This is an odd thing. Do you really care what currency you use? I... don't. I have traveled to other countries, and in so doing, used other currencies. I didn't enjoy paying fees to convert dollars to euros, for example, but the fact of paying for things in euros didn't feel better or worse to me. I could not possibly have cared less about the units of currency themselves.
Economists have studied money as a concept. The discipline isn't just about intersections of supply and demand curves, or whatever else you got in that shitty high school class through which you slept. (Or am I just projecting?) One of the interesting aspects of techie types is that they sort of want economic policy, and policy more generally, to be made in a technocratic way. It doesn't work that way. Too many disputes are unclear, and dependent on value judgments, even within economics. Consider the Phillips Curve, proposing an inverse relationship between unemployment and inflation. You can have low unemployment or low inflation, but not both. Which would you prefer? Make your choice. Question the first: Do you believe the Phillips curve? Question the second: If you have to make a choice, which choice do you make?
The data are somewhat unclear on the first question. We had a period of stagflation in the 1970s, with high unemployment and high inflation, which the Phillips Curve suggested couldn't happen. To followers of Milton Friedman, this meant the Phillips Curve was bullshit. To his detractors, it was a weird anomaly that hasn't repeated. But, even if you throw out that weird period of stagflation, do you prefer low unemployment or low inflation, if you accept that that is the tradeoff? That's a value judgment. Technocratic assessments can't answer that question. This is where the fantasies of techies who want "ideology" out of economics fall by the wayside. Ideology will always be a part of economics. Would you rather a few people suffer a lot under high unemployment, or everyone suffer somewhat with high inflation? That's an ideological question, and your answer will depend on the extend to which you blame the unemployed for their own situations, etc. Ideology.
The thing is, ideology pops up in weird places where it shouldn't. Fiat currency. This is a solved problem. I have addressed this throughout the series, but this isn't something that is really debatable anymore in economics. The meaning of 70s stagflation? Sure. That's hard. Fiat currency and monetary policy? No, that's a good thing. Period. Yes, governments can screw it up, but the idea of fiat currency... this is a good thing. Economists across the ideological spectrum rejected idiotic bullshit like the gold standard long ago.
There is a contingent who will never give up the dream of the gold standard, though. Those fucking Austrians. Many bad things throughout history have come from Austria... Worse things than have come from Africa and Haiti... Just sayin'... Anyway, there is a long history of ideological dispute regarding choice of currency, for those who haven't studied history.
Remember William Jennings Bryan? He was the dipshit anti-scientist in the Scopes trial. He also gave one of the most famous speeches in any party convention in US history. "You shall not crucify mankind upon a cross of gold." He held out his arms like he was being crucified himself, and really hammed it up. Fucking drama queen.
What has he blathering about? Gold standard versus silver. This was seriously a thing in 1896. Like, a big thing. A central ideological issue. People really can, and have, attached ideological principles to their currency preferences.
Then, we get to the depression, WWII, and the process of the world realizing how totally fucking stupid the gold standard was, and the value of fiat currency. This really was technocracy winning. There was simply no way for economic problems on the scale with which we were dealing to be handled with a strict gold standard. Fiat currency gave government the financial tools to address the depression, and fund WWII. By that point, you get everyone from John Maynard Keynes to Milton Friedman acknowledging that the gold standard is the dumbest fucking thing ever.
Except for those idiotic, fucking Austrians. Like I said, the extent of horribleness that has come from Austria cannot be overstated. If I had my choice, in history, between what has come from Africa and what has come from Austria... hint, hint, hint... Come on, people, read some fucking history. Some of my references are obscure and coded, but this one is not that obscure, is it?
And yet, there are still a bunch of people who are ideologically attached to gold. If you follow business news, what you will read is the notion that gold is a "hedge against inflation." What?! OK, translation. That means that if the value of the dollar goes down, the price of gold goes up such that gold retains its purchasing power.
Why would that be?
Um...
'Cuz...
Look, gold is a fucking scam. Gold has value. Why? People want it. It is used in jewelry, primarily, but also in electronics. Still, it is scarce, and people want it. Therefore, it has value. How much? Whatever people want to pay. Does it follow from that that gold retains purchasing power amid inflation?
