Wednesday, July 05, 2017

Bitcoin Is A Revolt Of Savers

Bitcoin has been making headlines recently as have all cryptocurrencies. The rise in values will always do that for a commodity of any sort. For the entire bloc of them to rise would garner media attention. Likewise, their price drops are reported. Moldbug wrote how Bitcoin could be killed instantly by USG, which still is true but has not happened yet. Is there an underlying cause that could give Bitcoin hope and potentially foreign help? Yes. Bitcoin is a revolt of savers.

Not just savers but holders of capital. Not just holders of dollars and capital but sovereigns seeing the dollar erode and USG continue to print. Gold is a way out, and it is easy to see those with dollars using them to buy gold. China continues to buy gold hand over fist. The interests high and low can align because you the small bitcoin user are the low but are part of the revolt.

The alignment is seeking the monetary trait of a store of value. Money is a medium of exchange, a unit of account but also a store of value. England is a good example where the pound held good value for over 100 years, collapsing after WW1 and the creation of the welfare state. Similar charts could hold for the Autro-Hungarian Empire, and this was something Stefan Zweig commented on as the comfort of the certainty with the currency. It allowed for long term planning and even acted as an incentive for saving as a dollar earned and saved could be counted on to be a dollar in later years. This is the savers' temperament.

This is not how our economy is set up. We are a consumer spending driven economy. Keynesians won every academic argument and then served the purpose of justifying forever pushing a consumer demand centric economy. We are so driven by this that our economy switched over from the productive focused industry side to a debt fueled economy that funded the marginal borrower to spur on activity because GDP is all that mattered. This applies to both left and nominal right. They ate the seed corn with the debt that was loaded onto corporations, households, home buyers, consumers and even students.

Added to this are FED and other central bank policies that continuously inject more money into the system. This continuous injection destroys one's capital by diluting it. Inflation is taxation yes, but it slaps an expiration date on your savings. It is not the frantic management of cash that hyperinflation causes, and please read about the 1980s and 1990s experience in Latin America for how to handle daily double digit rates of inflation. The subtle erosion is continuous and small, or not small, but arguably small because the same people eroding your capital are the ones fiddling with your government inflation statistics.

Savings becomes a threat. A bloc of savers can avoid the debt game. Savers can accumulate capital to then use as they see fit to challenge the regime. Savers can also invest their capital without the debt gatekeepers saying yea or nay to their desires. The debt game means that someone makes a decision about assigning you money to deploy. When you do not need leverage, you do not need their say in going forward or not. He who receives credit first also has the advantage for scarfing up assets, so the first receivers will be approved of by the system's men at the important nodes.

Bitcoin is not perfect. It can defy the system's current set up. Bitcoin can be endlessly split out so that slivers are used for paying but the potential for saying 1 Bicoin is a Bitcoin is a Bitcoin is there. Our financial infrastructure is geared towards using money purely as a medium of exchange and while not a majority or even a large minority, the saver bloc is out there. Like so many other tech processes that route around the current system, Bitcoin is this for money. This saver bloc can revolt and Bitcoin can be its means to achieving that capital accumulation and protection. Dedicated minorities with help from up high can create change or build new ecosystems. Bitcoin did not die in 2013. The rebellion lives on.


Kgaard said...

Hi ... I would approach this a bit differently. I was just thinking about this question of why bitcoin keeps RISING in value. That's not the mark of a store of value. If any regular fiat currency were to soar like this it would implode whatever economy was attached to it.

Which brings me to my points. a) Bitcoin is rising in value because there is no strong correlation between demand for the currency and new supply of bitcoins created. For years I thought that would be a fatal flaw. But it turns out not to be -- because nobody is BORROWING in Bitcoin. If they were they'd be destroyed.

b) Bitcoin's utility is as a cost-free transaction mechanism and a means of anonymity. These are hugely valuable. That's why bitcoin's value is going up: The appeal of those two aspects is creating demand greater than new supply.

c) The ideal electronic currency would find a way to balance supply and demand of the currency. Problem then is ... you might need something like a central bank to issue new liquidity and reel in excess liquidity. If loans are outstanding in the currency you have the exact same risk as 1929 and its re-enactment, 2008: Bank implosions.

Portlander said...

Heh. I'd been thinking of hitting you up for a Bit Coin/Crypto Currency post.

If one stipulates an alternative store of value is a necessary prerequisite to hyperinflation, well, Crypto Currencies may well be the first dog w/o fleas when it comes to the USD and its cohort of fiat competitors in their seeming race-to-the-bottom.

The problem I see with Bit Coin, and I'm not an expert so admit to the possibility I'm mistaken, is that it would be trivially possible for a state actor to take down the Bit Coin peer-network of ledgers. With considerably more money and motivation, they could even fork the ledgers and create immediate havoc with regard to who owns which coins.

