Mt. Gox is gone. Bankrupt. It took $473 million with it. About a million investors listened to the hype about the “untraceable money of the future,” and they turned real money over to some 25-year-old French kid — a programmer who lived in Japan. They gave him real money. He gave them a dream.
Mt. Gox’s founders were going to get rich — “Rich, I tell you! Rich! Hahahaha!” They had a plan. You can read it here.
My mind drifts back to the 1960’s.
Where have all the bitcoins gone, long time passing?
Where have all the bitcoins gone, long time ago?
Where have all the bitcoins gone?
Bad code swallowed every one.
Oh, when will they ever learn?
Oh, when will they . . . ever learn?
Pete Seeger, where are you, now that we need you?
Here is the #1 fact about bitcoins: there are no bitcoins independent of unknown, underfunded “exchanges.” Mt. Gox was such an exchange. It was the biggest one, the most trusted one, the one Americans used.
No one can buy bitcoins that exist as separate entities, the way that a $20 bill does. People who thought they were buying bitcoins from Mt. Gox were not buying bitcoins at all. They were buying Goxcoins.
Never forget this: a chain of payments can be broken at any point along the chain. The payments chain is no stronger than its weakest link.
Think “Mt. Gox.”
First, I now refuse to capitalize bitcoins. That which de-capitalizes its users should not be capitalized. Then there is this: for as long as its defenders do capitalize it, it is not currency. We do not capitalize dollar, yen, or euro, because they are money. We capitalize proprietary brands. We capitalize Charmin. We capitalize Drano. But that which is universally used, we no not capitalize. We capitalize Krugerrand. We do not capitalize gold.
Second, economists do not defend bitcoins as a future worldwide currency. There is no worldwide currency today. Gold once served this purpose. So did silver in the form of Spanish pieces of eight. But nothing else has.
Third, libertarian programmers think bitcoins will become the world’s first digital international currency, a stand-alone monetary system that is separate from commercial banking and central banking, a system where people will be able to buy and sell whatever they want, but without ever accessing a government-regulated bank account. Programmers do not understand either monetary theory or markets. Bitcoins are a dream come true for them, and they have adopted bitcoins as a representative dream.
(For the rest of my article, clink the link.)
Setting aside the drug market, there is still one market where "legal tender" is king – gun shows.
As for legal tender, federal law states "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues." However, the Treasury Department website (treasury.gov) goes on to say that, just because it is legal for you to tender (offer) currency and coins in payment, the intended recipient is not required to accept it.
This is legal mumbo-jumbo, without logic, but it is how, for example, toll roads can require you to have an EZ-Pass, e.g., account and refuse to accept cash.
All most every statement in this article is patently false. I'll start at the top and mention a few and then let readers go through the whole article and research it on their own.
"Here is the #1 fact about bitcoins: there are no bitcoins independent of unknown, underfunded “exchanges.” Mt. Gox was such an exchange. It was the biggest one, the most trusted one, the one Americans used." – The fact is that ALL Bitcoins are independent of exchanges. None of mine were ever associated with an exchange. I have no idea where Gary got this.
"No one can buy bitcoins that exist as separate entities, the way that a $20 bill does. People who thought they were buying bitcoins from Mt. Gox were not buying bitcoins at all. They were buying Goxcoins." – This is more pernicious nonsense. ALL Bitcoins exist as separate entities and can be exchanged between individuals, as can paper money, at will. No middle man needed.
"Never forget this: a chain of payments can be broken at any point along the chain. The payments chain is no stronger than its weakest link." – The chain of payments in Bitcoin is known as the blockchain and it has never been broken and most probably never will. It is the primary feature of Bitcoin. This is just more nonsense.
When you think of Mt. Gox, think of MF Global. MF Global went under but not because wheat and cattle were bogus but because they were crooks. Run all the arguments Gary makes under the same light and you'll see how silly they are.
Gary's first article on the subject this week led me to believe he was badly misinformed. The second led me to suspect he was willfully evading the facts. This article makes me think he is deliberately spreading falsehoods. That is unconscionable. I wish it weren't so but no one can remain that wrong for this long and claim he just didn't know.
I have owned no Bitcoins since the run up to the $1200 high. I sold my gold holdings shortly after the move down from $1900 started. I have no dog in this fight other than facts. For those that think the ongoing correction in Bitcoin (50% to date) is unique I'll remind them of the 70% correction in gold after 1980, and the 60% slide in stocks back in 2008. Lehman went bankrupt but the bond markets survived nicely. The problems in the Bitcoin world are old hat to those of us with memories. PS. Bitcoin was $50 a year ago. Today, after all the noise, it is sitting at $550. How are your gold holdings over that period?
