Bitcoin as a Black Swan?

Yes indeed.  The development of crypto currencies, such as bitcoin, or perhaps others to come soon, IS the black swan.  Prepare accordingly.
 
There are compelling reasons for this conclusion.
 
Why?
 
(1) Use of crypto currencies, such as bitcoin, cannot be stopped by centralized authority absent total shutdown of the internet.  Bitcoin is peer to peer, meaning that if part of the network is destroyed, or shut down, then the bitcoin network will still function, just as the internet designers contemplated when they designed it to withstand nuclear war.
 
But even if something or someone were to make the internet suddenly stop working, is this really likely?  How will those in charge have the ability to communicate electronically?  Or complete ATM or credit card transactions, or any of the other billion transactions that happen every day?  So, is the internet kill switch option really an option?   I think not.
 
(2) Bitcoin, or litecoin, or something else that comes along, takes the electronic transaction between buyer and seller away from the central planners.  This is a game changer.  That means the regular folks have an alternative to the valueless FRN notes and all the other fiat paper being printed from thin air.
 
(3) Crypto currencies are not about substitutes for money.  Crypto currencies are not gold.  There is no substitute for gold, or silver.  It is best to stack physical, for sure.  I do, and will always do.  But, recognize that bitcoin or their competitors are currencies, just like FRN’s or gold coins or silver coins.  They serve the same functions, that is, bitcoins used on the bitcoin network are a means of exchange, a unit of account, and for some, a store of value.  
 
Crypto currencies have their negative issues, but reading through the links below, one must be PRECISE in analyzing those issues.  If not, then one will confuse the Bitcoin network with the actual bitcoin unit and make mistakes in analysis.  The Bitcoin network has tremendous value.  There are real resources behind it.  Study up and read for yourself.  Do not take my word for it.
 
Remember, the same questions can be asked of physical gold.  Why is gold valuable?  Because, for one thing, it costs time and labor and resources to extract and refine.   The gold coin in one’s hands has value precisely because of this scarcity and effort to produce.  The Erik Voorhees Liberty Blitzkrieg article linked below is a must read.  It is THE KEY analytical tool, and makes for an easy read.  The arguments are compelling.
 
(4) Normalcy bias, and closed mindedness are deathly.  So too is a knee jerk reaction to bitcoin.  Under a Darwinistic view of evolution, it is not the strong that survive, it is those that can ADAPT that survive.  Us here on TFMR, we are too small in number to force our viewpoint on anyone.  Instead, our greatest strengths are our keen insight, and our unbiased intellect which allows us to constantly adapt based on circumstances, and to share this insight in a persuasive manner.  Look at Mr. TF himself.  He told us all to be wary of the Comex for it is rigged.  Yet, he was formerly earning his living from being a Comex trader.  He came around, persuaded us all to listen to him, and the next thing you know, this great site grew and grew.  We should all be so similarly open minded and view new developments with an open mind.
 
(5) Bitcoin is RISKY!!!!!  I am not saying to go out tonight and buy a bunch. Heck, I have not even spent one penny on it, yet.  I am trying to be anonymous, and have listened to tmosley’s suggestions, among others.  I am considering coinbase.com, and perhaps my own offline wallet.  I am also seriously considering doing what this guy says here:
 
 
(6) Getting a wallet set up, getting some bitcoins or other crypto currencies takes time and effort.  It is well worth it, if not strictly for the education it provides in learning about the mechanics of it, and having first hand experience as opposed to hearing others, like in Plato’s cave, discuss a shadow representation of what they think bitcoin really is.
 
(7) There are many merchants out there, who are moving to bitcoin as a means to accept payment.  Bitcoin can be part of an overall means to diversify risk, and prepare for the unknown to come.  
 
(8) TPTB have started condemning bitcoin.  That for me proves it is time to jump in, and pronto.  
 
(9) This crypto currency genie is OUT OF THE BOTTLE.  I believe this is going to be as revolutionary as the original credit card idea in the 1960's.  Back then, it was revolutionary.  Now, EBT cards, ATM and credit cards are the norm, while checks and cash are looked at like the anachronistic relics they are.  Crypto currency is no different than that, EXCEPT, there is no central command structure.  I like that A LOT.  Think about that concept.  That alone is what changed my mind.
 
(10) And for the kicker: I had a long-time client ask me whether he should transact his herbal pharmacological supply business using crypto currencies or not.  I realized that my advice I give him on this point is somber.  I have not given it yet.  I am still thinking about it.  I have an ethical duty to be a zealous advocate.  How can I tell my client NOT TO USE bitcoin, when it is legal, in use all over the world, largely anonymous (if done properly and correctly using on and off line wallets), and could protect him against law enforcement activity or physical robbery from using cash or other currencies to transact?  On the other hand, how can I tell him TO USE bitcoin, when it is so new, so risky (although, relatively not the case given his herbal business), subject to wild fluctuations in FRN exchange rates, and when a bitcoin itself in an off line wallet has ZERO VALUE in and off itself, and only has value as a medium of exchange on the bitcoin network, which could fail, be seized, be monitored by the feds, etc.?
 
Such a conundrum, no?
 
I LOVE conundrums, though, hence my efforts to educate myself and think about this more and more and to post to all you brilliant thinkers.
 
There are the IRS issues, too.  Is bitcoin a currency, or an investment?   Different tax rates apply.  How does one prove a capital expenditure, or a loss, or a gain?  Who in their right mind would even report such a thing?
 