Crypto Currencies are the pinnacle of human's faith in society & trust in abstractions. Fiat at least has guns and threat of force backing it. If a state-actor can break the trust in a crypto currency said currency becomes an instant 0.

Portlander said...

means of anonymity

Common mis-conception. It's, at best, pseudo-anonymity.

In fact, it can't be 100% anonymous because the whole point of the ledger is that ownership, and OWNERSHIP TRANSFERS, is 100% forever reproducible. One mistake using the wrong wallet to pay your electric bill, and you've forever doxed yourself and everything you've ever purchased via that wallet. Buy some hard good that you have shipped to your home, you've doxed yourself and every purchase you've ever made from that wallet. Few people know this.

nobody is BORROWING in Bitcoin

True that, and an aspect I hadn't considered. Could that be its Achilles Heal to supplanting fiat currencies?

need something like a central bank to issue new liquidity and reel in excess liquidity

Um, wow.

Anonymous said...

Agree it's revolt of the savers. The central problem is USG could destroy / expropriate it all overnight if they wanted to (as Moldbug pointed out). Why should USG do that? Same reason the Soviets liquidated the kulaks. They'd probably frame it as an anti-corruption measure rather than straight-up gibs / class hatred / tall poppy syndrome. (Can't you just hear Hillary talking about the illicit uses to which Bitcoin can be put? Worse than cash, you know.)

Anonymous said...

Moldbug's post on bitcoin is complete crap. You can't prosecute someone for holding bitcoin on money laundering anymore than you can prosecute some schlub holding cash for money laundering. No idea what people see in retarded posts like that. Moldbug is a dipshit.

To the extent that the USG could crack down on bitcoin, it would be with regulatory pressure, making it as painful as possible to convert bitcoin to dollars, or just taking out high profile exchanges with cyber tactics.

The reason the USG hasn't, and won't, take down bitcoin is obvious.

Bitcoin is useful for crooks, and the USG elite are full of crooks. They're obviously using it. Remember that Israeli jew calling in the phony bomb threats? Rumors abound that *somebody* paid him in bitcoin. Faster than a briefcase full of cash, less paper trail than a phony NGO. Bitcoin is a crook's dream. Any crook. That includes globalist elites.

Portlander said...

You can't prosecute someone for holding bitcoin on money laundering anymore than you can prosecute some schlub holding cash for money laundering.

Who retard this is? Nigga never heard of civil asset forfeiture... smh

Anonymous said...

civil asset forfeiture requires suspicion of a crime. Moldbug's idea that just holding bitcoin is grounds for asset seizure for money laundering is retarded and akin to grabbing cash from everyday nobodies on the grounds that cash is used in drug deals.

Kgaard said...

"Could the fact that nobody's borrowing in crypto be its achilles heel for supplanting fiat?"

I think so. If you borrow in fiat, the government behind the currency has a strong vested interest in not having the value of the currency leap or plunge. But the creator of a crypto probably has a vested interest in the value of the currency rising. That's an issue.

If you're gonna have a crypto that promises "stability" the question then is "stability versus what?" Would need to be gold or a basket of fiat currencies. Other issues would ensue from that promise of course ...

grey enlightenment said...

moldbug is smart but his bitcoin post missed the mark. been long since 2013. Why won't the govt. try to shut it down? Because that's not the way the US govt. works. Unless it's overtly illegal, instead they would rather tax and regulate. Trying to shut down bitcoin would create a chilling effect and hurt America's entrepreneurial spirit. Bitcoin may actually make it easier to catch certain online criminals by catching them when they trying to convert the coins into cash

Doragoon said...

"stability versus what?"

I think this gets to the heart of the divide between those who believe in the invisible hand, and those who believe in centralized management.

First an analogy, which boat would you say is more stable, one which is kept upright by ballast low down in it's hold, or one that is kept upright by a men carrying ballast back and forth on top of the deck to compensate for each wave. I'm sure theoretically, with modern robotics and sensors, you could create an actively managed system that would keep the boat much more still than the one with the static ballast being tossed around and rolling with every wave. But the consequences for a mistake are much more catastrophic for the actively managed (that which has the power to save the system has the power to destroy the system).

Which sense do we mean when we say "stability"? Is it the ability to remain more still, or is it the ability to correct for mistakes without completely falling apart.

Active management in currency creates one privileged set of "first receivers". Passive management could still have first receivers, but since there is no one central management, other people could in theory create other new groups of first receivers, which would itself create more passive stability.

As i understand bitcoin, it's "stability" is only relative to itself over time. The rate at which new bitcoins are generated is (theoretically) constant and known in advance. There is no printing more or printing less in order to create "stability". That sort of active stability would have to be provided by someone such as how J.P.Morgan got a bunch of his friends together in 1907.

Portlander said...

civil asset forfeiture requires suspicion of a crime...

lol gay

Portlander said...

Why everyone so provincial?

No considerations for China or Russia or Iran or N. Korea or Israel (OK, that last one was a joke) taking out BitCoin?