There are conflicting stories among Bitcoins’ supporters about why a Japanese programmer or team of Japanese programmers, who are known by a pseudonym Satoshi Nakamoto, developed the original idea for the Bitcoins software.
The primary justification for Bitcoins among libertarians is the prediction that Bitcoins will become an alternative currency to all existing central bank currencies. Bitcoins are seen as a first-stage revolt against central bank money.
In this essay, I’m going to make a series of arguments. I’m going to tell you in advance what my arguments are. You can then judge whether or not I have been successful in presenting my case. Here are my arguments.
First, the primary benefit that libertarian promoters of Bitcoins offer in justification of their theory that Bitcoins will become an alternative currency is this one: Bitcoins offer privacy. Paper money today offers a much greater degree of privacy than Bitcoins do, plus a whole series of other major advantages that Bitcoins do not offer. Second, money is the most marketable asset. Paper money is vastly more marketable than Bitcoins.
Third, gold-based and silver-based digital currencies are more likely to become future world digital currency than Bitcoins.
Fourth, most Americans do not want privacy in their exchanges. This is manifested by the fact that they do not use the form of currency in which privacy is easily available and totally legal: greenbacks.
I will compare the advantages of Bitcoins with the advantages of greenbacks. I will then compare the disadvantages of Bitcoins with the disadvantages of greenbacks. Then I will compare Bitcoins to digital currencies that are backed by either gold or silver.
Here, I discuss the price of buying privacy.
Greenbacks. There are three ways that anyone with a bank account in the United States can obtain greenbacks. First, he can walk into his bank, fill out a request for greenbacks, hand it to the teller, and the teller will hand over a specific quantity of paper money. Second, he can drive up to a booth in the bank’s parking lot, put a check into a tube, put the tube back into a reception box, and within a couple of minutes, the tube will come back with a specified amount of paper money in it. Third, an individual can walk over to an ATM machine, specify how many dollars he wants, run his bankcard through the machine, and will immediately receive his paper money.
All three approaches raise no eyebrows. All three approaches are quite conventional. The banks promote the use of ATMs, because they eliminate tellers’ labor time. ATMs are available in many locations. There is nothing controversial about them. They are easy to use, and most people who have a bank account know exactly how to use them. There is almost no learning curve involved.
As soon as an individual has paper money, he has total privacy. He also has total control over his money. He knows where the money is. He decides where the money will go. He decides how long he will keep the money. He can of course be robbed, but this is relatively rare.
(For the rest of my article, click the link.)
I'm confused I thought greenbacks were issued by Lincoln to obtain financing for the civil war. Greenbacks differ from dollars in that they are issued by the government (not the federal reserve) and unlike dollars issued by the federal reserve carry no interest.
Greenbacks are just slang for US Dollars in many parts of the country.
This is what, the fifth or sixth article North has written slamming Bitcoins in as many days? He's really on a hobby-horse, now, isn't he? This is REALLY reminding me of the Y2K hysteria he drummed up.
If it happens over the web (bitcoins, gold transactions), It's traceable and the government will burst your bubble. Read my lips…..
OK … I read the article. I would point out that today … right now … there are several places that WILL NOT accept cash money (greenbacks). The item we call money today is merely "currency" and it is being printed (or "created") at an alarming rate without regard to base value. The Government has been making it more and more difficult for anyone to "hide away" this "money". The currencies now available worldwide are no longer backed by anything of "real" value. There is a lot of conversation as to converting the currency in the USA to "digital only" and doing away with "greenbacks" aka Our Currency, the "Dollar". There are several countries, now including the USA, that are actually (or are) looking to get into IRA's, 401k's and other "Retirement Funds" for new taxes or outright takeover. Countries everywhere are falsely manipulating all currencies. Former "Tax Havens" and "Secret Accounts" are being voided (made available to Government oversight) all over the world. Gold and Silver (among other precious metals) are subject to confiscation or regulation (as has happened a few times in the USA and other countries). Currencies worldwide are (and have been) deflating at a shocking rate of speed since … they were created.
If any of the above are true then where does one put one's faith in a stable "currency"? Bitcoin might have drawbacks, might have some problems, might turn out to be worthless in the long run but … all of the currencies now available have all the same problems plus are subject to confiscation, taxation, deflation, manipulation and possibly obsolescence on an ongoing and regular basis.
