Why Bitcoin will fail.
Bitcoin is backed by nothing and eventually a new cryptocoin coin based on productive assets will come along and displace it. Bitcoin was created with work the same way a hamster riding on a wheel creates work, once the hamster gets off the wheel you have nothing. Bitcoin represents no wealth. It may have value as a collectible, but the value of that long-term is unknown.
Consider bitcoin is priced at about $500 per coin. Now suppose we had a cryptocurrency based on gold as Max Keiser recommends at $500 a coin. It would not really matter, it will still be based on faith the gold is there. As has been shown, gold always and eventually fails as a currency as leaders eventually cheat on the gold backing. Gold as a nations currency has a 100% failure rate. Bankers can even go into the vaults if unaudited daily and use some of the gold for a summer vacation or a new house. They can always issue too much debt or the government can shave or debase coins. However, gold as a metal commodity has never failed.
The U.S. dollar is only used because you have to use it. Social security checks, welfare checks, government jobs, and all stores depend on it. The government requires its use and no one would use it otherwise. Bitcoin is not subject to this tyranny. All government fiat is used for a specific geographic area. The M2 money supply has been increasing by about 6% annually since 1980 (
http://research.stlouisfed.org/fred2/data/M2.txt). Even before 1971 the U.S. dollar lost about 80% of its value. The United States learned a hard lesson in 1929, even though you are on a gold standard all the gold is not necessarily there to back the money supply.
Presently there is another asset worth about $539, it is called Autozone stock AZO. AutoZone is the second-largest retailer of aftermarket automotive parts and accessories in the United States, Founded in 1979, AutoZone has over 5,200 stores across the United States, Mexico, and Brazil. But there is something really unique about Autozone as a stock, it has no assets. Its book value has been negative for over 5 years. It pays no dividend. But why does it have value? Earnings and positive cash flow. It is the brain child of Eddie Lampert who does not even own the stock anymore. All virtually all earnings and debt not used for growth was used for buybacks or stock repurchases. AZO began the century at about $26 (see appendix below). Thus the stock has increased 20 to 1 or a 20 bagger. Today sometimes you hear in the investment world the stock is going to go Autozone on you. Meaning doing everything to do massive repurchases. The danger is if anything happens to AZO earnings stream it will go bankrupt. Even though bitcoin or any currency has zero assets, it still has more assets than Autozone.
Now consider a cryptocurrency (call it Capital Coin) that instead of $500 of nothing or gold, owns $500 or more of productive assets per coin. Furthermore the legal owners of these assets are in a country that pays no investment taxes. Suppose you buy $500 worth of a coin and it goes into Iowa farmland, or even 100% in a stock like Coca Cola KO. Now take the profits of this $500 a use it to buy Capital coin, send it to an void address, and destroy it. Coca Cola presently pays a 3.1% dividend. Just destroy 3.1% dividend of capital coin a year. There would be paper trail to see the coin was destroyed. If bitcoin with a market cap of $6 billion held only KO it would be the 4th largest shareholder of KO.
Rather than have $500 of nothing, invest the $500 in a stock or business. Destroy the coin of capital Coin with the profits. Use high transaction fees to protect the coin and keep blockchain small like peercoin. We should be able to make productive investments to earn and destroy 10% annually on our investments. There is also a lot we can do with those investments, we could own billboards, television stations, we could even allow you to rent land at low rates and destroy the rent in the coin. Thus you might rent 10,000 square feet of land for $50 U.S. equivalent annually. The only thing is the rent goes down 10% a year. So you have a nestegg of 30 coins and the rent is .1 CC. You have at least 300 years not to worry about rent.
Sales tax is often 10% in the United States. If we collect a 2% tax and destroy 1% and 1% to the miners. It would add more value to the coin and keep the blockchain small. Capital coins will be where you save like you should in a currency, as it was meant to be, that is truly INCREASING in value. Currency is suppose to increase in value, it is suppose to represent commodities, and represent things of value. It is not suppose to be a fantasy used to give government employees a big fat raise and summer vacation.
In summary which would you rather own:
Money Supply Growth Rates:
=================================
German Mark: Infinity
Zimbabwe Dollar: Infinity
Argentine Peso: 20%
U.S. Dollar: 6%
Euro: 4%?
Gold: 1-2%
Bitcoin: 0% (presently 9%)
Capital Coin: -10%
The answer is obvious a capital coin. This should put the nail in the coffin of the Euro and Dollar and all currencies controlled by professors, bankers, politicians, and lawyers. In his book stocks for the long run, Jeremy Seigel made a graph of investments. These are real returns of $1 invested in 1802 after inflation from 1802 to 2006. I added my estimates bitcoin and capital coin. I also added German Mark and Russian Ruble.
German Mark $0
Russian Ruble $10E-14
U.S. Dollar $0.06
Gold $1.95
Bitcoin $100
Bills $301 (dead)
Bonds $1083 (dead)
Stocks $755,163 (last hope of liberals to completely raid they got about 80% of it so far).
Capital Coin $2,000,000
Can bitcoin become a capital coin? I think so if new capital coins donate 1% of the deletion of bitcoin. Or people who create bitcoin businesses donate 1% of profits to the deletion of bitcoin. You might even see secret societies popping up around the coins. So instead of the coins you typically see, you will start to see new coins like:
Iowa farmland Coin
Coca Cola Coin
Autozone Coin
Crowdfunding Coin
Gold Mining Coin
Dog Kennel Coin
NY Rent Coin
Berkshire Coin (10% of value deleted every year)
Gas Station Coin
Ethanol Coin
Fishing Boat Coin
Autozone Stock
shares (MM)-Price
2013 034.3 $477
2012 037.0 $357
2011 040.1 $327
2010 045.1 $273
2009 050.8 $159
2008 059.6 $137
2007 064.9 $120
2006 071.3 $115
2005 076.6 $92
2004 079.8 $91
2003 088.7 $85
2002 099.3 $71
2001 109.4 $67
2000 121.5 $28
1999 144.4 $32
1998 152.3 $33
I would like to be known as the godfather of capital cryptocurrency coins (CCC). As a capital coin is being bought with dollars, there will always be a buyer, you will not need to promote the coin. The lower the coin goes the more will be bought back. A committee that runs these capital coin funds should be allowed to use 10% of the profits (coins that are to be destroyed) to run and maintain the system. Bitcoin can still be used as the base coin to buy all your goods online. Just a simple BTC-CCC exchange and it could all be done automatically like BTC is done with the dollar.
Welcome to capital coin, are you in?
When in doubt delete - capital coin.
Recommended Reading
Progress and Poverty - Henry George (capital definitions)
Stocks for the Long Run - Jeremy Seigel
100 to 1 in the Stock Market - Thomas W. Phelps
Global Stock Valuation - Mebane Faber
https://www.youtube.com/watch?v=B1RhAWzUCsc
