Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Why Bitcoin is Not a Threat to the U.S. Dollar

admin by admin
December 3, 2013
in Uncategorized
0
0
SHARES
3
VIEWS
Share on FacebookShare on Twitter

by Chris Mayer, Daily Reckoning

The best place to park some cash in the last five years was in Bitcoin, the digital currency.

Bill Bonner wrote recently in a note to members of his family office (of which I am one):

“The value of [Bitcoin], per unit, has gone from under 10 cents when it emerged, in 2008, to $754 at this writing. If you’d put in $10,000 a few years ago, your stake would be worth over $75 million today.”

There’s nothing that has come close to that.

Which inspires the thoughts that follow. Below are some speculations about the nature of money, Bitcoin, the U.S. dollar and the wealth-generating power of a simple coffee can.

I don’t know that anyone turned 10 cents into $75 million, but there are a lot of great stories out there about people reaping big gains with Bitcoin. I like the one about the guy from Oslo who bought $27 worth of Bitcoin – and then forgot about it. Four years later, he remembered, and found out his account was worth $1 million.

This story illustrates the power of what I call the coffee can idea.

The premise of the coffee can portfolio, you may remember, is to take a select group of stocks and forget about them. Figuratively speaking, you put them in your coffee can. Open 10 years later and see what you have.

Coffee Can

What’s in your coffee can?

The theory is you’ll be richer for your negligence, which protects you against your impatient and impulsive self. There is no way our man holds onto his Bitcoin if he’s paying attention. He talks himself out of his gains long before they hit $1 million. But he coffee-canned it, and made a handsome pile.

That’s the power of the coffee can concept.

Anyway, the guy wound up cashing in his Bitcoin once he found out his stash was worth a million bucks. He used one-fifth of that stash to buy an apartment in an expensive part of Oslo. Nicely turned.

Predictably, mind-boggling returns in Bitcoin have led to the creation of lots of new digital currencies: Peercoin, Namecoin, WorldCoin, Gridcoin, FireFlyCoin, Zeuscoin, HoboNickels and more. According to The Wall Street Journal, there are more than 80 such variants.

And why not? It’s of a piece with speculative mood of the times. Frankly, I don’t know what to make of it all.

I know a lot of people frame Bitcoin as some sort of free-market competitor to the U.S. dollar – or to any state-backed currency. On one level, this is obviously true. Bitcoin is an option of something you can hold instead of dollars, at least for a time. It’s a competitor to the dollar in the same sense as an ounce of a gold, a share of stock, a barrel of oil or a piece of real estate.

But Bitcoin isn’t a threat to the U.S. dollar as a currency – at least for the American taxpaying population – unless one thing happens: The government accepts it for the payment of taxes.

I know that’s about as likely as snow in Miami.

But it’s useful to think about because it gets to a question of why we accept paper dollars at all. Why does the U.S. dollar have any value at all?


What is the Income Play Rich Investors Love? (Hint: It’s Tax-Free)


Why does this have any value at all?

There are many theories on the nature of money. I have become enamored lately with the ideas of a little-known writer named Alfred Mitchell-Innes. He wrote a pair of essays in 1913 and 1914 that explored the history and nature of money.

The essays got quite a bit of attention in their day, even drawing the review of John Maynard Keynes. But economics went in another direction, and Mitchell-Innes got lost in the mists until a recent revival by a fringy group of economists and anthropologists.

The full story, as interesting as it is, would take us too far afield. Mitchell-Innes, though, made one point in these essays that is a timeless observation relevant here. He wrote, “Government money is required everywhere for the discharge of taxes or other obligations to the government.”

It’s pretty simple. If he’s right, then acceptance of the dollar depends on the ability of the U.S. government to collect taxes. And the U.S. is very good at collecting taxes, which any number of otherwise hard-to-bring-down criminals have found out. (They got Al Capone on tax evasion, don’t forget.)

Al Capone

Al Capone found out why everyone accepts U.S. dollars

So the U.S. levies taxes on the U.S. population, and when combined with its fearsome tax-gathering goons and prisons, it instantly turns everyone in dollar-seekers to settle those obligations. I think people tend to forget this elemental truth, especially when they start talking about Bitcoin.

It’s been true since the time of kings and explains why all kinds of odd things have been money at some point. Randall Wray, who seems like a bit of a nut, sums it up nicely in a book about the work of Mitchell-Innes (Credit and State Theories of Money):

“Why would the population accept otherwise ‘worthless’ sticks, clay, base metal, leather or paper? Because the state agreed to accept the same ‘worthless’ items in payment of obligations to the state.”

This doesn’t mean Bitcoin can’t grow in value or settle transactions among individuals. Of course it can. And it doesn’t mean the dollar can’t lose value over time. Of course it does.

The dollar, despite its ability to settle up with Uncle Sam, isn’t an investment. It’s really a token, a way of keeping score. It’s something to tally up credits and debits. This is an idea Mitchell-Innes understood.

And Bill Bonner, to bring the thing ’round to where I began, also knows this: “Money is just a placeholder,” he wrote. “It has no value in itself. It just signals your position relative to everyone else… It doesn’t really matter what you use as money. But some things work better than others.”

As for Bitcoin, your guess is as good as mine what happens. (I don’t own any.) As for the U.S. dollar, until the facts discussed above change, we’re stuck with the U.S. dollar. But I wouldn’t put it in your coffee can.

Previous Post

Smartphone Prices to Drop Everywhere But in North America

Next Post

Infographic of the Day: Unexpectedly Lucrative Products

Related Posts

Bitcoin Flirts With $24K, How High Will It Go?
Economics

Bitcoin Flirts With $24K, How High Will It Go?

by John Wanguba
February 3, 2023
Venezuela's PDVSA Toughens Oil Prepayment Terms
Business

Venezuela’s PDVSA Toughens Oil Prepayment Terms

by John Wanguba
February 2, 2023
German Economy Unexpectedly Contracts In Q4, Renewing Recession Fears
Economics

German Economy Unexpectedly Contracts In Q4, Renewing Recession Fears

by John Wanguba
February 2, 2023
Judge Dismisses Proposed Class-Action Suit Claiming Coinbase Securities Sales
Business

Judge Dismisses Proposed Class-Action Suit Claiming Coinbase Securities Sales

by John Wanguba
February 2, 2023
Aesop Targeted In $2bn Bidding War Between French Groups
Business

Aesop Targeted In $2bn Bidding War Between French Groups

by John Wanguba
February 1, 2023
Next Post

Infographic of the Day: Unexpectedly Lucrative Products

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins banking banks Binance Bitcoin Bitcoin adoption Bitcoin market Bitcoin mining blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe finance FTX inflation investment market analysis markets Metaverse mining NFT nonfungible tokens oil market price analysis recession regulation Russia technology Tesla the UK the US Twitter

Archives

  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Bitcoin Flirts With $24K, How High Will It Go?
  • Venezuela’s PDVSA Toughens Oil Prepayment Terms
  • German Economy Unexpectedly Contracts In Q4, Renewing Recession Fears

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish