BC can certainly be used as IOU, just like a privately issued banknote, or like any other item which has no non-monetary value, but has a certain unique identifier which protects it from counterfeiting (in the case of BC it is the fact that it is a unique string of numbers which cannot be replicated or is extremely difficult to replicate).
Mr Ed,
Ah, I see where I got confused. I am not claiming that money is a perfect store of value: I claim just that “store of value”, like “unit of account” and “medium of exchange”, is one of the functions of money. Obviously, if the thing that gives a money its value is taken away then it ceases to function as a store of value. Surely you agree that people do use money as a store of value? I mean, people have savings accounts, right? It’s not perfect but that is one of the things that people do with money.
Paul Marks said, “Remember money must be a store-of-value, not just a medium-of-exchange.” I agree.
Paul Marks wrote:
A useful reminder that even legal tender laws and tax demands can not (in the end) safeguard the store-of-value function. In the end a currency has to be (or at least be based upon) something is attractive for nonmonetary (nonmonetary) reasons.
I agree with the first sentence but not the second. The problem is that even if something is attractive for nonmonetary reasons, its demonetized price (i.e. its price for nonmonetary reasons) will be tiny in comparison to its monetized price. If it stops being used as money then anyone who tried to use it as a store of value will still lose most of their value.
As Paul Marks rightly says, crypto-currencies are not based on any such commodity. If they stop being used as money then their value is zero. Anyone who tried to use them as a store of value will lose all of their value.
My point is that losing all of your value is pretty much the same as losing most of your value. I suppose it is better to be left with a cheap commodity than to be left with nothing, but not much better. It certainly doesn’t make so much difference that I’d call one money but not the other.
Anonemat, I may be being overly doctrinal, but I think the ‘store of value’ meme has (apart from being undermined by inflation of the money supply) been a bit of a diversion from understanding of what money, particularly readily inflatable fiat money serves for. Certainly people save, but I have heard people who worked through the 1970s in the UK talk about buying a large cheese as a ‘hedge against inflation’ i.e. a small flight from money, preferring to dump money in exchange for something more durable (it was something like Edam, IIRC).
To be useful, I would agree that money must be expected to be valuable for a meaningful period between transactions, e.g. if I sell a car a second car to buy another, in Argentina I might want US $, not ARG Pesos, as by the time I buy another car, I might have lost out. What any period of expected usefulness would be depends on the circumstances of the individual, a computerised currency trader in the City might be thinking of seconds rather than months.
I see Bitcoin as a wonderful private ‘seignorage’ opportunity. People ‘mine’ them, and then sell them on. The mark-up in some instances might be massive. I don’t see how people recover that, not at present anyway.
Mr Ed,
Fair enough. Although, the less emphasis you put on ‘store of value’ and the more you put on ‘medium of exchange’, the more obvious it is that crypto-currencies are just as much money as anything else (assuming people are actually using them as a medium of exchange, of course).
There might be some confusion about what bitcoin ‘mining’ actually is. It is the act of verifying a transaction. Bitcoin is deliberately designed so that the cryptographic operations necessary to verify that a transaction is genuine – i.e. to prevent forgeries, double spending and so on – is computationally difficult. The bitcoins that ‘miners’ receive is payment for the work they do to verify transactions. It is a transaction cost.
In the long term money is a poor store of value. Active assets fare better, but even then, at the end of the day any store of value will lose value if there are fewer people around to give you something in exchange for your savings.
Quite frankly we cannot expect to live to 80 having not worked from 0 to 18 or 22 and not worked from whatever retirement age might be unless the latter is close enough to life expectancy. Not without having a [necessarily temporary] baby boom. I will not get to retire, and that is fair and just.
It is not possible to save too much, in the aggregate, since the saved wealth is, effectively, money waiting to be loosed — awaiting inflation, basically — without concommittant (and lasting) growth inproduction of goods and services.
