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Bitcoin Intrinsic Value Zero

Examining how a free society really works when things go wrong
Just released:

Image Credits: Jason Rainman, Flickr .

Editor’s note: This is Part Two of Paul Green’s four-part series on Bitcoin. Part One is available on Infowars.com

At the end of the day, digital bits and bytes on the internet or on a computer disk have zero value in an environment that is not upheld by artificial electrical and electronic infrastructure.

When the internet went down in Puerto Rico after the recent storm, for example, Bitcoin and other e-currencies were useless.

In that and most other disasters, cash is always king for a few days first, while desirable commodities for barter are next in line – and over an extended period, gold and silver can come under either heading.

Even with the necessary infrastructure in place, the whole Bitcoin “blockchain” is currently less than 150 Gigabytes in size.

These days you can get a 1000 Gigabyte (one million megabytes) hard drive for around fifty Dollars/ Francs/ Euros. So even given the millions of decentralized copies, in this respect one Bitcoin is comparable to even less than the paper value of a banknote and could just as well be digitally inscribed with:

“I promise to pay the bearer of this Bitcoin, one megabyte of data in the Blockchain.”

Even in normal, peacetime circumstances, Bitcoin’s only real value is an uncertain one based upon perceived convertibility to fiat currency at the other end of the wire.

So while it may not be central bank fiat, it is democratic consensus fiat.

Call this “free market” if you will – but if so, then so is a Ponzi scheme.

And as evil as central bank fiat may be, seen purely from a currency holder’s viewpoint, at least a government can crack out the whip and make millions of people accept it and/or do some work to earn it – most of the time, that is.

With a private Ponzi scheme, there can be no “full faith and credit” in any whip and, like musical chairs when the music stops, the losers are left standing and holding an empty bag. The music will have to stop when the supply of newcomers or of significant new money stops.

At that point, the only winners will be those sitting pretty after getting out early into gold. So when the next economic Big One comes – if it’s not already here – Bitcoin (etc.) will surely collapse. Or maybe before then, or maybe it will help trigger the Big One if it keeps on growing enough before it whipsaws.

The truth is that ultimately, crypto-currencies are built on nothing but the greater fool theory – which is often stoked up by a near religious neo-libertarian/techno zeal – and with a bias towards the young, the inexperienced, and the naive. Blinded by cryptography, they just can’t see the forest for each technical tree they obsess over.

But just like Visa or MasterCard, crypto-currencies have no intrinsic value except as a service. Even Visa/MasterCard etc. only have such a high value as companies because of regulatory hurdles limiting competition to a few big players.

Yes, Bitcoin (etc.) does add some additional value for shifting money and making purchases with some privacy through what are effectively numbered accounts, outside of central bank clutches.

And, until the regulations catch up, the door to Bitcoin is wide open to all – including desperate people in China, Venezuela and Zimbabwe etc. who have nowhere else to go.

But in time, a lot of people are going to be stung, and some will lose everything. If their faith in the future of liberty is based upon crypto-currencies – then that faith is going to be shattered too.

History Repeats Itself

Sadly, this is nothing new. Much the same thing happened in Albania in the 1990s.

In their zeal to get rich after communism, many in the country bought into various Ponzi type schemes, usually dressed up as plausible business ventures but ultimately backed by little or nothing.

Recently, I was told by family members who visited on a church mission trip, that this triggered an atmosphere of discouragement and hopelessness that lingers even today.

There are also other factors stoking up the current bubble:

One of which is market “whales” or big players, of which around 1000 are estimated to control 40% of the market.

This brings up the inevitability of coordination with big banking interests – if not willingly or through the bribery of regulatory privilege, then via legal/ regulatory blackmail.

Their designs include taking advantage of the still relatively small market capitalization to neutralize Bitcoin as a competitive threat and, simultaneously, to redirect funds away from gold through a “pump and dump” strategy:

The “pump and dump” idea is to initially pump up the price by riding and feeding the global mania, and then use the Bitcoin zealots and the poor suckers of China and Venezuela to supply the liquidity for a coordinated dump of big banking and corporate holdings, forming a final peak.

When the little people are wiped out, it offers the perfect excuse for a regulatory crackdown and/or a state takeover, blaming wild speculators and irresponsible “libertarians” for the whole thing.

But still, in the meantime, from some we continue to hear:

“Crypto-currencies are libertarian!”

“We are fighting central banks!”

This is often quoted alongside generic freedom-speak like, “World history shows that liberty works!!” The idea being that Bitcoin equals or is at one with true freedom.

But just like the Ponzi pain that the whole country of Albania experienced in the 1990’s, the pain that many Bitcoin believers will experience is going to demonstrate more than one gaping hole in that so-called “libertarian” worldview:

Sadly, the only real libertarian remedy for some may be the painful “school of hard knocks” along with a reminder of how a free society really works when things go wrong.

The Freedom to Fail

Of course, “liberty works” – but the idea of liberty is not that we are always right individually, let alone that a crowd or majority is always right.


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