Bitcoin … Financial Nirvana?
If you don’t know what Bitcoin is, do some research on the internet, and you’ll find plenty … But the short story is that Bitcoin was created as a medium of exchange without any central bank or issue bank being involved. Moreover, Bitcoin transactions are considered private, it is anonymous. Most interestingly, bitcoins do not exist in the real world; These exist only in computer software, as a kind of virtual reality.
The general idea is that bitcoins are ‘mined’ … the interesting word here … solves an increasingly difficult mathematical formula – more difficult since more bitcoins exist in ‘mining’; Interesting again- on a computer. Once created, the new bitcoin is placed in an electronic wallet. Then it is possible to trade real goods or fiat currency for bitcoins … and vice versa. Furthermore, since Bitcoins have no central issuer, they are all distributed, thus preventing them from being ‘managed’ by the authorities.
Naturally Bitcoin proponents, who have benefited from the rise of Bitcoin, have rather loudly stated that ‘of course, Bitcoin is money’ … and not just that, ‘it is the best money of all time, the money of the future’, etc … yes , Fiat supporters just shout out loud that paper money means … and we all know that Fiat paper is not money in any way, because it doesn’t have the most important feature of real money. So the question is whether Bitcoin qualifies even as money … don’t think of it as future money, or the best money ever.
For this, let’s look at the attributes that define money and see if Bitcoin qualifies. The three essential properties of money are;
1) Money is a stable store; The most necessary feature fails without the unit price stability of the function or value measurement of the number.
2) Money is a unit of sum, account.
3) The means of exchanging money … but other things can also fulfill this task i.e. direct barter, the ‘fake out’ of the exchange of goods. Also ‘trade goods’ (cheats) that hold value temporarily; And finally mutual credit exchange; I.e. the pricing of a promise fulfilled by the exchange of a bill or IU.
Bitcoin does not work as badly as a medium of exchange compared to Fiat. Fiat is only recognized in the geographic domain of its issuer. The dollar is not good in Europe, etc. Bitcoin is accepted internationally. On the other hand, very few retailers currently accept money in Bitcoin. Fiat will win if geometric acceptance does not increase … albeit at the expense of exchange between countries.
The first condition is much stricter; Money must be a stable value … Now Bitcoins have gone from a ‘value’ of $ 3.00 to about $ 1000 dollars in a few years. It’s almost as far away as the ‘store of stable values’; As you can get! In fact, such gains are a perfect example of a speculative rise, such as Dutch tulip bulbs, or junior mining firms, or Nortel stocks.
Of course, here Fiat also fails; The US dollar, the ‘original’ Fiat, for example, has lost more than 95% of its value over the decades … Neither Fiat nor Bitcoin qualifies for the most important measure of money; Ability to preserve value and preserve value over time. Real money, which is gold, has shown its ability to hold value not only for centuries, but also for competition. Neither Fiat nor Bitcoin has this serious power … both fail in terms of money.
Finally, we come to the second feature; That’s the number. Now this is really interesting and we get a closer look at the question of ‘numbers’ to see why both Bitcoin and Fiat fail as money. Numerical refers not only to the use of money to save money, but also to the measurement or comparison of values in a sense. In the Austrian economy, it is actually considered impossible to measure value; After all, value only exists in human consciousness … and how can something actually be measured in consciousness? Yet, through the core principle of Mengerian Market Action, this is the interaction between bids and offers, market prices can be established … only if for a moment … and this market value is expressed in terms of numbers, the most marketable good, that means.
So how do we set the standard for Fiat …? Through the concept of ‘purchasing power’ … that is, the price of Fiat is determined by how it is traded … the so-called ‘basket of basics’ thing. However, it clearly indicates that Fiat has no value of its own, but rather that the value flows from the products and services that may be traded. Functionality flows from ‘purchased’ products to Fiat numbers. After all, what is the difference between a one-dollar bill and a hundred-dollar bill, the number printed on it … and the purchasing power of the number?
Gold, on the other hand, is not measured by how much it trades; Rather, uniquely, it is measured by other physical values; By its weight or mass. One gram of gold is one gram of gold, and an ounce of gold is an ounce of gold … no matter what number is engraved on its page, ‘face value’ or otherwise no functionality is the opposite of Fiat; Gold is measured by weight, an internal quality … not by purchasing power. Now, do you have any idea about the value of the ounce dollar? There is no such thing. Fiat is only ‘measured’ by a small amount … the number printed on it, the ‘face value’.
Bitcoin is far from numbers; It’s not just a number like Fiat … but its value is measured in Fiat! Even if Bitcoin became internationally recognized as a medium of exchange and even able to replace it as an acceptable ‘number’ of dollars, there could never be any internal measure like gold. Gold measured by a true, unchanging physical quantity is unique. There is nothing else that combines these unique qualities within the reach of a unique humanity in preserving the value of gold for thousands of years.
In conclusion, some of the names of Bitcoin’s fiat such as anonymity and decentralization, however, fail to claim to be meaningful. Its benefits are also questionable; The aim is to limit the ‘mining’ of bitcoins to 2,000,000,000 units; That is, the ‘mining’ algorithm becomes harder and harder to solve, but impossible after digging 26 million bitcoins. Unfortunately, this announcement could very well be the death knell of Bitcoin; Meanwhile, some central banks have announced that bitcoins could become a ‘reserveable’ currency.
Wow, that sounds like a big step for Bitcoin, doesn’t it? After all, the ‘big banks’ seem to be accepting the true value of Bitcoin, aren’t they? This means that banks recognize that they can trade fiat for bitcoins … and the planned 226 million bitcoins will have to buy a small amount of 26 billion fiat dollars. Even the twenty-six billion dollar Fiat printer is no small change; That’s about a week’s worth of printing by the US Fed alone. And, once Bitcoins are locked in the Fed’s ‘wallet’ … for what purpose can they work?
There will be no bitcoin in circulation; In a perfect corner. If there are no bitcoins in circulation, how on earth can they be used as a medium of exchange? And, what can bitcoin issuers probably do to protect against this kind of fate? Change the algorithm and increase 26 million … 52 million? 104 million? Join the Fiat Printing Parade? But with the money theory, Bitcoin will start to lose value, just as Fiat will lose value through over-printing …
We come to the main issue; Why look for ‘new money’ when we already have very good money, Gold? Fear of gold budget? Lack of disclosure of the name of an interventionist government? Cruel? Fiat Money Legal Tender Act? All of the above. The answer is not in the form of new money, but in a new social structure, one without fiat, without official espionage, without drones and SWAT teams … without the IRS, border guards, TSA thugs … going on. Autocracy is not a world of freedom. When this is done, the old and important role of gold will resume as honest money … and not a moment ago.