Bitcoins for the Kiddies

Tuesday, 13 August 2013

Hugo Salinas Price

August 15, 2013,
42 A.N. (Anno Nixonis)

Our world is awash in fiat currencies.

What is a fiat currency? It is a fictitious currency foisted and forced upon people by a government edict.

The currencies of the world retained at least a vestige of authenticity up until the fateful August 15th of 1971. On that day, President Nixon reneged on the Bretton Woods Agreements and refused to deliver any more gold from US reserves, in exchange for dollars. At the same moment, all currencies in the world became out-and-out simulations of money: fiat money.

Since that event of 42 years ago, it appears that humanity has largely forgotten about real money, and has become so accustomed to falsity – along with tattoos, drugs, same-sex “marriage”, abortion, porn, and living off welfare – that a privately invented fiat currency is now being offered to the world, and some people are freely accepting it. This invention is called the “Bitcoin”.

The creators of the Bitcoin are acting in good faith, no doubt. They are technicians with an implicit faith in technology but little understanding of what money has always been and must always be. In this day and age, people are totally fascinated with technology and can be persuaded to accept the validity of the Bitcoin, especially so when the creators are expert in electronic digital technology.

The creators and promoters of the Bitcoin aim to help people by providing them with something better than ordinary fiat, government-issue, money. However, the final result of the promotion of the Bitcoin will be a painful loss for those who have had most confidence in it.

Ludwig von Mises pointed out that all fiat currencies trace their ancestry to gold and silver; all paper money, at the moment of its introduction into circulation, was redeemable in gold or silver; the fiat currencies, no longer redeemable into gold or silver, retain a numeric value whose origin can be traced to the original gold and silver into which they were at one time redeemable.

No fiat currency has ever been successfully introduced into circulation without “parentage”, that is to say, without a numeric value whose origin can be traced back to gold or silver.

The Bitcoin is no exception. In order to obtain Bitcoins you must purchase them for dollars or some other currency at the current rate of exchange. So the Bitcoin is not born fatherless; it is a derivative of the dollar. Technology is amazing, but it cannot create “fatherless money”.

The dollar is issued by the Federal Reserve; the creators of the Bitcoin correctly judge that the Fed is abusing the fiat dollar by excessive creation. The Bitcoin, we are told, will be created by a large number of electronic “miners”, as they quaintly call them, who will have to solve difficult problems to obtain – for free – their small individual rations of bitcoins. Now suppose the Bitcoin achieves great success. How long do you think all these “miners” will be willing to stick to solving difficult problems? Since they are so bright, would you put it past one or more of them, to find very easy solutions and “mine” ever larger quantities of Bitcoins for themselves? Humans have a poor record of resisting temptation.

What this means is that the creation of “money”, as they call the Bitcoin, is the same operation as that of the Fed, with the difference that the job is divided up among a large number of these “miners” of money-out-of-nothing. So, a falsification of money by a large number of falsifying “miners” is fundamentally different from the falsification of money by one large institution, the Fed? False is false, I say.

The Bitcoin may be a somewhat more reliable fiat currency than other, government-sponsored currencies. This has not yet been proved; the Bitcoin is still in the experimental stage and improvements are under way, so we are told.

However, the fundamental and insoluble problem attached to fiat currencies in general, including the Bitcoin, is that though they may enjoy extensive use as a means of exchange, they cannot be a means of payment.

Even within national boundaries, fiat currencies do not effect payment, or “settlement”. What we are doing today, is simply shuffling these currencies around in exchanges of goods and services; but there always remains a latent doubt felt by all who have accumulated a substantial amount of any one of these currencies: “What should I do with my accumulation of fiat?” This question becomes a gnawing worry, the more cash you have. It is a worry that will not go away, because fiat money does not effect payment. When in other days people were paid in gold or silver they had nothing more to worry about. They owned gold or silver and that was that. No longer is that the case, because there is no payment going on. We are simply shuffling fiat money around.

Neither the dollar, nor the euro, nor the pound, nor the yen, nor the yuan, nor the kwatcha (yes, there is a currency called the kwatcha) can effect international payment: no fiat currency can settle an international debt.

In our present world, there is no means of payment; debts cannot be settled; debts are not extinguished when fiat currencies travel around the world, in supposed payment of debts.

I offer China as a proof. China’s International Reserves in its Central Bank amount to over $3 Trillion dollars (China’s Central Bank owns currencies other than dollars but the total of Reserves is calculated in dollars.)

These Reserves are not held in the form of paper bills, nor as digital deposits in foreign banks, but in the form of Bonds. If the Central Bank of China holds Bonds, it must be because China has not been paid for amounts owed to it.

If no currency in the world can settle national or international debts, neither can the Bitcoin.

The world has gone crazy. The words of Rudyard Kipling come to mind: “If you can keep your head when all about you are losing theirs…” Our age is the Age of Falsification, of “The Flight from Reality”, title of an excellent book by Clarence B. Carson. We live amid lies and fictions. Reality is fading before our eyes. The worst of it is that humanity accepts falsity so readily.

And so we have come to see some highly trained computer geeks, who call themselves “scientists”, who are going to create new, bullet-proof computer money, the Bitcoin. Why does humanity revel in artificiality? Why is it considered such a wonderful thing, to substitute what is real and natural, with a man-made creation? Do we want to be gods?

Next thing you know, we shall be told we don’t have to eat steak and potatoes – pills will do the trick – they are quicker and there is no mess to clean up, after the meal.

Well, I’ll stick to steak and potatoes – medium-well, please – and some gold and silver coins. You kiddies may go ahead and play with the Bitcoins, if they amuse you.