They didn't give him 'real money', but fake federal reserve notes, printed on paper made from ordinary cotton, which you can buy at the grocery store for a few pennies.
Uh….When you sold your bitcoins how were you paid?
True! However they have held their value better than either Gold, Silver or Bitcoin over the last year. I will be moving away from FRN over time.
Another article by Dr. North which demonstrates his incomprehension of Bitcoin.
But it is easy to get significant dollars back out of physical gold holdings compared to bitcoin.
To redeem more than a few thousand dollars worth of bitcoin to digital currency requires an exchange.
But with the recent collapse of at least two exchanges, who can one trust to promptly redeem BC for digital currency? (dollars, euros, yen).
It doesn't matter if one has a million dollars worth of BC in their wallet if they can't exchange those BC for digital currency.
Actually, not so. There are a number of companies, not exchanges, that store, buy and sell Bitcoins as a business. They operate in the manner of banks. Coinbase is one and has an impeccable record, excellent security and top-notch oversight. There are others as well but that is one you might know due to its size (over 1,000,000 client accounts). If you have an account you can transfer thousands of dollars in Bitcoins from your personal holdings to your regular bank in a few minutes. It is far easier than selling gold.
This author has not idea what money is. Money is not a commodity, ie gold or silver. Money is not cash, is those little bits of paper in your wallet. Money is the agreement that X amount of A is worth Y amount of B.
Boy, I'm trying to imagine Mr. North during the 80's. "When you think about fiat currency, think about the Savings & Loans institutions. S&L's failed, so trading paper money for goods doesn't work."
North needs to go the way of Obama only he needs to HE hanged for terminal retardation.
I have no argument against gold and have been a long time proponent and investor. Your comments on Bitcoin only belie a deep ignorance of the subject. Throwing out the terms "Ponzi Scheme" and "pyramid" reenforces it. By the way, In the last four years Bitcoin went from around 15 cents to a current price of around $600. Work those numbers, cowboy.
What is it with the Gary North hypocrite? He has long claimed to be an advocate of the free-market, and even the idea of competing currencies. When one comes along – a VERY well designed one – he starts a vendetta against it. WTF?
Since I'm sure he isn't a hypocrite, he must have a better idea. C'mon Mr. Gary North – lets hear it!
What is your idea for a fully transparent currency that would function more efficiently and more securely in a modern internet connected world? I'll sit right here and wait for your answer… We need it badly.
Dr. North is (at lest partially) wrong. http://www.RighTo.com/2014/03/the-programming-err…
"Bitcoin isn't money! It isn't!" Stamps foot. "It isn't!"
Meanwhile, 25,000 and growing vendors on the internet accept it, it's perfect for moving money past borders…oh, and the price is back into the $600s this morning. It's not a tragedy that Gox is gone, it's a relief. It will be replaced by exchanges that actually have a clue.
And, this morning it's back up to $686, which means the whole premise of this article is kaput! The bitcoin market looked at the loss of Mt. Gox, was a little uncertain for a week, and is now right back where it was.
Funny, when I hear "Bitcoin" I think about the scripturally predicted "cashless society," of Revelation the "forbidden foreigner"(non-Anglo-Saxon) of Deuteronomy 17:15(only one in 6,000 years since the same thing got man thrown out of Eden), and this time the correct "Anti-Christ"(Marxist) "under" U.S. of Revelation chapters 7 & 11! So, I sure hope that all Anglo-Saxons & Jews understand just what they really have done to themselves? However, just in case they do not, our Hebrew inspired, not Greek inspired, Savior & High Priest "Yahshua" even gave U.S. the predicted scriptural "scapegoat" to correspond with our REAL Jewish-born Savior & High Priest "Yahshua," meaning in Hebrew, the ONLY spiritually inspired language(Zeph. 3:9, Acts 26:14, 1 Cor. 4:6 with the last two examples even saying exactly that same thing in Greek), or that only "Yahweh means salvation!" Watch; because things soon will get interesting on Wednesday, September 24th, 2014, if I'm reading "the signs of the times" correctly…
Gary, you should research how the blockchain works. This would clear up most of your misconceptions. Bitcoin is very different than what we are used to. It will takes weeks of study before you will be able to fully framework it in your mind. Once this happens you will be shocked.
Yes! Finally something about www sky.