There is the bankruptcy angle, too.  What if one has a stash of bitcoins, and declares bankruptcy.  Are the bitcoins valued as a currency on the schedules, or as an investment, or what?  Further, who would even claim such a thing on their schedules when they are so easy to simply hide?
 
Does this concept not open up a whole industry of bitcoin entrepreneurs? I can envision that a person will offer a service to hold a bankrupt debtor’s assets in the form of bitcoin until after the bankruptcy discharge.  The debtor would convert everything into bitcoins before the bankruptcy filing, transfer them to the holder for a small fee, file the bankruptcy, then wait for discharge before getting the bitcoins back from the holder.  It is seamless, anonymous, and untraceable.  It preserves the debtor's assets, while simultaneously allowing the debtor to eliminate debts owed to unsecured creditors.  After the bankruptcy, the debtor emerges free and clear, with his or her stash intact.  This is massively deflationary for the big banks, and for the whole daisy chain scheme of collateral in general, and the central banks or authorities have NO remedy or way to prevent this from happening.
 
There is not a single bankruptcy attorney I can think of who can figure this one out and prove that the debtor was hiding assets.  There is thus, no effective remedy to prevent massive bankruptcy fraud by any debtor willing to undertake this scheme.  It is akin to the MFGlobal theft.  We all know what happened, but it cannot be proved, and Corzine walked.  The little guys now can do the same thing, risk free.  Why will they NOT do it?
 
A business can do the same thing. Imagine a medium size business, saddled with losses, suddenly just closing shop, filing a chapter 7, and shutting down.  Meanwhile, the owner has secretly converted all of the assets to bitcoin, stashed them away instantly, securely, anonymously, then hires a bankruptcy attorney to file the petition and get a discharge.  Once the discharge happens, the owner can start fresh, but with all his money intact?  The owner would not need to tell his attorney.  The creditors could never find out.  The court would never find out.  All the wealth would be concealed, hidden, beyond the reach of legal process.
 
Has ANY COMMENTATOR analyzed bitcoin from this angle yet?  Not that I know of.  Will the mainstream media report on this?  Heck no!  But, will sharp folks figure it out and take advantage of it?  Of course! 
 
So, how does this prevent the FRN currency users from wanting to ditch the FRN’s?  It does not!
 
This is a game changer.  I say it again.  Just start thinking, and the ideas will flood to mind.
 
The big thinkers out there are already way on top of this.  I am sure there are countless other examples.  
 
See what decentralization of the currency does?  Even if TPTB try to stop it, they cannot.
 
Freedom is emerging.  I ask each of you to carefully think about this new crypto currency paradigm before closing one’s mind totally because of a narrow focus on bitcoin not having any intrinsic value.  
 
I hope to have a robust discussion, and let’s remember, this post will be here forever in the ethernet, so anyone who is strident or cocksure, may want to couch one’s opinions in the event one needs to save face later on.  Just saying . . .
 
Ok, have at it everyone.
 
Bitcoin articles of note:
 
 
 
 
 
 
 
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182 Comments

SMM's picture

Another First!

Another First!

Now off to read what is sure to be an excellent article from an excellent TFMR contributor.

Edit: Boy Oh Boy This Thread Ought to Be Fun!

brent's picture

crypto currency

http://coinmarketcap.com/ gives you some comparisons between the various coins.  The most interesting I'm finding right now is Quarkcoin.  It is still cheap (about 20 cents per coin), has some ongoing incentives for miners (the miners grow the blockchain and verify transactions) so they keep mining, runs 9 passes of 6 cryptographic algorithms for encryption and converges/approves transactions significantly faster than bitcoin.

On December 19th, Bill Still will be on Max Keiser's show - both are pro Quarkcoin so it will get a decent pump out of the gates.

In the real money area, I got a freedom girl and 13 1/10th AGE's delivered today - early Christmas for me!

AND since we are on a site run by a Turd, checkout http://presstokill.com/coins/ for audible tracking of bitcoin transactions.

Loud Noises's picture

What I have learned so far

What I have learned so far from watching bitcoin is that value is assigned by people, not set by nature.  There are many aspects of it which make me uneasy but my grasp of the first point was enough for me to throw some money in the ring at BTC = $200. 

I have since cashed out my initial investment, plus a "free" ounce of Au with profits.  I still have an amount greater than my initial investment in BTC, LTC and PPC.  Not because I believe or don't believe in it.  I'm cautious at best.  But I do see the wave of people that are giving it value and I do believe in riding that wave, when possible.

lamare's picture

What is the value of BitCoin at the end of the great Keynesian E

I wrote an article about BitCoin from the perspective of what it would be worth when the end of the Great Keynesian Experiment finally arrives. How are you going to 'wire'  your gold/silver across the planet when government virtual fiat currency is in a hyper inflationary melt-down?

http://www.tuks.nl/wiki/index.php/Main/BitCoin

And remember Stamp's warning?

"Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits." — SIR JOSIAH STAMP, (President of the Bank of England in the 1920's, the second richest man in Britain).

With the BitCoin system, We, The People can take the "power to create deposits" away from the bankers. And *that* is a game changer, a black swan, indeed.

We are now looking at a new virtual currency, which competes with goverment fiat virtual currencies. One is issued in ever greater quantities and issued "as debt"  bearing interest, the other is issued in limited quantities, but most importantly: it is issued "debt free".

In other words: while virtual government fiat takes away your wealth by design, BitCoin does not.