No. No it does not. That's just ideology. Here's the price of gold, since the "great recession," from Federal Reserve Economic Data.
The price of gold went way, way up as people freaked the fuck out about inflation, which never materialized, and the price of gold has fluctuated a lot. Remember that "stable store of value" thing I keep mentioning? Does this look like a stable store of value to you? No? That's 'cuz it ain't. Gold is not a stable store of value. It isn't a hedge against inflation. It is a commodity subject to market speculation and ideological bullshit.
And that's why there are ads for paranoid nutjobs to buy gold based on the premise that everything is going to go to shit, and gold will be the real currency because gold is and has always been the true currency. The idea that gold is a hedge against inflation is predicated on the notion that it maintains purchasing power because it is the true currency. Bull-fucking-shit. Just look at that graph!
So, um, what does this have to do with bitcoin? Well, I've been writing regularly about the similarities between arguments for bitcoin and arguments for gold because they are basically the same thing. They are driven by the same ideological impulse, that being the impulse to take currency away from the control of government. If you listen to any bitcoin bug for any significant length of time, this is the centerpiece of what motivates them. Fiat currency is bad, government control of currency is bad, so bitcoin is the bestest thing evAAAAR!
And really, that's no different from the impulse towards the gold standard. We don't use the gold standard. People still buy gold. Its price just fluctuates.
What about bitcoin, then? The problem for bitcoin is that it has no actual use. For anything, really. Gold is used in jewelry, electronics, and a few other things. Beyond that, people have been convinced to trade it, 'cuz... um...
... uh...
... 'cuz people are trading it. There are endpoint uses, though, and it can be exchanged as a unit of currency. It generally isn't because it is a pain in the fuckin' ass to use as currency, but you can trade it for stuff. A lot of what it has going for it is goldbuggery, which is a bizarre ideology committed to the notion that gold just has intrinsic value and will always have intrinsic value.
But, as along as someone will pay for it, it has value. That's how markets work. If someone will pay for the shit that comes from my cats' litter box, then catshit has value.
Anyone wanna buy some catshit? I'll give you a great deal.
Bitcoin? It has no use in and of itself, unlike gold. You can't use it for jewelry, electronics, or anything else, and as I keep writing, you have big problems trying to use it as currency. Right now, there aren't many vendors that accept bitcoin, and even if there were, it's stupid currency. A currency needs to be a stable store of value. If it is going up in price, I'm stupid to buy stuff in bitcoin because I could get more for the same price later. If it is going down, you're stupid to sell stuff to me in bitcoin because what you get will be worth less tomorrow. And even that aside, since the government won't take tax payments in bitcoin, there are transaction costs to conducting transactions in bitcoin anyway, so... bitcoin is worthless as anything other than currency, and fucking stupid as currency.
What does bitcoin have? It has people ideologically committed to it. As long as bitcoin has that, people will buy it. At what price? I have no clue. But as long as bitcoin has that, it will circulate. Not widely, and not as a prominent consumer currency, but as a curiosity because a group of people who care more about an ideological statement than economic efficiency want it.
And therein lies the irony. The very people who advocate bitcoin-- techno-libertarian types-- tend to be the ones who think that everything has a technocratic solution, and miss the fact that they are pushing against every technocratic economic solution we have found in the last century.
Of course, the actual ideological impulse is not towards bitcoin itself, but the concept of an electronic cryptocurrency. Hell, for all I know, that joke currency, Dogecoin might overtake bitcoin, but the fact that people actually buy Dogecoin demonstrates exactly how fucking stupid the cryptocurrency craze is.
At the end of the day, most people just want the easiest way to pay for stuff. That will always be the currency issued by the government in any country with a functioning government. There is no actual utility that anyone gets by using a cryptocurrency. Advocates of bitcoin, and other cryptocurrencies, just like it because it makes an ideological statement. There is a history to attaching ideological value to currencies, but whatever ideological value bitcoin bugs attach to their cryptocurrency, that won't make it become a big thing. That's not how economic transactions work. Because bitcoin is bullshit.
Where does that push the price of bitcoin, and how does that affect the cryptocurrency market? Coming soon...