And if you promise someone bitcoin – you better have the bitcoin too. You do actually have to have it you know.
Er, surely no one is proposing that bankruptcy/failure be impossible… Right .
I still think being a crypto trader is safer than being a trader of something real – that is actually an argument in favour of the stuff that some people on this thread are doing (although they are treating it as an attack).
I just watched the print-a-pistol person being interviewed BBC “Hardtalk”. An odd experience as the young man talked in a very weird way (almost as if he was using some sort of chemical intoxicant). I still think there was NOTHING WRONG with what he did – but I would not buy anything from him, he was just too weird (“spaced out” I think the term is). Hopefully other people involved in crypto currencies are more compos mentis.
Nico – naughty, naughty to use sarcasm (although you make a good point).
Yes indeed, as far as banking (and the other markets)are concerned, the basic discipline of physical reality (of bankruptcy – of have the physical stuff you say you have, or lose your shirt) has gone. The government has de facto abolished the financial markets – and replaced them with fake “markets”.
So, yes, the vast majority of what is said by Mr Putin’s “RT” in attacking Western economic policy is CORRECT (they are not talking “nonsense” Mr Ed – if something is mostly correct it is not nonsense). HOWERVER, they then twist it round (twist in the tail) to get a collectivist conclusion (that is the bit that IS nonsense).
It is what “left libertarians” do all the time. We could all have free ……. (whatever) if only it was not for the “banksters” (we could “print it off the internet” with no limit of PHYSICAL REALITY).
That is the bit that is nonsense.
Even if they do not talk (in demented ways) about being “beyond good and evil” – like the spaced out weirdo I just watched on BBC “Hardtalk”.
I am against “Gun Control”, but I would be deeply concerned if I found that this man owned a firearm (for example his reaction to being asked about the murder of the children at Sandy Hook was to smile with an almost nonhuman look on his face – rather than speak in a rational way).
Better than such people stick to electronic pass-times (such as crypto currencies) rather than have physical objects in their hands.
No more “beyond good and evil” types please.
So this is what is going on, Paul, as far as I can tell: you are taking something that RT/”Libertarian” Left/tail-twisters are promoting (BC), and having no understanding in the matter (namely, BC), you lump it with the tail-twisting part, rather than with the good part of what they are saying. That is an association fallacy, IMHO.
No Alisa – only when they say that there are some sort of special benefits from using a Cyrpto (such as “young people from Africa will now be able to go to university”).
I have nothing against people playing crypto games (and I have said that – repeatedly). My objection is when they confuse it with real life and start to think that that it can “change the world” (and so on).
Then we are in Sandyhook (spelling alert) country.
After all Adam L. was not doing any harm when he was playing video games (none at all) – it was only when he took the fatal step of trying to play the game in real life that real harm was done.
However…….
There may indeed come a time (via nanotechnology and so on) when people really are able to make anything with “dirt and a bit of energy”.
That time may come (I do not deny it).
However, crypto “currencies” have NOTHING to do with this, they are not connected with it. They have nothing to do with bringing such a state of affairs about.
I repeat……
Cryptos are (as long as everyone remembers they are cryptos) are HARMLESS – they are not fraud, and they offer no special losses (or gains). Indeed many people (although, sadly, not me) may get a great deal of pleasure from this form of applied mathematics.
Who said that?
Not just the endless young “techo” libertarians that our friend Max has on his show. But the mentor of them all – whom I just watched on BBC “Hardtalk” with his fantasies about a new world (via the wonders of this ……)
Actually I like Max better – he is dishonest, but sane (this is just assignment to him).
The young (print-a-gun) man I did not like at all – there was the light of madness in his eyes (he believes this stuff).
And I was NOT biased against him – after all I do not think there is anything wrong with printing firearms (other than the practical problem that they are not likely to be much good).
I went into watching that interview on his side – and he (not the BBC interviewer) turned me against him.