BitCoin is the bankers' biggest nightmare.

brent's picture

Stefan Molyneux - value of bitcoin

This is more about the value of crypto currencies in my thinking.  It is more looking at the future of what the blockchain can be used for - IPOs without the high cost, stock trading without brokers, wills / trust fund transfers without lawyers.

It seems to me that this is like the Internet before it got popular.  I used to be involved in BBSs on my C-64 and 300 baud modem and thought it was a toy and kept thinking it was all through the Internet ramp up.  I interviewed at Earthlink when it was still small, but turned it down for what I thought was better opportunity.  I don't want to miss that type of opportunity again so I'm going to invest in crypto.  Whether crypto coins are currency or just another pump and dump scheme, I don't really know and only time will tell.  But the power of the distributed blockchain alone seems compelling to me.

And, like the Internet in the early days, BIG money will be made by the companies establishing themselves now to offer services and to ease the way in for individuals and companies that want to use crypto coins and services.  Just think of all that Wall Street / Banker money that will soon be beating the doors down for investing in crypto currency!

I wish I had become a programmer...

Katie Rose's picture

Ramblings..

I read all the way through, got up, made a cup of tea, and still am in the top 10? 

Wow!

CL your reasoning is superb. Bitcoins are a measure of currency not controlled by the EE. I'm thinking that my normalcy bias has kept me from exploring this bitcoin event.

Your writings on bankruptcy were frightening to me. The attitude that 'John Corzine got away with it, why can't I do the same?' is what destroys civilizations from within .  My former roommate was friends with a famous convicted murderer, who murdered in order 'to save lives." When I spoke with her about it, she spoke forcefully: "Two wrongs never make anything right."

There are oh, so many ways to justify thievery. It looks like bitcoins may just make it much easier and less traceable to do so. Yet my experience has shown me that the universe always has a way of balancing things out. We do reap what we sow.

When I saw your title, I thought to myself -

"BLACK SWAN ~ HIGH CBD MARIJUANA."

But after reading, I realized that High CBD Marijuana is a black swan to the established medical, money making/ never get truly healthy, paradigm. Anyone can secretly grow the plants inside a closet with just a grow light. Then they can clone them and spread them around to their friends, who then do the same. It could easily be a runaway and untraceable happening, with the end result being that many, many people are healed. And the PTB who control the FDA/ Pharmaceutical/ $ making health care paradigm are powerless to stop such an underground movement.

I'm hoping there are many more black swans. We need them.

Citizen Doctor's picture

A very thoughtful analysis

Thank you, California Lawyer, for your insights and balanced analysis.

I have followed Bitcoin almost since its beginning, since  I had already been following all alternative forms of money for years before Bitcoin appeared. For example, I was excited about Ryan Fugger's Ripple system, based on a trust network, which has yet to reach critical mass. My main concern with Ripple is that it is not entirely decentralized. So, I was very excited when Bitcoin appeared, as it seemed to overcome all of the previous technological barriers to a truly decentralized currency. It really is a great achievement for humanity, built on several relatively recent breakthroughs in cryptography and computation. It does have the potential to be a black swan, a game changer.

The designer(s) of Bitcoin had a difficult problem: how to include all of the most desirable qualities of money, because some of these qualities are at odds.

For example, any form of money that excels as a store of value tends to be hoarded, taking it out of circulation and thus reducing its effectiveness as a currency or medium of exchange. Additionally, forms of money that store value intrinsically have historically been tangible and as such have become increasingly obsolete as currency in the information age, which really is a new paradigm for humanity. As the Amazons of the world continue to supplant brick and mortar storefronts, metals will be relevant mostly as stores of value and possibly for local commerce.

But the Bitcoin designers must have known how difficult it is to promote a pure currency with no intrinsic value for global use. There are many successful community currencies, such as BerkShares, but they are all centrally controlled. Their success depends on the integrity of the controllers which is recognized by people in their community who know them personally. Beyond the community, there is no more basis for trust than there is in trusting the Federal Reserve System. A globally successful currency would need to be based on something other than trust in a central controller.

The Bitcoin designers decided that what they could trust most on a global scale is greed (for lack of a better word). Bitcoins have no intrinsic value, but they have effective value because of their usefulness as currency, especially a currency outside the control of governments and banks. The designers included a bounty for the production of a Bitcoin, which simultaneously freezes and stores a block of recent transactions. Thus,  Bitcoins have a circumstantial value, enough to motivate miners to provide the significant computational (and energetic) resources needed to produce Bitcoins, which in turn adds to their value by ensuring their scarcity.

The whole scheme is brilliant. Unfortunately, in every compromise situation there is potential for imbalance due to miscalculation or changing circumstance. Bitcoin's value depends mostly on its usefulness as currency which by definition depends on its stability, but by design also depends on its value. There is a circular negative feedback loop at work. Right now, the value attribute of Bitcoin money has greatly exceeded its currency attribute, which was always meant to be its primary attribute. The imbalance will eventually be corrected, one way or another, either by a very widespread and rapid adoption of Bitcoin as a currency, such that it significantly supplants paper fiat money, conventional credit cards and paychecks (this has already been priced in); or there could be a crash in Bitcoin price. The former could actually happen, but obviously there are risks involved.

The ideal situation would be for people to recognize that crypto-currencies and precious metals together offer a decentralized alternative to centrally controlled money, with crypto-currencies excelling as a currencies and precious metals as stores of value. Together they could free us. Unfortunately, human nature often is self-defeating, and excessive greed is undermining this paradigm shift. Bitcoin may survive a crash, and government and banker attempts to control it or destroy it, and competition from other brands, but it may not. My advice is to treat it like any other highly speculative investment (store of value), but also to support it in a cautious, experimental way as a currency, for the benefit of humanity.

