I shall probably get myself into dangerous waters here, but that has never bothered me in the past, so I shan’t let it bother me today.

Bitcoins, the beloved alternative currency of the Libertarian movement as espoused by those who are tech-savvy. The last word in that sentence alone should be sufficient to exclude me from the Bitcoin conversation. I am not tech-savvy; quite how I’ve managed to keep this blog afloat all these years is a mystery known only to the brilliant and eternally patient folk at Bluehost.com, who have extracted me from the deep binary doo-dah so many times that they now ask me for the current weather in the Dordogne before they ask for my password…

That hasn’t stopped me from following the fortunes of Bitcoins, as I have that of Gold; if only because it is the subject most frequently discussed in the serious Libertarian sites.

The theory seems to be (and don’t blame me if it isn’t – blame the people who attempt to explain it to the non-techy world) that the banking world is full of speculators, investors, and other ne’er do wells (including assorted lizards and people with the surname Rothschild) who treat money, the comfortable folding stuff, as a means to profit from the need of we ‘ornery folk to buy an egg for our brekkers. They knead it and manipulate it, and tell us its worth more than it really is, and then pull the rug from under us when we think we’ve got enough to buy an egg and say ‘Sorry mate, its Thursday, money’s gone down today, just half an egg for you’.

The folding stuff originated from a time when a lump of gold was enough to buy hundreds of eggs,  which was monumentally inconvenient before they invented fridges, so you gave your lump of gold to a man, and he gave you hundreds of slivers of paper each worth the price of an egg. Voila! You could give the grocer a slice of paper each day for your egg, and when the grocer had collected enough slivers of paper, he could take them back to ‘the man’ and have a lump of gold instead. The grocer could even give them to the man with the Ford Cortina Mark ll, and get the car in exchange – and let him go chasing after the man with your gold.

All well and good, until it was discovered that the man with the lump of gold had a printing press in his garden shed and had been handing out slivers of paper like bloody confetti to everybody in sight, including the government – and he’d flogged 15 lumps of gold to someone called Fat Dildo in China when he only had three lumps in the first place… which meant that even if you’d been able to get your lump of gold back, it would only be worth a fifth of what you thought it was. I think I’ve got that bit right, but do correct me if I’m wrong.

Now some people got very excited about all this and said ’Gis our Gold back, I’d rather keep it under the bed’. Which was fine, and I can understand the sentiment, but it seems to me that there was still a problem there. a) You still couldn’t break a bit off your Kruggerand or your gold bar to pay the grocer, so at some point you needed to convert it back into folding money, and b) Fat Dildo was still insisting he had fifteen lumps of gold, and nobody knew whether he was an idiot, had dug some more up in his garden, or whether ‘the man’ had really sold him 15 lumps and the media was lying about ‘the man’ only having 3 lumps. Consequently, no one really knew what any of the lumps were worth, and investors and speculators and lizards and people with the surname Rothschild were making a fortune as the price of a lump of Gold zoomed all over the place.

Personally I went out and bought myself a chicken at that point, having more faith in an old fashioned hen to deliver my breakfast. I got a cockerel too; nothing like increasing production.

Enter the tech-savvy. They invented the Bitcoin.  It only existed on the Internet. It didn’t have (note past tense) lizards or speculators. It only existed in Geek world. Geek world was solely inhabited by Libertarians, and they were all honest. It was the brave new world as opposed to the new world order. They had a terribly geeky way of manipulating their new currency, it was all to do with Field Programmable Gate Arrays (FPGA) and the inflexibility of Application Specific Integrated Circuits (ASIC) and other things that only the insiders truly understood. A bit like banking actually. But it was Geek land, and therefore the Internet trusted it. Anyway, they only used it to buy more property on Farmland and a few drugs, so what did it matter?

Unfortunately it seems that there were a few geeky lizards. Or IT experts called Rothschild. ‘Cos the next thing you know, up zooms the price of a Bitcoin. In three years the nominal exchange rate went from a bag full of 1300 of the little blighters for one dollar to $266 dollars for one little bitcoin. That’s what you call inflation. Er, and Speculation. Maybe the brave new world of Geeks and Libertarians wasn’t quite as altruistic as it imagined. Turns out that instead of just using them for drugs and bits of Farmland, some people were hoarding them, so that when people went to pay for their drugs, they couldn’t get hold of any, hence the people who had some charged the earth for them. Heroin addicts were quaking in their shoes.

I got interested when I heard that archetypical techy geek Rick Falkvinge, founder of Sweden’s Pirate Party, had cashed in his bitcoins for good old fashioned folding stuff. When tulips bulbs are shooting up in value and someone decides to get out of tulip bulbs, you know there is something up. The number of spam e-mails I got inviting me to invest in Bitcoins suddenly doubled, far outweighing the number inviting me to buy gold bars. Or Viagra.