Bitcoin should be looked at like any other tradable commodity. It will have its ups and downs. It does have some measure of volatility and there is the possibility that it could wind up having no trading value at some time however … the exct same thing can be said for all of today's currencies. The same can be said for Stocks, Bonds, Stamps, Playing Cards or any other Collectable Items used for "Investment Purposes".
Bitcoin's Avantage is that they are not responsive to Governments. They are not tracable. Unless you tell someone you have them, no-one knows that you do have them. In the curerent situation of today's finances on a Local, Governmental or Worldwide basis, there is more reason to believe that these offer some way to "Keep What is Yours" when compared to any other medium.
Are they "Safe"? Are they "100% Secure"? No. Do you believe those pieces of paper in your pocket represent Safety or Security?
Given the options available today, I cannot see that Bitcoin is any worse a medium of exchange than any other currency out there.
The primary benefit of Bitcoin is not privacy, it is international remittances, person to person transfers of any size, near zero transmission fees and commerce on the internet without the possibility of payer fraud. You are not thinking deeply enough about the potential of this new technology.
This is the first time that a currency has been possible on the internet that cannot be spent twice. This fact has gone completely over your head, as it does most people’s heads. It doesn’t matter what the public thinks; the only thing that matters is that business men can build on top of this innovation freely and will do so. This will change the way people pay for everything online, and will completely replace the credit card for online transactions. Even you, Gary North, accept Bitcoin right now, without even knowing it.
Paper money is not money. You should know this. The Federal Reserve Dollar is a Ponzi Scheme in the true definition of that much over used phrase.
Paper money is vastly more marketable than Bitcoins TODAY, but once the spread of Bitcoin wallets goes viral, Bitcoin will be vastly more marketable than any paper money has ever been. Every mobile phone, laptop and ecommerce site in the entire world will be able to send and receive it, without the permission or aid from a third party. This is a true revolution in online payments, and there is no question about that fact.
Gold and silver based digital currencies, like Gold Money, will never succeed, because they have third party risk attached to them, and the gold stock can be confiscated at any time by the State. Bitcoin can be exchanged for gold or any other commodity, and it might be true in the future that gold is what Bitcoin’s value is derived from by agreement of the market. You cannot have a centralized gold backed currency without the permission of the State; that is the Achilles heel of that concept.
You say that most Americans do not want privacy in their exchanges, but this is a Straw Man argument, since privacy is not the primary goal or feature of Bitcoin.
What is clearly manifested in the American man in the streets rejection of cash is that they like their money to be a part of their digital lives. Bitcoin is a perfect fit for this use, as it is unencumbered by the State and its anti human restrictions and State imposed limitations.
I've been watching the recent furor that is being "suddenly" created by Bitcoin. I think that all the people and Government Agencies that have begun to make comments on it are actually a commentary about how well its doing and how bright its future is.
I believe these people (including Gary) are having their feathers ruffled by the idea that there is now a type of exchange medium that is NOT beholden to the Central Banks, the Government(s) or any Other Monetary Management System. All the "3rd Person" entities who have been skimming the Monetary Marketplace see themselves being pushed aside and cannot figure how to get their percentage out of this new system.
Governments, Banks & Other Money Management Systems take their income from their "investors" the fact that on occassion there is something left over for the "investor" is more accidental than deliberate. In Bitcoin there is no (from the Godfather Film) "Way for me to wet my beak" … ie. take what they see as "their cut" before you get yours.
From his conclusion: "Fifth, Bitcoins offer no advantage over gold or silver digital currencies."
You know, I agree…IF IT WAS POSSIBLE TO HAVE A GOLD OR SILVER DIGITAL CURRENCY!
Dr. North, will you please tell me where I can invest in a gold or silver digital currency? And when you do that, can you make any likely predictions on how long the US Government will allow said currency to exist? (You do know they've taken down multiple ones already, right?)
So right! Federal Reserve and Federal Government vastly different.