I was rational enough to see the great potential of Bitcoin but too rational to imagine how much greed could drive up their price beyond anything sane. I still root for the success of Bitcoins but can't bring myself to invest in them as a store of value; I have been burned before by chasing a mania, and a mania is definitely underway. I privately take some consolation that humanity's greed and tendency toward mania may work in my favor someday when precious metals become the object of their obsession. The astronomical rise in Bitcoin price is an indicator for me that the maniacal tendancies of humanity are as strong as ever.

pointer's picture

I am a long time reader and

I am a long time reader and don't comment all that much.  I bought some Bitcoins a few weeks ago at $400.  Bought some Litecoins at $4.  Unfortunately sold them all after they went up a little bit thinking the price was going to crash.  Oh well.  Could have had a 10 bagger had I waited a few more days.

Anyways - after playing around with transfers, offline paper wallets and exchanges I had a few thousand USD in BTC & LTC stored on a piece of printed out paper, but I didn't feel all that comfortable looking at my print out with a string of random letters and numbers that somehow held my money.  I had quite a time getting my bitcoins off of my paper wallet and had to do it manually by overriding a setting on digital wallet.  As a tech savvy web developer I didn't find it to be too user friendly.  The paper wallet print out made it hard to distinguish between an "l" and "i" and I had to guess multiple times before I got my money off of my paper wallet and transferred to my digital wallet.  Before I went the route of typing in my string of characters I noticed there was a QR code I could scan, but could not find an app on Android or Apple to get this done.  That's why I manually had to override my digital wallet and manually type in my "key".

I bought my coins anonymously through localbitcoins.com with cash and it was a really easy process.  What I did was  tell the person how much I wanted, they contacted me and we both agreed on a place to meet. The localbitcoins site acts as an escrow service where the seller deposits their Bitcoins into the localbitcoins site - we meet and I give him the cash.  Before the deal happens the localbitcoins site gave me a code such as "leiu87" and when I met the person they will release the bitcoins through the localbitcoin site and once done tell me the "leiu87" code so I know the process has been completed and bitcoins deposited into my localbitcoins "wallet".  From there I can transfer the coins to an exchange to trade, to a digital wallet or paper wallet.  This is how I would liquidate bitcoins tax free if I had a substantial amount.  It won't be easy to unload a large lump sum, but most sellers in my area will do deals between 200 - 3000 USD.

Bitcoin transactions seem to take about 20-30 minutes to fully clear.  Litecoin is much quicker.  Peercoin is very fast and so is Primecoin, but lack the infrastructure and features that Bitcoin has.

Currently I don't hold any crypto currency because I don't really have a use for them and don't really see them as a store of value given the invisibility and volatility.  It is fun trading on BTC-e.com because it's a true free market without manipulators and "market makers".  I can make a few hundred a day if I day trade it.  Bitcoin and Litecoin seem to go up and down like clock work lately.

Some of my doubts: After having done quite a bit of research on the New World Order and reading about their goals for an intangible money/cashless society I am a little weary about crypto currencies.  Bitcoin almost fits the mold 100%.  It seems like Bitcoin was introduced by some unknown "Satoshi Nakamoto" and the geeks who were early adopters see bitcoin as a slap in the face of government issued fiat...but is it?  It could be the perfect plan - the hegelian dialectic at work - making "the people" think they built their own currency outside of a centralized system when in fact Bitcoin could be used as the vehicle to get people on board using digital currency only to later have a government issued digital currency.  China could have developed it (Satoshi Nakamoto is an Asian name afterall).

The other thing I think of is the quote by Rothschild "give me control of a nations money supply and I care not who makes it's laws".  The bankers with their endless supply of money have more than enough to buy up enough Bitcoins to essentially control the market.  One of the characteristics of a currency is stability according to Mike Maloney's 'secrets of money' series.  If the bankers want to keep people out of bitcoin then the best thing they can do is swing the price up and down frequently to scare away the average Joe from entering the market thus making Bitcoin more of a commodity rather than a "currency".  While this is going on let the players who trade it work out the bugs, figure out the weaknesses and come up with something better.  Who knows?

The other thing to consider is Bitcoin is created using non-renewable resources such as materials to build the processors and electricity to power them - at least your FRN's can be recycled ;)

A little bit about 2 other coins I've played with.  Peercoin is 3rd behind Bitcoin and Litecoin and is unique because it don't require huge processors to process transactions, but rather uses a method of using existing coins to process transactions.  Primecoin is a spin off of Peercoin and the blockchain uses a method where the processing power is used to find prime numbers so it gives a mathematical contribution, but who has a use for knowing a prime number that is a million characters long?  Some of these "alt-coins" have different coin limits and some have no coin cap limits and allow for a small amount of inflation.

My conclusion is that Bitcoin is a good way to transfer money across borders without fees or taxes.  Bitcoin is still priced in USD and when people get paid in Bitcoin the amount they get is still priced in USD which means your FRN's aren't completely worthless...yet.

Oh - and keep in mind the blockchain that stores all of the transactions and amount that is in your wallet is completely transparent and viewable at blockchain.info - meaning that if anyone finds your wallet address they can see how much has been deposited/withdrawn to your account.  Of course, you can create as many wallet addresses as you want so there is still some anonymity as long as nobody can link your name to a wallet address.

If anyone wants to donate or check my ledger be my guest!

