Bitcoin Billionaire? Bitcoin as now constituted can NOT be money

  1. http://csinvesting.org/2014/03/19/is-bitcoin-a-scam/
  2. http://csinvesting.org/2018/04/26/bitcoin-the-worlds-largest-pump-and-dump-in-history-who-knew/

The Bitcoin Flaw

To understand the prospects for bitcoin and the other cryptocurrencies and tokens, it is necessary to grasp the centrality of gold.

Gold resolved both the horizontal and vertical enigmas of money.  As a universal index of value, it muted the volatile shifts and shuffles of exchange rates.   As an unchanging standard, it made interest rates a reliable guide for entrepreneurs making commitments in the darkness of time.

The gold standard thus provided maps and metrics that enabled entrepreneurs to act confidently across time and space.  they were assured that in an ever-changing and insecure world the monetary measuring sticks would not change when they brought their products in for a landing in the marketplace.

As King Midas discovered, gold (and all candidates to be real money) is not wealth itself but a metric of wealth.  While some gold advocates–including George Gilder in years past–have insisted that its slow but steady 2 percent rate of growth assures an expanding supply of money.  But under a gold standard, the money supply has virtually nothing to do with the gold supply.  In 1775, the total mount of currency in circulation (primarily gold and silver coins) was an estimated $12 million. In 1900, it was $1,954 million –an increase of 163X. During this time, the amount of gold in the world increased by about 3.4 times, due to mining production.

Since gold does not deteriorate, all the 189,000 tones of gold mined over the centuries remains available for use as money. Maintaining neutrality in time and space, gold is neither inflationary nor deflationary (KEY POINT!) It penalized neither creditors nor debtors.  It is a measuring stick and unit of account for the world’s goods and services.

Bitcoin

Satoshi, the “founder” of Bitcoin believed that his mining algorithm was mimicking gold. Bitcoin did laboriously cancel out the advance of technology through its ten-minute mining cycles and lottery process.

George Gilder initially believed The Bitcoin Standard by Saifedean Ammous presented bitcoin as a satisfactory replacement for the gold standard. See http://csinvesting.org/2018/06/02/bitcoin-blockchain-and-money/

However, Mike Kendall, who was drilling down into the economic model of bitcoin as a possible successor to the gold standard noted that “Contrary to the most egregiously erroneous and central tenet of the state theory of money, it was not government that decreed gold as money, rather it is only by holding gold that governments could EVEN ISSUE ANY FORM OF MONEY AT ALL.” http://manonthemargin.com/notes-on-the-bitcoin-standard/

Or an easier MUST read PDF: Bitcoin and the gold standard_Man on the margin

Nakamoto invented digital scarcity….a digital good that is scarce and cannot be reproduced infinitely….a digital good whose transfer stops it from being owned by the sender..

“The limit on the quantity we can produce of any good is never its prevalence on the planet, but the effort and time dedicated to producing it.  With its absolute scarcity, writes Ammous, “bitcoin is highly salable across time.”

THE FATAL FLAW

The fatal flaw is the belief that the money supply can and should be determined by the supply of bitcoin or gold.  Gold (or bitcoin mimicking gold) should serve not only as a measuring stick or unit of account but as the actual medium for all exchanges.

Such monolithic money was also the ERROR of Murray Rothbard, an idiosyncratic exponent of Austrian theory who believed that any authentic gold standard must have 100 percent gold backing.  He did not even believe in fractional reserve banking, intrinsic to the role of banks, which necessarily mediates between savers seeking safety and liquidity and entrepreneurs destroying it through long-term investments. The value of liquid savings is necessarily dependent on the achievements of illiquid and long-term enterprise.  There is no way to avoid the maturity mismatch between savings and investments except by abolishing capitalism.

In the same way, bitcoin and other cryptocurrencies cannot become significant money without systems to intermediate between savers and investors.  Money cannot be simply a smart contract. It entails continual acts of intelligent discretion in the provision of loans and investments responding to changes in markets and technologies.

Cameron Harwick of George Mason University makes the point that BITCOIN CANNOT SUCCEED AS A SMART CONTRACT; IT MUST BE COMPLEMENTED BY AN ENTREPRENURIAL BANKING FUNCTION:

If the main source of Bitcoin’s volatility is volatile demand, we can expect the issue and circulation of bitcoin-redeemable liabilities to stabilize the demand for and therefore the value of Bitcoin by allowi9ng fluctuations to be borne by changes in the supply of liabilities rather than by the price level or the volume of transactions.

A currency needs oracles to channel it to the most promising entrepreneurial uses.

