Joel Bowman

[Ed. Note: This article originally published on Jan. 24, 2013]

Stocks up. Gold down. Bitcoin…waaay up.

The S&P 500 busted through the 1,500 mark this morning. Stocks haven’t been this expensive since 2007…right before they got a whole lot cheaper…for a whole lot longer. Gold, meanwhile, dipped a tad. This, despite central bankers of the world goading it on, promising to dilute the value of their respective paper currencies against the Midas Metal. Befriend the dips.

And what about bitcoin? Wait…what is bitcoin??

Here is your misfit! Your champion of decentralized power… And with it, a price…determined by the free market you profess to adore.

Why, it’s a speculation, of course; a dark horse, beloved by anarchists, ne’er-do-wells and fringe-dwelling lunatics, the kind of people you wouldn’t invite over for tea with your mother-in-law. It is the fascination of the ill-adjusted, the oddly-mannered, the heterodoxical hedonist. Indeed, the very idea of bitcoin, a “decentralized, cyber-crypto currency,” has to it a ring of the unknown…of disruption, rebellion…perhaps even revolution…

In plain English, it’s not to be trusted by members of polite society. And these are just some of the reasons we like it so much!

Since we first disgraced these pages with mention of the wretched thing, bitcoin has quadrupled in price…then fallen through the floor…then risen once again, like a Phoenix, nurtured by the fertile ashes of doubt and skepticism.

On the subject of cyber currencies, pointy-headed professors remain predictably divided. Economists, too, are split down the middle.

Even the libertarian camp seems unsure of its “official” stance…

“Can we fairly consider bitcoin a money? Is it even real? Can we take it to be intellectually ‘valid.’

What a pompous band of academic lickspittles! You who criticize the mainstream for their blind adherence to rigidly archaic principles. You who admonish the stuffy Ivy Leaguers for their brittle little theories, lacking in dynamism and ill-equipped to deal with the world as it is and as it changes. You who rage against the concentration of power, against the arrogance of control and the folly of central planning.

Well then…Here is your misfit! Your champion of decentralized power…your catalyst for democratic, horizontal information dissemination. And with it, a price…determined by the free market you profess to adore. Here, within your grasp, lies a spectacular failure…or else the agent of change for which you’ve long been waiting. Have you nothing to say but, “Yes…but does it satisfy Aristotle’s requirements of sound money?”

Ah, Phooey to you all!

We first brought you word of this underdog currency a couple of years back, shortly after it began making waves on Internet message boards. The premise seemed appealing. It was – and still is – a bet against the omniscience of central bankers. Demand for the currency rests, in no small part, on the continued arrogance of the Bernankes, Shirakawas, Kings, Stevens and Draghis of the world.

“The demand for a totally free market currency arose, naturally, out of the dismal state of the current monetary environment,” we wrote at the time, an environment “in which governments around the world systematically debase the value of their printed monies in order to pay for the various welfare-warfare states they promised but can’t possibly afford. The resulting inflation is sometimes referred to as a ‘sneaky tax,’ one that silently, insidiously infiltrates the marketplace, with each freshly-inked dollar compromising the value and integrity of each and every currency unit already in circulation.”

What, if anything, has changed in the two years since we penned those words? Has a single central banker admitted a single mistake? Has one been reprimanded for his gross negligence – be it criminal, cerebral or a combination of the two? Is one of them serving time behind bars…or on the rack…for his crimes against progress and human advancement?

Not a chance! Indeed, it is to those who caused the mess that a brain dead populace look for solutions! These are the men, mind you, who worked – actually labored – to keep alive companies that ought now to be decomposing in the tar pits of corporate failure, breaking down in order that other creative agents might one day unlock its idle energy and potential. The very presence of these individuals at the solution table is an offense to decency.

In the end, bitcoin is a bet on the other side of The State’s coin; the free market side. It’s a bet that voluntary trade will, in the end, overcome neanderthalic force and coercion. It’s a wager that the conversation currently underway in the shadowy “black” market is far more intriguing, far more complex, far more nuanced and exceedingly more interesting than the yip-yapping that distracts the undead, mainstream TV-consumer for an hour or so around feeding time every evening.

If bitcoin goes to its grave tomorrow – and it may well do so – it will be in service of precisely the point free market enthusiasts have been advocating all along: That it is not for a committee to determine the price of a good (including money itself)…or for a state or a central agency or a law or an edict.

That is for the market to decide. Today, that market says a bitcoin is worth $19. Tomorrow, maybe 19 cents…or $19k. No one body knows…and that’s exactly the point.

Regards,

Joel Bowman
for The Daily Reckoning

Ed. Note: Joel’s been following this cyber-crypto currency for years now, and his insight has given readers plenty to think about. This kind of analysis, especially as regards fringey little Interent currencies, is just what you’ll find in the FREE Laissez Faire Today email edition – a daily newsletter devoted to providing the most in-depth analysis on the topics of liberty, freedom and politics the world has to offer. Don’t wait. Sign up for FREE, right here.

You May Also Like:


You Can’t Cover Up Bad Monetary Policy

Chris Mayer

Argentina suffers from super-high inflation brought on by its print-happy central bank. Heh... Sound familiar? On a recent visit to Buenos Aires, Chris Mayer noticed shocking similarities between the state of the Argentine peso and the future of the U.S. dollar and wondered aloud about the possibilities for the U.S. economy.

Joel Bowman

Joel Bowman is a contributor to The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.

Recent Articles

Extra!
How YOU Can Help Pass the Swiss Gold Referendum

Grant Williams

For those who doubt the effectiveness of the Swiss Gold Initiative, Grant Williams has a few startling charts to show you. Today, he relays just how popular this movement is, and how you can actually influence the outcome... no matter where in the world you call home. Read on...


How Small Cap Stocks Saved the Market

Greg Guenthner

For most of the year, no one wanted small cap stocks in their portfolios. But over the last three weeks, few sectors of the market have performed better than small caps. Greg Guenthner explains how to use this to your advantage... and what to expect for the rest of 2014. Read on...


Why a Strong Dollar is the Mortal Enemy of Gold and Oil

Frank Holmes

Gold and oil are down because the US dollar is up, despite all the inflationary pressures the Fed has put on it. What's going on? Today, Frank Holmes, breaks down the U.S. economy’s current direction with several important charts. Plus, he's got a mining play for you that's prospering despite the current sentiment...


Bill Bonner
Confessions of a Newsletter Man

Bill Bonner

Being a financial newsletter writer certainly has a few advantages. Namely, it affords one the opportunity to comment on the financial markets without having to take them seriously. Today, Bill Bonner looks back on what drew him to this business, and the unique and entertaining cast of characters he's met along the way. Read on...


R.I.P. Tapir (5/22/13 – 10/29/14)

Greg Kadajski

The Tapir, beloved pig-like mammal and financial machination, quietly passed away at 2:00 p.m. EST on October 29, 2014. He lived a misunderstood life and was held responsible for many things entirely out of his control. Nevertheless, he will be missed by all who thought they knew him...


Extra!
The Most Important Factor of the Swiss Gold Initiative

Grant Williams

The Swiss Gold Initiative has the the Swiss National Bank in a panic. Should the referendum pass, the SNB will be responsible for ensuring that 20% of its total assets are held in gold. That's an awful lot of yellow metal. Today, Grant Williams puts that number into perspective and explains how it could affect the gold market...