My BTC wallet address:  1FoWJ8bEkq7s6pSDwHSKqZidfRSi7HgEnY

My LTC wallet address:  LU5s3sjTUbJ5M6GW5bCQCzjGFjVE6UoFF1

lamare's picture

The fundamental point about BitCoin vs government fiat

Don't compare BitCoin with gold/silver. Compare it with virtual government fiat currencies.

There is a fundamental difference between crypto currencies and virtual government fiat:

Virtual government fiat is debt based: it is brought into circulation by banks as interest bearing "debt".

Crypto currencies are credit based: they are brought into circulation by a group of people, which you might compare to a virtual "State".

The problem with the "money as debt" paradigm is that *only* the "debt" is brought into circulation, but *not* the "interest". In other words: by design, there is not enough "money" in circulation in order to pay off all debts + interest. That's the fundamental problem with virtual government fiat!  It's a system which "leaks" away wealth stored in the currency by design, because the interest is *not* brought into circulation.

BitCoin is a credit system. ALL currency units are brought into circulation. There is no "interest leak", which is basically the same principle as Lincoln's greenback and the "mefo bill system" which enabled Hitler to re-build Germany after the Weimar debacle:

http://whatreallyhappened.com/WRHARTICLES/LKO.php

Lincoln issued his famous greenbacks to fund the Civil War without enslaving the American people to the 30% interest demanded by the bankers. Lincoln refused to plunge the people of the nation into a debt they could never pay back, and issued his own currency instead.

“... (we) gave the people of this Republic the greatest blessing they have ever had – their own paper money to pay their own debts...”

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

A Mefo bill (sometimes written as MEFO bill), named after the company Metallurgische Forschungsgesellschaft, was a promissory note used for a system of deferred payment to finance the German rearmament, devised by the German Central Bank President, Hjalmar Schacht, in 1934.

Mefo bills followed the scheme for which the Öffa bills were the blueprint.

As Germany was rearming against the terms of the Treaty of Versailles they needed a way to fund rearming without leaving a paper trail; Schacht created this system as a temporary method to fund rearming with only one million Reichsmarks in capital. Schacht has later said that the device "enabled the Reichsbank to lend by a subterfuge to the Government what it normally or legally could not do".

And the essence of the Mefo Bill:

Hjalmar Schacht formed the limited liability company Metallurgische Forschungsgesellschaft, m.b.H., or "MEFO" for short. The company's "mefo bills" served as bills of exchange, convertible into Reichsmark upon demand. MEFO had no actual existence or operations and was solely a balance sheet entity.

Let's re-write this a bit:

"The interweb's "BitCoins" served as bills of exchange, convertible into virtual government fiat on demand trough "exchanges". BitCoin had no actual existence or operations and was solely a balance sheet entity."

Get the point?

Current government fiat is issued as debt.

Greenback's, MEFO's and BitCoins are issued as credit.

"Money as debt" sucks wealth away from the People and transfers it to the bankers in a negative (hyper) inflationary spiral. It rewards "lending"  and "speculation", while sucking away wealth of "producing".

"Money as credit" returns the power of the printing press to We, The People and transfers virtual wealth from the banker's debt system back into the owners of the credit notes, aka "BitCoins" in a positive, deflationary spiral. It rewards "saving" and "producing".

So, what is the value of a global credit-based currency which deprives the bankers of their power?

In other words: let's all bet one dollar that this internet-based credit based system will make the bankers poor:

SS121's picture

Bitcoin from a Silver perspective

Bitcoin is most likely the demo for what the owners of the World Fiat Currency system hope will soon be a Single, Official, "Gold"sortabacked/related’ish’ Digital, World, Currency.  ( The next generation issuance of money that isn't)

(Remember-  Only Silver and Gold are Money)

The Banker's World Fiat Currency system is failing as Silver and Gold continue to return to their world Monetary role. 

Bitcoin, or whatever it eventually morphs into, will be the "last hurrah" for this dying mess.  It's being covertly marketed as 'edgy'.. "outside the system",  "go with Bitcoin and really stick it to the bankers" etc etc..  (You definitely don't want to quit stackin' and get caught drinking that Kool-Aid... imo)

The bankers are counting on the institutionalized nature of the public to lead them out of the their current failing currency system and right into the world system's next shiny new digital 'fake money' offering... that they (Yes They) do and will own/control.

Only Silver and Gold are Money

Below is the most recent Vault posted update tracking the Bitcoin promotional campaign- (posted on Monday 2, Dec)

BITCOIN- Last week we saw a steady increase in the promotion of bitcoin. We saw headlines saying that Silicon Valley is really getting into the whole thing, both as an investment and as a new tech area.

We also saw some intro-hype headlines for what was the start of a Gold digital currency.

AND, almost every bitcoin related internet "news" article had well written comments stating that some type of gold backing for the digital currency would just be the bestest thing ever.

Including that stuff from last week, here's what we've seen up until now- 

--we’ve seen the bitcoin price pumped up, (to get bitcoin into the conversation)

--we’ve seen the FED, Dept of Justice(lol), and other agencies officially endorse bitcoin ("we don’t regulate it", "it’s legit" blah blah etc etc)

--we’ve seen the media-proclaimed experts (both MSM and alt.) list bitcoin as an asset worthy of consideration as an alternative to the failing USD

--we’ve seen the bitcoin price show itself as being equal to Gold. (anybody know the date that happened?)

--we’ve seen "gold" start to get mixed into the digital currency promotional narrative

--again, we’ve seen the tech sector’s legitimizing endorsement of the technology, and the concept.