As Kendall explains, “While Satoshi was brilliant in creating the blockchain as the basis for bitcoin, Satoshi had no understanding of currency as a unit of account.  By limiting bitcoin’s supply to 21 million units over a 131-year period,  Satoshi designed bitcoin as a deflationary currency….Because of its deflationary design, bitcoin is used more as a volatile investment bet: than as a MEASURING STICK or UNIT  OF ACCOUNT.   In other words, bitcoin’s fixed limit is deflationary and unworkable. 

Bitcoin is the transactions medium ITSELF rather than a stable metric for the valuation of fiat moneys. For gold, transactions are incidental; for bitcoin, transactions are the key point.  Bitcoin, unlike gold, must therefore increase in either volume or value if the system is to succeed.

Bitcoin, as now constituted, CANNOT BE A CURRENCY.   Currencies create value by measuring it.  The price of bitcoin changes with demand. You could respond that the price of the dollar also changes with demand.   That has been mostly true since 1971, and such fluctuations are the Achilles heel of the dollar as a long-term currency.

“No other basic unit of measure,” says Kendall–whether it is the second, the meter, the ampere, or the kilogram-“changes in value with demand.  They are standards” based on physical constants. IF MONEY IS A MEASURING STICK, IT CANNOT RESPOND TO DEMAND.

Since bitcoin cannot fulfill its basic role as a currency. its historical fate is to provide a haven from governments and central banks and a harbor for a great innovation, the blockchain.

Source: Life After Google by George Gilder.

The EXPERTS

Lorimer Wilson January 24, 2011
$5,000 Gold Bandwagon Now Includes 85 Analysts!

More and more economists, analysts and financial writers, 125 in fact, have taken the bold step of projecting the price at which gold will achieve its parabolic peak with 5 individuals claiming that the peak price will be realized sometime in 2011. Some have adjusted their previous prognostications higher given gold’s strong advance again in 2010 while others have jumped aboard what has become a bandwagon of optimism. The majority (85) maintain that $5,000 or more for gold is possible.

