Bitcoin is a monetary version of that fabled little boy who advertised the Emperor’s nakedness. Noting that we have never again heard of that little boy, we expect the same fate for Bitcoin; governors seldom appreciate exposure.
Historically, governments have openly taxed and covertly stolen as much of their citizens’ wealth as they could. For any doubters, the exceptionally well documented history of Rome’s silver coinage may be helpful. Summed up: Roman coins contained less silver over time, a precursor of today’s “quantitative easing” and other manifestations of unbridled central bank money puffing. And always and everywhere, governments have disliked sharing their access to this ever-filled purse.
Inflating the paper money supply automatically deflates the purchasing power of a dollar; it provides more dollars available to claim an unchanged amount of real wealth. Paper and today’s electronic money are intrinsically worthless, their real value is limited to the amount of real wealth –things- that they can purchase. Governments have always spent more than they could afford by using money fraud, once by reducing gold/silver content of coins and now by inflating the supply of paper/electronic money. That is theft because people must provide full value to earn their wages but will receive a reduced value when they spend it later.
But now, we have Bitcoin, which is increasingly accepted as payment. New technology has provided an opportunity for monetary competition with governments and naturally, Bitcoin’s mysterious entrepreneur (and others) have run with it. And Bitcoin and other “cryptocurrencies” are expanding in a financial Big Bang, gaining value as they proceed. And money buying Bitcoin is money that governments would prefer to see buying government bonds, stocks or anything denominated in dollars.
Folks watching central banks nearly everywhere dumping money onto their economies from helicopters and running up debts their great grandchildren won’t live long enough to repay are prime customers for money that isn’t debased by politicians and is ascending, not declining in value. Bitcoin’s mere existence not only makes government money seem inferior, it also seems to offer an escape.
We point out though, that so far as we can see, Bitcoin consists of electrons, not even paper. Just like the money now taking over from cash courtesy of the respective governments in India and Sweden. And intended at least by some, for the United States. You are already using electrons to make payments over the internet; if you want to broaden your range with a cryptocurrency, fine. But we are a little leery about storing too much of our wealth in little, invisible particles… But then, we likely wouldn’t have bought stock in Henry Ford’s first factory, either.
Seems to us, now that money is just a politician’s promise – or a mysterious Australian’s – we should feel better with more tangible wealth. We’ve never seen an electron that looked like it could be trusted.