--we’ve seen the London Bros. internet news "comment"ers stir ‘gold’ into the mix.

--we’ve seen the start up of a gold digital currency.

And here we are into December and The London Bros. are rolling forward toward a Single, Official, "Gold"sortabacked/related’ish’ Digital, World, Currency. 

It'll be the grand epic failure exclamation "!" mark at the end of the "World Fiat Currency System Has Failed!" headline,… but that’s where we’re going. . .

What we HAVE NOT yet seen (but will see if they make it that far) ...

--digital currency a common part of the Main St. side of conversations. Main St. is starting to get used to hearing the word ‘Bitcoin’, but that’s about it.

--The big corporate/market use of bitcoin(or other digital currency)

--The conflicts or problems (staged) that will require an Official gov (U.N.?) issued , digital, gold'esque', currency (or will it continue to run as organic even though it’s LB owned?)

---

Will keep watching, but we may never see the complete manifestation of much of this. Why?

Because this is the London Bros. Monetary End-Game strategy, and just like the loser in a game of chess, the loser’s end-game strategy never actually reaches its final objective. But it has stumbled along this far.

Silver is sitting across the table from the London Bros. World Fiat Currency system and Silver’s End-Game objective is to return to it’s role as Money, and that is exactly what it is in the process of doing. And will do.  -END

This info varies from the suppositions of the posted article, but that's how it looks from this perspective.

ivars's picture

Bitcoin seems to be in a

Bitcoin seems to be in a collective cornering attempt. If You own  big share of them and continue to add, price will move up whatever. Market is small, illiquid, and You own bitcoin and it gets delivered when You buy it-there are no futures..i hope.  

At some point it will collapse, but its going longer then expected. Looks similar to gold in 1981.

As to that it has intrinsic value because of mining and storage and verification costs, there can be no doubt at all. As with gold, these tend to increase over time due to increased complexity of calculations and size of bitcoin codes and certification software process. 

The fact there are many digital competing currencies possible does not mean AT ALL that one of them will not end up with 90% market share ( might be bitcoin as well). Such things always happen due to various factors ( first comer advantages, technology standardization and switching costs, etc. ) . See MS OS, Amazon, E-bay, QUERTY keyboard, etc for examples of high market share even in digital time. Also, gold vs.  platinum ...and other potential metals that have completely disappeared/not appeared into monetary sphere. 

So, bitcoin might be it, in terms of digital currencies, but right now its bubbling . But i feel it will maintain reasonable and real value as long as electricity and/or calculation and data storage and transfer possibilities will exist even after the bubble, and compete with gold for sure. There need to be autonomous, like solar battery powered local "weighting and purity  (verification) check" stations. The KEY is to have compatible reference  standard worldwide that would allow to check the reality of offered bitcoin without connection to intranet, then bitcoins can travel in hard disks or flash memories. 

Pseudozero's picture

interesting thoughts.

great topic, great discussion, i would like to firmly second the statement that the article posted on libertyblitzkrieg.com is a must read. i hadn't thought much about the difference between the currency unit itself, and the payment network before, but that article really opened my eyes. just watch fiatleak.com for 5 minutes as you can see the people have spoken/are speaking in favor of crypto's.

to reiterate: it's not btc-vs-gold, that'd be just silly, it's about btc-vs-FRN'S!!!!! and the btc network-vs-western union!!!!, and transparency-vs-bullshit. the metals market is so full of shit i have no idea what my pm holdings are worth, futures, open interest, delivery months, cme/comex/cftc... but the open market in crypto's allows me real-time access to that price-discovery-thing we're all talking about. 

as for value, like anything else it's worth what you can get for it. which is more than i can say for my silver stack lately. i have not, nor will i divest my pm holdings for cryptocurrency, but the few bucks i put into bitcoin earlier this year has done extremely well, and the fact remains that if i bought as much btc, as i did oz's over the same time frame...i'd be a bona-fide millionaire today.  que sera.  

i'd just use it to buy a monster box of gold maples...how bad-ass would that be?

this is the best site on the internet.

thanks turd

Rainforest's picture

The Argument Against Digital "Currencies"

From The Market Ticker

Bitcoin is not a currency – and as long as it lacks the fundamental qualities that define a currency it will not be one.  It is, at best, a digital commodity much like Farmville land or “level ups” for various online games – a series of bits that may have a price to some people, but utterly lacking inherent value.

The mania currently being found in digital commodities is amusing to watch but none of these are in fact “currencies” since they fulfill neither of the primary requirements of same nor either of what I consider to be the two most-important secondary characteristics.

Instead these fads are more akin to tulip bulbs.

In Holland.

In the 1630s.

Entire Article can be found here  http://market-ticker.org/akcs-www?post=226425

SilveryBlue's picture

Disappointed Cal.

"I can envision that a person will offer a service to hold a bankrupt debtor’s assets in the form of bitcoin until after the bankruptcy discharge.  The debtor would convert everything into bitcoins before the bankruptcy filing, transfer them to the holder for a small fee, file the bankruptcy, then wait for discharge before getting the bitcoins back from the holder.  It is seamless, anonymous, and untraceable.  It preserves the debtor's assets, while simultaneously allowing the debtor to eliminate debts owed to unsecured creditors.  After the bankruptcy, the debtor emerges free and clear, with his or her stash intact.  This is massively deflationary for the big banks, and for the whole daisy chain scheme of collateral in general, and the central banks or authorities have NO remedy or way to prevent this from happening."