These 5 Analysts Believe Gold Will Reach Parabolic Peak Sometime in 2011
1. Bob Kirtley: $10,000;
2. Patrick Kerr: $5,000 – $10,000;
3. James Dines: $3,000 – $5,000;
4. Taran Marwah: $3,000;
5. Jim Sinclair: $3,000 – $5,000 (by June 2011);
These 6 Analysts See Gold Price Going Parabolic to +$10,000
1. Mike Maloney: $15,000;
2. Ben Davies: $10,000 – $15,000;
3. Howard Katz: $14,000;
4. Dr. Jeffrey Lewis: $7,000 – $14,000;
5. Jim Rickards: $4,000 – $11,000;
6. Roland Watson: $10,800
These 46 Analysts See Gold Price Peaking Between $5,001 and $10,000
1. Bob Kirtley: $10,000 (by 2011);
2. Arnold Bock: $10,000 (by 2012);
3. Porter Stansberry: $10,000 (by 2012);
4. Peter George: $10,000 (by Dec. 2015);
5. Tom Fischer: $10,000;
6. Shayne McGuire: $10,000;
7. Eric Hommelberg: $10,000;
8. David Petch: $6,000 – $10,000;
9. Gerald Celente: $6,000 – $10,000;
10. Egon von Greyerz: $6,000 – $10,000;
11. Peter Schiff: $5,000 – $10,000 (in 5 to 10 years);
12. Patrick Kerr: $5,000 – $10,000 (by 2011);
13. Peter Millar: $5,000 – $10,000;
14. Roger Wiegand: $5,000 – $10,000;
15. Alf Field: $4,250 – $10,000;
16. Jeff Nielson: $3,000 – $10,000;
17. Dennis van Ek: $9,000 (by 2015);
18. Dominic Frisby: $8,500;
19. Paul Brodsky: $8,000;
20. James Turk: $8,000 (by 2015);
21. Joseph Russo: $7,000 – $8,000;
22. Bob Chapman: $7,000+;
23. Michael Rozeff: $2,865 – $7,151;
24. Jim Willie: $7,000;
25. Dylan Grice: $6,300;
26. Chris Mack: $6,241.64 (by 2015);
27. Chuck DiFalco: $6,214 (by 2018);
28. Jeff Clark: $6,214;
29. Aubie Baltin: $6,200 (by 2017);
30. Murray Sabrin: $6,153;
31. Samuel “Bud” Kress: $6,000 (by 2014);
32. Adam Hamilton: $6,000;
33. Robert Kientz: $6,000;
34. Harry Schultz: $6,000;
35. John Bougearel: $6,000;
36. David Tice: $5,000 – $6,000;
37. Laurence Hunt: $5,000 – $6,000 (by 2019);
38. Taran Marwah: $3,000 – $6,000+ (by Dec. 2011 and Dec. 2012, respectively);
39. Martin Hutchinson: $3,100 – $5,700;
40. Stephen Leeb: $5,500 (by 2015);
41. Louise Yamada: $5,200;
42. Jeremy Charlesworth: $5,000+;
43. Przemyslaw Radomski: $5,000+;
44. Jason Hamlin: $5,000+;
45. Greg McCoach: $5,000+ (by 2012)
46. David McAlvany: $5,000+
Cumulative sub-total: 52
These 34 Analysts Believe Gold Price Could Go As High As $5,000
1. David Rosenberg: $5,000;
2. Doug Casey: $5,000;
3. Peter Cooper: $5,000;
4. Robert McEwen: $5,000 (by 2012 -2014);
5. Martin Armstrong: $5,000 (by 2016);
6. Peter Krauth: $5,000;
7. Tim Iacono: $5,000 (by 2017);
8. Christopher Wyke: $5,000;
9. Frank Barbera: $5,000;
10. John Lee: $5,000;
11. Barry Dawes: $5,000;
12. Bob Lenzer: $5,000 (by 2015);
13. Steve Betts: $5,000;
14. Stewart Thomson: $5,000;
15. Charles Morris: $5,000 (by 2015);
16. Marvin Clark: $5,000 (by 2015?);
17. Eric Sprott: $5,000;
18. Nathan Narusis: $5,000;
19. Bud Conrad: $4,000 – $5,000;
20. Paul Mylchreest: $4,000 -$5,000;
21. Pierre Lassonde: $4,000 – $5,000;
22. Willem Middelkoop: $4,000 – $5,000;
23. Mary Anne and Pamela Aden: $3,000 – $5,000 (by February 2012);
24. James Dines: $3,000 – $5,000 (by June 2011);
25. Goldrunner: $3,000 – $5,000 (by 2012);
26. Bill Murphy: $3,000 – $5,000;
27. Bill Bonner: $3,000 – $5,000;
28. Peter Degraaf; $2,500 – $5,000;
29. Eric Janszen: $2,500 – $5,000;
30. Larry Jeddeloh: $2,300 – $5,000 (by 2013);
31. Larry Edelson: $2,300 – $5,000 (by 2015);
32. Luke Burgess: $2,000 – $5,000;
33. Jim Sinclair: $3,000-$5,000 (by June 2011);
34. Marc Faber: $1,500 – $5,000
Cumulative sub-total: 86
These 27 Analysts Believe Gold Will Achieve a Parabolic Peak Price Between $3,000 and $4,999
1. David Moenning: $4,525;
2. Larry Reaugh: $4,000+;
3. Mike Knowles: $4,000;
4. Ian Gordon/Christopher Funston: $4,000;
5. Barry Elias: $4,000; (by 2020);
6. Jay Taylor: $3,000 – $4,000;
7. Christian Barnard: $2,500 -$4,000;
8. John Paulson: $2,400 – $4,000 (by 2012);
9. Myles Zyblock : $3,800;
10. Eric Roseman: $3,500+;
11. Christopher Wood: $3,360;
12. Franklin Sanders: $3,130;
13. John Henderson: $3,000+ (by 2015-17);
14. Michael Berry: $3,000+; (by 2015)
15. Hans Goetti: $3,000;
16. Michael Yorba: $3,000;
17. David Urban: $3,000;
18. Mitchell Langbert: $3,000;
19. Brett Arends: $3,000;
20. Ambrose Evans-Pritchard: $3,000;
21. John Williams: $3,000;
22. Byron King: $3,000;
23. Ron Paul: $3,000 (by 2020);
24. Chris Weber: $3,000 (by 2020);
25. Mark Leibovit: $3,000;
26. Mark O’Byrne: $3,000;
27. Kevin Kerr: $3,000
Cumulative sub-total: 113
Source:- http://www.munknee.com

There seems to be one name missing from the list. All those SWAGS have missed one important element. When you are talking about the price of gold, you are talking about two commodities, gold and whatever currency you are quoting the price in.
If you can’t predict the value of the dollar in the future with accuracy, you cannot predict the price of gold either.

You should buy gold when it is cheap and unloved. You should then sell it when it is expensive and everyone loves it.

 

So much for “experts.”

 

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