Bitcoin, from an Austrian perspective

Don’t Buy Bitcoins (April 22nd, 2011)

Don’t Buy Bitcoins, Part 2 (June 17th, 2011)

Don’t Buy Bitcoins, Part 3 - Why Goods Attain Prices (July 6th, 2011)

The Lew Rockwell Show - Tulip Mania

Peter Schiff on bitcoin:

Doug Casey on bitcoin (June 22nd, 2011):

"L: Do they have value in themselves?

Doug: There’s the rub; I don’t see that they do. Bitcoins are just an electronic abstraction. They can’t be used for anything else, nor are they made of something that can be used for anything else. They are like one of those knots in a string that disappear if you pull hard enough on the ends of the string. They are not backed by anything at all. Like government fiat currencies, they are a con game, functioning only as long as people have confidence in them, regardless of whether that confidence is well placed or not.

I’ve always said that the dollar is an “I owe you nothing,” and that the euro is a “Who owes you nothing.” With Bitcoins – which no individual can be held accountable for and which have no value in themselves – I’d have to say they are a “No one owes you anything.” It was inevitable, therefore, that the scheme would collapse… at least in its present form.

Their main value seems to have been as a speculative medium. Worse, actually, in that they are – or were – based on finding a “greater fool” to pass them on to, for something of value. The bubble in Bitcoins is, however, just one of many to come as people try to get out of paper currencies in the years to come. With the bubble that arose in tulip bulbs in 17th century Holland, you might at least have wound up with a flower. This time, people just got stung. The message is clear: Get used to bubbles, as governments print up more and more fiat money.

Bitcoin reminds me of the so-called “barter currencies” people tried to start in the U.S. some time ago, supposedly trading units of “barter.” People traded chits, where a barber might charge ten for a haircut, and a lawyer 100 for an hour of counsel. But they were just another paper currency, based on confidence. And, when you’re dealing with total strangers, confidence is hard to come by…”
- Doug Casey on Bitcoin and Currencies

Also at:

Further comments on bitcoin:

Murray N. Rothbard on money (1963):

"A most important truth about money now emerges from our discussion: money is a commodity. Learning this simple lesson is one of the world’s most important tasks. So often have people talked about money as something much more or less than this. Money is not an abstract unit of account, divorceable from a concrete good; it is not a useless token only good for exchanging; it is not a “claim on society”; it is not a guarantee of a fixed price level. It is simply a commodity [emphasis added]. It differs from other commodities in being demanded mainly as a medium of exchange. But aside from this, it is a commodity—and, like all commodities, it has an existing stock, it faces demands by people to buy and hold it, etc. Like all commodities, its “price”—in terms of other goods—is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it.”

-What Has Government Done to Our Money?

Henry Hazlitt on money (1978):

"A long-established government money has an established purchasing power, even though additional paper money issues reduce it. But how does a private issuer establish the value of his money unit in the first place? Why would anybody take it? Who would accept his certificates for their own goods or services? And at what rate? Against what would the private banker issue his money? With what would the would-be user buy it from him? Into what would the issuer keep it constantly convertible? These are the essential questions.

To assure a dependable, definite, and precise value for anything in terms of anything else, the first must be constantly convertible into the second. Under a gold standard each currency unit is constantly convertible, on demand, into a precise weight of gold. This not only assures a precise value for the pound, for example, and a precise value for the dollar; it also assures a precise “parity” ratio between the pound and the dollar, or any other two currencies…

But you cannot make a currency convertible into an abstraction. You cannot make a currency convertible into an index number. A true “commodity” dollar or ducat would have to be convertible into a precise quantity of each of a thousand different commodities. A private issuer cannot assure any specific or definite value for his money unit by limiting the volume of its issuance [emphasis added]. There is no fixed and dependable relationship or ratio between the two.

The crucial question in the mind of the holder, or the accepter, will always be: What can I be confident of getting in exchange for this?”

-The Inflation Crisis, and How To Resolve It

Jörg Guido Hülsmann on money (2008):

"To be spontaneously adopted as a medium of exchange, a commodity must be desired for its nonmonetary services (for its own sake) and be marketable, that is, it must be widely bought and sold. The prices that are initially being paid for its nonmonetary services enable prospective buyers to estimate the future prices at which one can reasonably expect to resell it. The prices paid for its nonmonetary use are, so to speak, the empirical basis for its use in indirect exchange. It would be extremely risky to buy a commodity for indirect exchange without knowing its past prices; as a consequence, the spontaneous emergence of a medium of exchange is virtually impossible whenever such knowledge is lacking. On the other hand, when it exists, then there can arise a monetary demand for the commodity in question. The monetary demand then adds to the original nonmonetary demand, so that the price of the money-commodity contains a monetary component and a nonmonetary component. Although in a developed economy the former is likely to outweigh the latter quite substantially, it is important to keep in mind that the monetary use of a commodity ultimately depends on its nonmonetary use [emphasis added]. The medieval scholastics called money a res fungibilis et primo usu consumptibilis. It was in the very nature of money to be a marketable thing that had its primary use in consumption.”

-The Ethics of Money Production, page 23

(June 22nd, 2011)

  1. nielsio posted this
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