Bankruptcy comes in waves or so I have observed. The little guys get wiped out first. It would take a while before any of the banks get hurt and if none of the banks have skin in BTC seems like we would only be preying on each other. Perhaps hiding marital assets before a split would be more tasteful?

So if BTC is a new way of transacting and avoiding control by the bankers, what is the gain if it is only used to hide assets and rip people off? Isn't that just setting us up as mini JPM clones?

We spend time here observing the collusion of the banks & the govt and despise how they are not playing by the rules & no one can touch them. As soon as we have the opportunity we are supposed to craft ourselves in their image! Seriously??

Corruption is corruption is corruption.

Pseudozero's picture

It's the network dude

Bitcoin might not be a currency as you define it, but the bitcoin protocol has plenty of value, the fact that I could transfer as much wealth as I want to anywhere on earth without paying a fee is quite valuable. Try leaving the country with gold bars, or cash, or bushels of soybeans and you'll understand the "intrinsic" value of the bitcoin network. We're on the cusp of something big, and cryptos are just another paragraph in the story.

lamare's picture

Re: The Argument Against Digital "Currencies"

You can't compare BitCoin with commodities.

What virtual currencies are is essentially ONE thing and ONE thing only:

BOOK KEEPING

It does not matter what the "value" of the "items" on the "book" are!

What really, really, really matters is in what direction the items on the books flow.

The "book" itself is a ZERO SUM GAME!

With government fiat systems, the items are burdened with "interest". So, the items on the book flow from the "customers" to "the debt issuer" by design. It may look like interest is just a small percentage, but you get interest over interest and thus an exponential process, whereby the value REPRESENTED by the items on the books move from the people to the bankers. After all, it's a zero sum game and the bank ALWAYS wins, because ALL items on the book come with a price: interest.

With BitCoin, NO INTEREST is being charged on the items on "the books" and thus it is really a ZERO SUM game by which one can exchange "value" represented by an item in a book-keeping system WITHOUT any "interest leak".

When you take this all the way down to the fundamentals, then BitCoin is essentially the same thing as current virtual government fiat systems with one BIG difference:

You don't have to pay the 'interest' price which makes you loose to the bankers.

To put it in yet another way: virtual currencies, including government fiat, are nothing but book-keeping systems. They simply register who "owns" how much of the REAL pie.

With virtual government fiat systems, part of the pie is take by the government and the bankers by design. In other words: YOU loose, by definition, by design.

With BitCoin, the pieces of the pie simply move back and forth between different 'account holders'. There's just no 3d party taking away crums of the pie over and over again.

So, there is no question that from the perspective of 'account holders' the BitCoin book-keeping system is vastly superior to the government alternative.

Whether or not you want to call this book-keeping system "real money" is irrelevant. What matters is that virtual government fiat systems are about to go to zero, because there is an alternative system available, whereby the bottom line is that the 'user', the 'account holder', gets more bang for the buck because there is no interest to pay to the banks.

lamare's picture

Re: The Argument Against Digital "Currencies"

oops. sorry, double post.

lamare's picture

To put the Tulip argument in perspective....

Let's consider how well the Dutch fared with this stuff after the initial "value" was a bit over-estimated:

http://www.dutchagrofood.com/english/horticulture/facts-figures/

  • n 2011, total horticultural production amounted to €8.6 billion. Exports (including re-exports) amounted to €16.2 billion. Horticulture accounts for 39 percent of Dutch agricultural production. The share of horticulture in the total Dutch exports in 2010 was 4% (share of agricultural exports 34%).
  • The Netherlands has an exceptionally large share of the world trade in horticultural products, at 24%. In trade in floricultural products worldwide, the Netherlands is dominant with a share of 50%. In bulbs, the share is even 80%.
  • The Dutch produce 4.32 billion tulip bulbs each year, some 53% of which (2.3 billion) are grown into cut flowers. Of these, 1.3 billion (or 57%) are sold in the Netherlands as cut flowers and the remainder is exported: 630 million bulbs in Europe and 370 million outside of Europe.
  • For the fourth year in a row, the Netherlands is the world’s biggest exporter (in value) of fresh vegetables. The Netherlands exported 4.6 billion kilos of vegetables in 2010, with a market value of € 4.2 billion. A little-know fact is that the Netherlands is the world’s top producer of onions.
  • The Dutch are the world’s largest exporter of seeds: the exports of seeds amounted to € 1.5 billion, growing 5% each year.
  • Of the approximately 1,800 new plant varieties that enter the European market each year, 65 per cent originate in the Netherlands. In addition, Dutch breeders account for more than 40% of all applications for community plant variety rights.
  • The world’s largest auction company for cut flowers and plants is Dutch. It has 4,100 employees and sales of about €4 billion in 2010. Each day it sells 34.5 million flowers and 2.3 million plants and conducts 120,000 transactions using 46 clocks.

In other words: some 250 years after the so-called "disaster", the descendants of the "first movers"  still account for about 80% of the global tulip market....

dgstage's picture

This is worth watching

Economic Collapse March 2014!! (Derivative Meltdown for the New World Order)

Economic Collapse March 2014!! (Derivative Meltdown for the New World Order

AlienEyes's picture

Include Me Out of Bitcoin's

Call me “old fashioned”, but (or possibly “butt”)..... unless I am mistaken :
 
1) Bitcoins have no (zero, zilch, nada) intrinsic value whatsoever.
 
2) The difference between bitcoins and fiat is that fiat is visible and without intrinsic value while bitcoins are invisible, undetectable and without intrinsic value.
 