Everything was a source of amusement for the young man (even the dead children at Sandy Hook), and all that mattered to him were his fantasies.
True I am based against the internet – it has helped ruin my health (and prevent me doing many things) by chaining me to this poxy computer for most of each day, siting in this chair (I hate it – at least I hate e.mails, sitting with the endless “in box” each day). But is a duty – and I must do my duty.
But hating the internet is silly – I admit that.
Just as putting religious faith in it is silly – which the young man is unable to any longer see.
Paul, just to clarify: you call the use of crypto-currencies “playing crypto games” – do you call the use of fiat currencies “playing fiat games” or the use of commodity-based currencies “playing commodity games”? If not, why not?
Anomenat – I was using the word “game” to make the point that this is NOT a fraud.
It is now almost 1630 and I have done nothing all day but answer stupid e.mails. I have had enough.
If you want to go to prison (for selling something as money when you know it is NOT money) then go to prison.
Stop bothering me about it.
It has been a beautiful day, and responding to other posters is entirely voluntary, as befits a libertarian leaning site. The world is still turning, with or without Bitcoin or any other form of specie.
Anonemat’s last posting is bordering on trolling. What Mr Marks choses to call things is besides any point.
I meant no sarcasm, it’s just that on this ipad i tried to type a question mark and it came out as a period, and i posted without noticing. The point was that even with maturity matching and so on failure is always possible. Someone, i thought, said something about oromises having to be kept, but no, they can’t always be kept.
Paul Marks doesn’t “get” crypto, which is fine (he even seems confused what the term crypto used correctly actually means in this context). But then he starts rabbeting on yet again about this Max guy who so obsesses him.
So, who’s the troll really?
I did not say anyone was a troll, but Mr Marks has a genuine wish to post for the sake of truth, even if he is one of the few who regard ‘Pravda TV’ staff as worthy of note and comment.
LOLcoin, it seems that you have not the fainest idea who Paul is and where he is coming from. Please do not mistake criticism aimed at some very particular and specific message for an attack on the messenger.
Oh but I do not want to scare Paul Marks away from the topic. So he doesn’t get cryptographic currencies (hard to blame anyone for that, and though i believe we’ll have a winning crypto currency eventually, none of the current crop are likely to be it for many reasons). But for please please do keep writing about history.
So people are talking about this.
Well I do “get” (understand) cryptos (not the specific mathematics – but the principle) and cryptos (as long as everyone understands what they are and what they are not) are harmless (indeed they are actually useful). However, it they are sold as money,if people make false claims for monetary gain, then that is a matter for the criminal justice system – it is nothing to do with me.
I started before 0600 this morning (in this dirty house) and I have to be at an office by 0900. I have a vast number of e.mails to get through – and I will not manage it.
When I next turn on this machine there will be hundreds more e.mails.
I hate the internet (I hate it with a passion) it has helped mess up my life and undermine my health. But that is not your problem.
But I will not waste any more time on cryptos.
I am sorry if anyone took offence from my message. I thought I phrased it in such a way that my genuine question would be apparent but evidently I failed. Both Mr Ed and Paul Marks seem to have interpreted it as an attack, which suggests that the fault was in my writing rather than their interpretation. Sorry.
I too have a genuine wish to post for the sake of truth, which is the only reason I began posting on this topic. Although I have never met Paul Marks, he appears to be a respected commentator here and seems, as far as I can tell, to have a good understanding of politics, history and economics. On top of that, he has expressed strong opinions on Bitcoin on this site. I therefore thought this would be a good place to learn about Bitcoin and he would be a good person to learn from. I also did not expect him to continue commenting unless he wanted to do so!
I have found his comments extremely difficult to relate to the topic. His understanding of Bitcoin differs vastly from my own and from any other I have ever encountered before. I found this interesting and wanted to understand it. In the end, I have come to agree with Alisa’s diagnosis, but I appreciate the opportunity to have done so.