Somebody appeared on reddit and gave away several thousand dollars worth of tulip bulbs Bitcoins. Pandemonium raged. Were they completely worthless? Could be if people were giving them away! Within hours the price of the $266 dollar Bitcoin had dropped to $130 dollars, still way over its $20 price of three months ago. Was a late entrant trying to manipulate the market hoping it would go back up to $250?

Fascinating to watch, and if anybody wants to try and convince me to invest in Bitcoins, or indeed gold, after this last week, they are very welcome to try.

I’ve commissioned Mr G to build a bigger hen house. Old fashioned girl, me; I don’t like starting the day without my breakfast.

Saul April 12, 2013 at 09:47

Or even Philip Roth’s children, but that might make them Portnoy’s.

SisterEvaLongoria
April 12, 2013 at 09:27

“including assorted lizards and people with the surname Rothschild”.
I
have two lizards, one is called Fearne and one is called Holly. I confess that
I have never thought to consider what their surnames were, before today. This
is most remiss of me. I have made enquiries and as I understand it, allowing
for the vagaries of lizard speak, their surnames are Cotton and Willoughby. I
am therefore not able to clioam that my lizards are related to the eponumous
Rothschilds. However, if I were to procure he assistance of the well known
actor/thespian Tim Roth (he always seeems to play a baddie) and were he to
legally adopt my lizards, they could then be legitimatley called
“Roths-child”, or at least “Roths-childen”.
At present they have no plans
to take over the world.
I hope that this has been a useful and informative
contribution to the debate
In love and light
Sister E x

Daedalus X.
Parrot April 12, 2013 at 10:39

Don’t understand.

Instead of naming your beclawed, scaly-skinned pets after two specimens
of female loveliness, why didn’t you name them after two examples of
ideological ugliness, say the delusional, rubbish-spewing ranters Ken
Livingstone and David Icke?

Mudplugger April 12, 2013 at 08:44

Same is true of any item where its ‘value’ is rooted in the perception of
others.

The Mona Lisa is actually worth about a fiver, it’s just a few bits of
cheap material, that collection of Picasso ‘art’ donated to the museum by
Lauder is valued at a billion dollars, yet it’s just paint, canvas and wood.
Behind these and the markets for diamonds, fine wines, classic cars and other
‘precious’ goods, there lies enough people prepared to suspend their rational
judgement and subscribe to a value system with no foundation in fact.

Paper currency, numbers on a computised bank account or Bitcoins are the
same – they’re only worth what enough people are prepared to agree they are
worth, regardless of their real substance, or lack of it. And therein lies the
source of the fiscal problem.

John-Paul April 12, 2013 at 07:00

Gold hasn’t any actual value, it’s just a convention that it’s worth
something, shared by lots of people so that they can have a common exchange
mechanism.
Same with Dollars and Bitcoins.

The problem with bankers (even those tiny few who are not reptilian
semites) is that they keep inventing things that they claim is worth something
to sell to each other.
And no one else agrees.

If anyone offered to exchange some actual money in your pocket for an
option to buy insurance policy against some mortgages defaulting,
you’d
probably not go ahead.
Because you (probably, not being a banker) don’t
share a frame of reference which includes that such a weird thing having any
value.

But the banks claimed they were worth gazillions, and used them as
collateral for actual money.
Which is fine as long as everyone agrees with
the shared frame of reference – the moment someone says “wait a second, these
mortgages are actually defaulting, and you’ve been selling to the poor just to
make money on the insurance”, the whole agreement that they have a value
collapses.
And the assets become instantly worthless.

Which becomes really serious when the same people say, “hang one, these
dollar things are only worth money because they’re backed by the banks who’s
assets we’ve just decided are worthless – my confidence that dollars will be
worth anything is also eroding”.

Because if that particular shared convention is lost, they’re just
worthless bits of printed material.

NielsR April 12, 2013 at 12:17

Gold and Bitcoin are the same in that way, but then so is anything else.
The advantage they have is that it is harder to manipulate their value than
dollars and pounds. A currency issuer can run the presses, or do QE, or be
Cyprus, and have the value of the wodge of paper in your pocket devalue.
Gold, not so much, at least provided you can get it out of the country.

With Bitcoins capped in number, and (as I understand it), needing a
program to spend x computing cycles to have a chance of mining one (where x
is large), and most importantly, not directly linked to the economy of any
one country, the theory is that it will be a more reliable store of
value.

sounds like there need to be a bunch more of them mined for the market to
be able to handle Cyprus-like events, though…

John Galt
April 11, 2013 at 23:43

The only genuine purpose I’ve seen for bitcoins is buying drugs from the
Silk Road TOR site or renting cars in Argentina to bypass currency
controls.

http://www.sovereignman.com/offshore/argentines-escaping-currency-controls-with-bitcoins-11192/

I would also point out that Bitcoins aren’t so much anonymous as
pseudonymous. In that you can transact using a pseudonym, but it is still
possible for law enforcement agencies to track the transactions backwards to
the person who sold the bitcoins, unless this was a pure-cash, no names
exchange, which is quite difficult (doing a part face-to-face / part
electronic transaction)

Before anyone asks, I don’t do drugs and have never bought any off the Silk
Road TOR site.