3) Fiat can be used to legally settle debt. Not so bitcoins unless both parties agree. However, if you purchase a house or new car with bitcoins, you are in deep sh!t when you try to record the deed or title. You will shortly thereafter get a letter from the IRS inquiring as to what you used as money. They will assume you are a drug dealer or a Mafia member or terrorist or a tax dodger and it will be up to you to prove otherwise.
 
4) Bitcoins cannot be converted to $USD’s without fear of being asked by some bug-eyed IRS bean-counter, “Where did this money come from?”
 
5) As far as I know, “A fool and his money are soon parted” is still valid.
 
6) Bitcoins and also much fiat are exactly one EMP away from non-existence.
 
7) Bitcoins are really no more than an invisible fiat for geeks. Geeks suffering from both greed and a financial death-wish.
Pseudozero's picture

alien eyes

1. bitcoins are opening a long-overdue dialogue on the nature of money/currency/wealth/value, and thus are worth at least as much as a few minutes of your time. people never listened to me when i spoke of money-vs-currency with silver as the example...even with 000's of years of history and a few pre-67 coins in my hand. tell them you own some btc...they're all ears...that's worth something. (plus $1000+)

2. there are very many differences between btc and fiat. not least of which is the shadow system by which fiat is counted/stored and leveraged, the sovereign nature of most curencies relative to each other. and the fractional reserve nature of our banks. nevermind the inflationary question. no there's more difference than similarities IMHO.

3. sounds just like your describing CASH here. enough said.

4. localbitcoins.com is as good as the lcs in any city around the world. you want conversion...i could sell 5 bitcoins for any nations currency much easier than 5 oz's of gold. in fact i wouldn't have to leave my seat.

5. no argument here, make the wrong move at the wrong time and you'll get wiped out, no matter what asset class you're dealing with.

6. if that sci-fi shit actually happens...then all bets are off and all money/currency/metals/crypto's are each worth less than your next meal.

7. if not for geeks you'd be waiting 45 mins to upload your comment via a 14.4kbps modem...actually you'd be faxing turd for his charts...actually you'd be farming.

you can choose to ignore btc if you like, it's going to continue to make fortunes for it's early adopters, panic the bankers, allow for the free movement of wealth, and fly-by the noses of the non-believers.

nobody says to bet the farm on it. but the payment network itself IS changing the world.

Groaner's picture

Uncle Benny and his comrades are salivating at bit coin

Yes they are trying to figure out how to destroy that system. No way will they allow it to compete with their crapola fiat. Its such a great idea to be free from the monopoly and manipulation of fiat. But the crooks I am sure are in the works of crashing that system.

I think we are very close to the bottom in the metals.. Something has got to give soon.

Urban Roman's picture

The Dollar is a lot like Bitcoin

It is traded electronically, mostly.

Except:

  • there is only one miner;
  • the 'difficulty' is zero;
  • it uses weak or no crypto;
  • there is no limit to the quantity issued.

Come to think of it, it isn't. Nevermind.

Groaner's picture

Business as usual

smash down before the jobs report.. then no matter what the report is, gold will be smashed at 8:30 tomorrow too.
Nothing to see here kids., keep moving.
why the short covering yesterday? duhhh

Pseudozero's picture

another angle

just to further the train of  thought from california lawyer i came across this:

http://www.coindesk.com/divorcee-hide-assets-bitcoins/

yes, corruption is corruption, cheating is cheating, lying is lying...etc...

the only real difference between a skill-saw and a murder weapon is INTENT. people are assholes regardless of the tools at their disposal.

Hammer's picture

Well China just banned

Well China just banned financial companies from accepting it 

http://www.zerohedge.com/news/2013-12-05/bitcoin-tumbles-after-china-central-bank-bans-financial-companies-using-digital-curr

 
 

The Chinese regulators noted three main risks. First, they said Bitcoin was an unsafe investment because the amount in circulation is small and can be easily controlled by speculators, making it highly volatile.

Second, because it is a largely anonymous product with few controls on it, they said that Bitcoin makes money laundering easy and can be used to support terrorism.

Third, they said there was a risk that it could be used by criminal organisations, noting that Bitcoin had been used internationally for the purchase of drugs and weapons.

“We have clearly stipulated that at the present moment all financial institutions and payment institutions cannot develop any business related to Bitcoin,” the central bank said. The regulators said that any websites serving as platforms for Bitcoin transactions would have to provide detailed information about their users and report any suspicious activity.

The central bank said it would continue to monitor Bitcoin trends and risks, adding that it would also focus on educating the public. “We will guide people to correctly understand the concept of a currency as well as investment theory,” it said.

silver66's picture

Is it credit money?

needed a catchy title so I  could post this.

Hope everyone stacks till it hurts

Silver66

AlienEyes's picture

pseudozero

You sound as if you are a "bit-believer".

I have no doubt that the bitcoin is growing, no doubt propelled by many of the same people with the same mindset that voted for "change" in the last two elections. From the fact that bitcoin has never had any actual value except the blind faith of foolish people, personally, I have no time for self-delusion. I'll leave that to the goberment.

opticsguy's picture

Uncle Benny would probably prefer us using gold instead of BTC

as a store of wealth.

BTC helps educate people about wealth preservation and the pitfalls of fiat, possibly creating more interest in PMs after BTC fails or it outlawed or something else happens to it.

If I were Benny, I would prefer gold over BTC because the Feds can always nationalize the mines and control production of more gold.

Pseudozero's picture

silver66

are you suggesting that pm's are worth acquiring debt to obtain?

(sarc)

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