2013-12-6: Gary North "I, Broken Pencil": An Economic Analysis of Bitcoins"

[davidgdg]

http://www.garynorth.com/public/11857.cfm

No property rights. No contracts. Manufacturers don't accept it. It's a mania. It's not private. Only bank money is real money.  Bitcoin is anti-Austrian. It's a conceptual delusion.

Fair to say that he doesn't sit on the fence.

[runam0k]

He'd get on really well with Izabella Kaminska at FTAlphaville.  This is literally all she writes about whenever she discusses Bitcoin.

[Akka]

Let's not do this guy this favor:

There will be a hundred angry online rebuttals by programmers, published on obscure websites. They will insist that I do not understand Mises. Make up your mind after you read at least one critical response by an Austrian school economist who has written at least one book. Meanwhile, read mine: Mises on Money.)

Nobody is forced to use BTC. If he doesn't want to investigate if there maybe is more than the price level to Bitcoin. So be it.

[Shermo]

So his premise is that Bitcoins can't be real money, because you can't manufacture something for Bitcoins without at some point converting it to fiat?

Surely that's the same premise as saying you can't manufacture something for $$$ without first converting to £££ or Yuan or Euros, if the materials you need are priced in that.

[bitcool]

Until there are contracts and courts in the Bitcoins world, Bitcoins will remain a conceptual delusion -- one inherently opposed to Mises' conception of capitalism's pricing system.

I see many Bitcoin contracts and (people's) courts here on this forum

[Gabi]

What a joke 

[jdbtracker]

Indeed, the man does not understand Bitcoin.

I agree with the statement above, that it is like saying you have to convert money to function from one economy to the next... which is what he is saying... the hypocrisy and confusion of his argument is amazing. If I want to buy stuff in Japan I have to convert to Yen, but they will accept any easily convertible currency in a limited amount through that territory. Bitcoin's territory is the internet... and denying it's adoption is claiming that all things must be done by force by that of a government dictating what is and what is not by the threat of force... Force... how can he have a say in his government if he denies his own freedom of choice, is government not for the people by the people?... but wait, government dictates what we are all thinking and is the final arbiter of what we collectively believe and disbelieve.

The banking system has not changed in thousands of years... why would they want to change? It's filled with people who just want to get paid and go home, they have no incentive to change the system. In that system only the ceo s have the right to dream and change, what incentive does the common person have to support the advancement of a institution it has no interest in beyond a paycheck? We are a collective of millions of people, encouraged to think, talk change and advance the system, survival of the fittest favours those capable of adapting.

“Ignorance more frequently begets confidence than does knowledge: it is those who know little, not those who know much, who so positively assert that this or that problem will never be solved by science.”
― Charles Darwin, The Descent of Man

The article denies the effects of social networks and their ability to grow and expand, if there is a place cryptocurrencies cannot go, we will modify it to go where it has not gone before.

The ability of cryptocurrencies to move in ways that traditional money cannot is what will benefit it's adoption of more goods and services, when is the last time you looked at how different banks around the world convert local money to buy international goods? They have to wire transfer the amounts, convert to dollars if necessary, confirm the transaction, keep a ledger of foreign banks national currency reserves compared to dollars. It all takes time, weeks, months even... the Normal Banking system is magnitudes more complex and inefficient compared to all Cryptocurrencies to be able to buy goods abroad... With Bitcoin the transaction is universal any currency anytime at a moments notice and it is global.

and no courts, contracts? Man, the guy has clearly not seen BitcoinJ or the unfinished contract code inside Bitcoin for irrefutable, undeniable, enforcement of contracts... enforcing contracts by mathematics. What do we need Courts for when the code for contracts is built in such a way that you simply cannot willingly forfeit it's clauses? All you can do is default and be given the automatic penalty dictated by the contract for defaulting on it's terms. If the system is broken then yeah we need courts... but it's software so we just write better algorithms and code. We live we learn.

If key components of an economy are accepted for Bitcoin everything will change, start at the bottom Farmers willing to earn Bitcoin and the greater support of the community to advance agriculture is a fair trade, from that foundation is required shipping companies to accept Bitcoin to move the crops, people willing to accept payment in Bitcoin to transport these goods, stores willing to accept BTC in payment for these few goods, which in time they will use to buy other goods that they can purchase for Bitcoins.

We must not forget the network effect ever! The more people buy into Bitcoin means that the companies that Hold onto bitcoins will grow in size faster as they make connections, traditional companies that do not accept and hold BTC will shrink in size while BTC companies worth increases not just by their economic worth but by their stake in Bitcoin... they will get richer faster, bigger growth potential! If it is done right, we can eat every single other company on the planet within a few years.

This is going to be big my friends, the way we are connecting our ideas, projects together is huge... traditional companies are not built to leverage this technology! they still rely on having centralized thinkers, CEOs to do all the change for the corporation... they are too indoctrinated by the traditional system to understand... this is a grass roots movement, it'll be the organic farmers, little mom and pops with more decentralized independent ways of thinking that will move this forward... they will be the winners.

My brothers and sisters, are you ready to use this technology to change the world? Who can change it but us? In the social order of things there are only a few government officials making decisions, compared to the billions of us who live our lives choosing our fate everyday.

[monkeybars]

So . . . a new currency must come out of the gates and be accepted by everyone all at once, or it will fail utterly?

So . . . all the private varied monies in the 19th century, which were accepted by some but not others, completely stopped industry?

So . . . because Bitcoin does not have the surrounding legal and contractual infrastructure of fiat, it never will?

So . . . any and all movement of Bitcoin for trade of physical goods must move back to fiat?

So . . . all speculative markets based on future potential are tulip manias?

So . . . all money must start with a legal framework, not with creation of currency, or else it's in violation of the Regression Theorem?

So . . . Bitcoin transactional privacy is nonexistant and always will be?

So . . . Bitcoin isn't decentralized?

So . . . new, cryptocurrency-based institutional arrangements aren't extensions of the prevailing social order?

So . . . if they aren't, that means they're not legitimate?

I could go on, but won't bother. North makes a lot of assumptions, some of which are simply bullshit, some of which are clearly specious, and some of which are reasonable.

This half-baked essay is the shot over the bow from the economic thinkers to the technological thinkers. Bitcoin is the battlefield for this conceptual struggle. If this is the best they can come up with, it's a bullish sign for Bitcoin.

Bitcoin enthusiasts make a lot of assumptions too. Probably none are complete bullshit, but many certainly can't be proven. Some of them:

So . . . mining will always be financially attractive to some entities?

So . . . sudden cryptographic cracks never happen?

So . . . stealthy takeover and disruption of the mining network is impossible?

So . . . absolute worldwide outlawing of cryptocurrency is impossible, or would not affect their usefulness?