Wednesday, January 01, 2014

Money, Bitcoin, and bad economics

To walk in money through the night crowd, protected by money, lulled by money, dulled by money, the crowd itself a money, the breath money, no least single object anywhere that is not money, money, money everywhere and still not enough, and then no money or a little money or less money or more money, but money, always money, and if you have money or you don't have money it is the money that counts and money makes money, but what makes money make money? - Henry Miller

This post is hopefully an attempt at a well-mannered response to C4Chaos's pro-Bitcoin post here.  I say "hopefuly" an attempt at well-mannered but I'm not especially optimistic, because somewhere percolating through all this Bitcoin ideology is a lot of libertarian junk, and Austrian School libertarian junk at that.  C4Chaos's post featured about 40 minutes worth of video as a response to Paul Krugman, who I'm sure knows better than to respond to that sort of thing.  I, myself, have no patience for video responses on pretty much anything that's not intended at least partially for entertainment (yeah, I include academic lectures as well - they should be entertaining).  Anyway, I replied to C4Chaos by asking for text links which he dutifully supplied...and so here we go...

First of all, let me start out by saying that Ludwig von Mises was worse than a crackpot.  Don't believe me?  Check out the man in his own words.  Von Mises seems to be intimately related to these so-called "Bitcoin theorists," and that should raise a warning flag pretty much immediately.  Von Mises was an apologist for laissez-faire capitalism, funded lock, stock and barrel by the 1%.   Anyone who's had a basic course in Macro-ecomomics  can refute such clap-trap standing on 1 foot. 

The key point I'd like to make, as long as C4Chaos indirectly referenced von Mises in re: Bitcoin, is that one of the von Mises points is that somehow money is  "good money" if people want to hold money "as cash," as a "store" of value. But, given the nature of capitalism to generate more and more goods and services of value, that "store" doesn't remain constant, and so that position is a political position inherently favoring deflation,  And the political position inherently favoring deflation is in fact a position inherently against labor in favor of capital, and in these times such a position is not ethically defensible.

Another class of objects has recently been touted as a "store" of value as well, and that class of objects are precious metals.  Precious medals experienced a very nice bubble in the last decade or so, which popped in 2012.  You can still hear hucksters on AM right-wing talk radio pushing gold as a store of value.  And yes, I made a few bucks on that bubble.  But that doesn't mean that the bubble was good.  But the capitalism in which we currently dwell requires we all participate to some extent in the Prisoner's Dilemma, and hopefully we do that skillfully towards helping people rather than exploiting them

There was yet another class of objects in the last decade that sort of was a "store" of value though that class wasn't touted as a "store" of value.  That store of value was ... drumroll... US government securities, despite (actually due to) the fact that deficit hawks reigned supreme after 2009.

In the case of precious metals  and  Bitcoin, a "store" of value was touted as a bulwark against some perceived "threat" from central banks, yada yada yada, but in the Greater Fool theory fueled speculative bubbles.

Bitcoin will be accepted as a medium of exchange in barter long as people accept it, of course, but Bitcoin will never really be money unless, ironically for Bitcoin believers,  at least one government can mandate settlement of transactions in Bitcoin.  But then the Bitcoin believers tend to be suspicious of governments.  While it is true that governments commit many crimes and atrocities, their existence is still preferable to crimes and atrocities committed in failed states whether you're talking about Somalia or that libertarian paradise of yore, the Roman Republic.

Yeah, C4Chaos is right that Bitcoin is more than an object of "value", it's a protocol, but so what? Really, so what? It's not going to replace commerce that exists now, including internet commerce.  And the end of the day you're going to want to have dollars and yen and krona and euros and pounds and yuan, because that's what the rest of the world will take to buy bread and rice and vegetables.  Moreover,  Bitcoin will almost certainly be exploited maliciously.  Unlike robbing a bank (which compromises the bank, not the medium of exchange), if Bitcoin is compromised it does compromise the medium of exchange.

It's really a tremendous waste of time and energy and labor, in my view.   And not particularly useful from a Buddhist ethics standpoint...


Mumon K said...

Also see this bit onKrugman's blog:

Buddhist_philosopher said...

Thanks for this, Mumon. I've always followed my father's advice that if joe sixpack is suddenly jumping on the investment bandwagon, then it's probably not a good idea to follow (or get off). I saw a similar excitement in property in 2007-early 2008 and in gold in 2010...

As a student of Buddhist ethics, the rapid rise in value of any item, and the concomitant speculation that follows, is deeply worrying. If bitcoin or anything else is to hold value and allow free exchange, that is fine, but rapid fluctuation creates winners (people who have vast wealth with no effort) and losers (people who have lost vast wealth by no fault of their own).

As much as there is a "Buddhist economics" this sort of thing seems clearly contrary to it.