In the 1860s, the U.S. created over $400 million in legal tender to finance its war against itself. These were called greenbacks simply because the backs were printed in green. The government backed this currency and stated that it could be used to pay back public and private debts. The value fluctuated according to the North's success or failure at certain stages in the war. Confederate dollars, also issued during the 1800s, followed the fate of the confederacy and were worthless by the end of the war.
See The Creature of Jekyll Island
The premise that bitcoins have only an advantage of transaction privacy seems mistaken. Bitcoins also cannot be abused by over-issue because they are ultimately limited in total number and even then, difficult to produce (to "mine"). To the extent they will be perpetually accepted in the market, they also have the theoretical capacity to provide long-term store of value.
It is true that bitcoins are not "backed" by any tangible commodity (e.g. gold or silver) or by any government taxing authority (like national currencies). That said, trade currencies locally produced for exchange of goods and services are also backed by "nothing" apart from mutual agreement by local people to accept them for transaction within the community. The market will often produce some form of alternative currency as a unit of account for trade if the "official" currency remains in chronic short supply or is deemed worthless owing to unlimited supply.
Authorities may decree by fiat what must be accepted as "currency", but private markets alone define what is "money" — i.e. the most readily accepted (that is, most "liquid") and widely circulated good representing portable wealth. In prisons, this may be cigarettes and chocolates. In a remote island culture, it may be cowrie shells. In pastoral societies, it has often been cattle or sheep.
Different denominations of money may also be more favored in one market vs. another owing to practical differences in risk value for participants in that market. International transactions are simple and secure using bitcoin transfer compared to any currency transfer by bank wire or physical courier. Bitcoins bear virtually no country risk because forbidden transactions would not be practically enforceable under any international regime of currency controls.
Since all "official" currencies eventually die of over-printing, bitcoins may be the first to overcome that fate.
Bitcoin proponents continue to ignore the regular theft (with no recourse) of bitcoins from their owners.
We'll never know if Sheep really get sheared via faulty encryption or if it just stole from all those foolish enough to trust it?
GREENBACKS AS I KNOW HAVE ALWAYS MEANT THE DOLLAR, OR PAPER CURREANCY.
The problem with backing any currency with a commodity is when small groups form cartels to corner the market on said commodity, so they can create artificial shortages (think Enron) to drive the price up and make a killing. Ideally, the currency should not have any intrinsic value (like gold or silver) so it would not encourage hoarding.
It should be an agreed-upon medium of exchange tied to the productivity of the population (GDP). As the GDP rises, more of the medium is created to handle the free exchange of goods among people. If GDP falls, then the surplus could be taxed back at the end of the fiscal year, so as to avoid hyper-inflation caused by too much currency chasing fewer goods produced.
Trouble is, mankind is always going to have individuals who conspire together against the public good to rip off their fellow men.
Paper money proponents continue to ignore the regular theft (with no recourse) of the US Dollar by inflation, whilst ignoring what Bitcoin actually is, using schoolboy level Straw Man arguments to denounce it.
They bandy about words like "encryption" to try and appear savvy, but this only exposes them more as completely clueless.
Yep, I used the word 'encryption' because Sheep blamed a flaw in their use of it for the loss of ALL their users' bitcoins.
Again, I know of no way to verify Sheep's story versus the likelihood that the Sheep owners simply decided to expropriate all the bitcoins of those users foolish enough to trust it.
But if you want to get actual cash (not drugs) in exchange for bitcoins you've got to use someone like Sheep – so who do you trust, and why?
Yesterday I received a gold coin in the mail from a seller located in the USA. I’m in Norway. My bank account is in Norwegian kroner. I used a fraction of a Bitcoin to pay for the gold coin.
Can you think of a better way I could pay for the gold? Buying greenbacks for Norwegian Kroner and mailing them to the seller in the US would be inconvenient, slow and risky. Using VISA would add a huge fee for their credit card fraud risk on top of the fee for paying in US Dollars from a Norwegian Kroner VISA card.
My point isn’t that Bitcoins aren’t in a bubble. They are. My point is that Bitcoins have features that paper money is missing. They also have features “bail in” bank accounts are missing.
I DEFY you to name anyplace that accepts bitcoins but not cash.
If you believe bitcoins can't be 'overprinted', you are naive. You have ONLY the word of ANONYMOUS programmers that there is ANY limit on the creation of bitcoins.