Carney gets it right! (Almost)
British central banker Carney has masterfully destroyed the Bitcoin bubble.

The speech itself in PDF form is even better than the summaries given in various media. It's a well-constructed academic lecture on the broad subject of money and value, showing how Bitcoin fails the test of moneyness.

He includes a couple of fresh insights:

It is important to recognise that modern money takes three forms that are linked by retail and wholesale payments systems. Each link in the chain is critical to the resilience of money. The first form of money is the banknotes issued by central banks. These account for just 3% of the stock but 40% of all consumer transactions. Next is electronic central bank money in the form of the reserves that commercial banks hold with us, including to settle transactions with one another. Finally, and most significantly, the electronic deposits that commercial banks create when they extend loans to borrowers, accounting for fully 80% of money in the system.

We rarely hear about the dominance of plain cash. Both bankers and bitcoiners try to persuade us that cash is extinct. It's not.

The private financial sector cannot create money without limit, but is disciplined by competition, constrained by prudential regulation, and limited by decisions of households and companies that can reduce the stock of money (by, for example, repaying existing debt).

We never hear about our own POWER over value, and I'd never thought of it that way! It's strictly logical. Staying out of debt obviously keeps your OWN life within the circle of real value; it also plays a tiny part in reducing the power of the abstract Tribe over the ENTIRE economy. If nobody ever borrowed, the fractional reserve system would stop creating false value and the Tribe would lose its power.

On Bitcoin, Carney lists the three fake claims made by the racketeers:

1. Its supply is fixed and therefore immune from the age-old temptations of debasement;

2. Its use is free from risky private banks;

3. Those who hold it can remain anonymous and therefore free from the ravenous eyes of tax authorities or worse still law enforcement.

... and demolishes the first two with plain facts and logic.

1. The fixed supply GUARANTEES a bubble. That's the whole point of the fixed supply. Like famous artworks or classic cars or land, there's no elasticity of supply to balance out demand.

2. Free from the control of private banks? Bitcoin places your transaction in the hands of a few unknown and unregulated criminals, who have no particular reason to LET you make the transaction.

And if you use a debit or credit card in the UK, the transaction is completed in seconds and without exchange rate risk. In contrast, Bitcoin users can face queues of hours. Those wanting to get to the front to make time-pressing payments need to offer up a transaction fee sufficintly large to persuade Bitcoin “miners”, who verify and process transactions, to do so quickly. The fees paid vary through time, but reached £40 in late 2017. Fees are currently around £2, but even that is expensive relative to cash, cards or online payments which cost the retailer around 1.5 pence, 8 pence and 19 pence respectively.

3. Anonymity. This is the one point Carney misses, whether intentionally or not. Anonymity is OBVIOUSLY a false claim, since Bitcoin runs through NSA and was designed by CIA to be a trap. I'm not sure why Carney skips this; maybe he's constrained by gov't rules. Good old can't confirm or deny.

Carney then asks what gov'ts should do about Bitcoin, and makes a convincing argument for strict regulation and taxation. Banning a popular activity after it's well under way is the quickest way to force total criminality. Regulating it and taxing it places a counterforce against the scarcity bubble.

Later thought: By stating that taxation is possible, Carney takes down the anonymity claim without explicitly disputing it. So he does destroy all three points.

Labels: Natural law = Sharia law

  ¶ 1:28 AM