When will otherwise intelligent people learn the folly of unproven, exotic financial instruments?
We may see a quick end to this bitcoin insanity as the world's largest exchange for trading bitcoin currency collapsed, cascading into a traumatic sell-off.
This should have come as no great surprise. What makes bitcoins so appealing to certain people -- anonymity, utter lack of regulation, speedy non-reversible transactions - makes them about as chaotic and unstable as one of those elements at the end of the Periodic Table, lasting a few milliseconds. More ephemeral ether for some young - and not-so-young adults - who apparently didn't learn the lessons from exotic derivatives & other financial hocus-pocus before the Great Recession.
And how much better is our paper money? Just like Bitcoins, our money is only worth the "faith" we place upon the currency. Our paper money was once worth something...when it was backed by silver/gold and one could go to any bank in the U.S. and trade the paper currency (promissory note) for real money (silver/gold coins).
Ron Paul was right...it's time to audit the Federal Reserve and then go back to the gold standard.
Wed, Feb 26, 2014 8:50am
I was awaiting your predictable response. In fact, I welcome it. And here is my rebuttal:
Ultimately, the value of ANY currency - or even a precious metal - is based on demand.
For the forseeable future, the greenback remains in great demand. (I can put it in an envelope, and sent it nearly anywhere in the world, and the recipient can trade it in. In fact, I do that when I send reception reports to radio stations around the world!)
I agree in the universality of precious metals, but even in their case, they have value to the extent that people consider them having value.
If you are shipwrecked on an isolated, unpopulated island - where you can't use your gold or currency for ANYTHING - any food you can find, or materials for shelter - are infinitely more valuable to you at that point than those instruments of a modern monetary system. You can't eat precious metals OR paper currency!
Mike from Delaware
Wed, Feb 26, 2014 8:55am
People are always looking for that get-rich-quick scheme, thus there's a sucker born every minute.
By the way, P.T. Barnum never did say that. Actually, it was said by his competitor David Hannum. Which is an interesting story. Enjoy.
Wed, Feb 26, 2014 9:15am
Mr. Loudell: I get that currency on a deserted island makes gold/silver useless but we are talking about the currency that we (and other nations) use as trade. The "greenback" will remain as a common currency for quite some time into the future, but its true value keeps decreasing. How many nations are currently trying to rid themselves of our "greenbacks" while at the same time buying tons of gold/silver?
If the economy collapses... everything changes, and a pound of gold is worth a loaf of bread if you and your family are starving. So, when the collapse does come, it's good to have a hobby like mine... home-brewing beer...you can barter quite a few "necessities" with beer ;)
Wed, Feb 26, 2014 9:23am
True, Mr. Grey (and I've blogged about it)... some countries have contemplated an alternative currency, or a "basket of currencies".
For a while, the Euro appeared to be an alternative, but the Eurozone is troubled.
As long as the Chinese keep devaluing their currency - for trade reasons, contributing to our trade deficits - the Yuan is no realistic alternative to the U.S. Dollar. In fact, U.S. international trade suffers because the U.S. Dollar is worth too much.
But I won't dispute the value of your "hobby", not to mention home vegetable gardens, etc.
By the way, I just don't think returning to the Gold Standard is plausible.
For example, if the United States were chasing gold to back every greenback in circulation, that would create an incredible global demand for gold, which would make gold prices rise exponentially, which would make it all the more expensive to chase down that gold.
Or if the United States tried just to raise the price of gold - in dollar terms - one suspects that would be tremendously destabilizing and undermine the alleged benefits of returning to the Gold Standard.
Just like with a flat tax, I think there's a reason some (not all) wealthy people talk about returning to the Gold Standard.
Another caveat: Not only is it difficult to believe the United States would ever take that fateful step, but given international impasses on so many matters, would it be at all realistic to expect the rest of the world to return to the Gold Standard, even if the U.S. did so? If the U.S. took the plunge unilaterally, wouldn't that place the U.S. at a further competitive disadvantage? Competing with a devalued Yuan is bad enough!
Wed, Feb 26, 2014 10:13am
Mr. Loudell: I'll concede you are probably right about the implausibility of our country ever returning back to the Gold Standard...do you think that any U.S. president could get the Federal Reserve audited? Maybe a Rand Paul?
Germany has tons of gold stored in the Fed which they want back and our government has refused... now the Germans are claiming it's because the gold is no longer there (i.e. it's been spent/traded already).
Earl - home brewer? Me too. What's you favorite style? Bottle or keg? What do you have aging now?
Wed, Feb 26, 2014 11:29am
Hey dunmore: I'm just a newbie at brewing...so not up to keg/mini-kegs or a Kegerator (though some of my friends are, and some even grow their own hops)...just bottles for me. I Have a Thomas Coopers IPA aging now.
How about you?..and (if you bottle) are you using glass or plastic bottles?
Wed, Feb 26, 2014 12:08pm
Earl, I've been brewing by myself for about 10 years now, and with a friend for over 30. I do all-grain brewing, mostly IPAs and pale ales. I also do a couple of Belgian batches a year.
I mostly keg now. I build a 2-keg kegerator a few years ago from a Sanyo refrigerator. I bottle my hard cider and the occasional beer when I want to give it as gifts. I always use glass bottles.
I do grow some hops, although I only get enough for one batch of beer.
I highly recommend home-brewing for anyone who likes good beer and has some time and space. It's a great way to learn about what goes into what you eat and drink, plus it's very social - you'll find your friends are always up for a brewing and tasting session.
Right now I have a oat ale (hopped with Amarillo hops) on tap, along with a rye IPA. Waiting in the wings is a Citra IPA.
Wed, Feb 26, 2014 8:21pm
If you're looking for bitcoin schemes, one need look no further than the U.S. Treasury or Wall Street.
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