Rick Falkvinge
April 11, 2013 at 21:36

Where did you hear that I would have sold my position in bitcoin recently?
In any case, it’s not true. (I did sell half my position at the time when it
was trading at $5 because I was cash-strapped back then, about a year ago –
that feels a bit sour today; I tried going back in more later, but it cost
me.)

Cheers,
Rick

Anna
Raccoon April 12, 2013 at 08:16

Until now, the currency, invented in 2009, had been treated as the cute
Web experiment of hackers, libertarians and anarchists. Last year, the value
of a bitcoin was stagnating at €5. And now some people are suddenly getting
rich, including Rick Falkvinge, founder of Sweden’s Pirate Party. “I had
invested all of my assets in bitcoins,” he says. “Now I’ve converted half of
it into other currencies. I’ve never been this rich before.”

http://www.spiegel.de/international/business/boom-of-digital-currency-bitcoin-raises-questions-of-stability-a-893342.html

Rick
Falkvinge April 12, 2013 at
15:32

Yes, I saw that. Somebody inserted the “now” in editing; I was all in
when that interview happened. I sold half at $5 then went back in
later.

Anna
Raccoon April 12, 2013 at
15:35

Not rich then? You have to ‘love’ the media, that’s really what this
blog is all about – the way the media chose to portray events.

Mark April 11, 2013 at 17:20

A mistressful explanation of currency.

Is Rothschild a Jewish name? I never knew.

Mark April 11, 2013 at 17:24

(Won’t stop me from using it as a stereotypical surname for rich bankers
though)

Moor Larkin April 11, 2013 at 17:32

More of a Coutts man myself

Mudplugger
April 11, 2013 at 20:30

Isn’t that just the chav division of Nat West ?

Moor Larkin April 11, 2013 at 21:08

You have never met me, and yet you know me………….

Ted Treen April 12, 2013 at 23:07

I believe it originally derived from “Rotshild” – meaning Red Shield – a
distinguishing house mark which was nothing to do with the owner/occupier’s
ethnics

alan April 11, 2013 at 17:18

Bitcoin isn’t specifically libertarian, although libertarians like talking
about it. The bigger picture is different currency models. There have been
multiple examples in history. Look up Wikipedia on Local_currency. In the UK
there is an example called the “totnes pound”.

The whole gold/paper subject is very nicely described on Khan academy https://www.khanacademy.org/science/macroeconomics/monetary-system-topic

JimS April 11, 2013 at 17:05

If a Bitcoin is ‘virtual’ what stops someone making a virtual ‘printing
press’?

I understand growth when a farmer plants a seed, grows a crop and keeps
back some seed for next year. That is real and it happens slowly. The idea
that a currency can gain or lose 10% or more in a day is ridiculous, the whole
of modern economics is mutual smoke and mirrors, the new emperor’s
clothes.

binao April 11, 2013 at 20:54

I shall look at my perpetual shallot surplus from the garden in a
completely new light.

John
Galt April 11, 2013 at 23:29

My understanding is that there will only ever by 21 million bitcoins and
these are “mined” using specialist software and tracked whenever each single
bitcoin is used to confirm it is genuine. Not sure how this works, but I
think they are a bit like certificates.

Ian
Hills April 11, 2013 at 17:01

Pity you’re an anti-semitic crank. There are more gentile “lizards” than
Jewish ones in the world of banking.

jonseer April 11, 2013 at 19:41

Goys ?

Ted Treen April 12, 2013 at 09:21

Castigating the Rothschild dynasty no more makes one anti-semitic than my
distaste for Ed Balls makes me anti-English.

Unless of course, you’re a professional outragee à la Toynbee, who
worships at the altar of St Grauniad…

Twenty_Rothmans April
12, 2013 at 22:52

Shame on you, Anna. It should have been the Medicis. Then you could be
called a Wogophobe crank. (I am allowed to say that because Wog means
Italian in my country – they refer to themselves that way, as do we – and
I expect you to accept my cultural mores).

Perfidy! Singling out the most recognised name in banking to mask your
rabid, seething, spittle-flecked anitsemitism on your brown-shirted, black
leather-coated, toothbrush mustachioed, website of hate.

The Rothschilds were from Frankfurt, but nobody stands up for
Germans.

Unless they’re pointing a rifle at you.