"Twice-Lent Money" page 1.1
Bitcoin and other Crypto-currencies

Bitcoin is cutting-edge technology devoted to mimicking the most primitive form of money, a "single uniform commodity in limited supply the value of which depends on its scarcity". This concept of money was necessary when there was no other way to transfer value over long distances except by using objects of perceived value.

Today, as the rest of this analysis has presented, this concept of money is the root cause of our economic growth imperative, wealth disparity and resulting instability.

But, unlike gold which has a real limited supply, the scarcity of digital money is false.
If you think fiat money is out of control, crypto currencies are potentially boundless.

Theory
Let us suppose Bitcoin had a monopoly on the world's money supply (which could only be enforced by world government). The designed-in limit of 21 million Bitcoins stays in effect, and before long the Bitcoins are accumulating in the possession of the banks, corporations and rich people just like bank credit money does today and gold and silver did in the past. The fundamental problem is not solved. It is worsened!

The rich don't need to spend their Bitcoins, and by hoarding them, they can drive the value up in terms of real goods and services to who knows what astronomical figure? As well, the rich will make their Bitcoins available as loans at interest and soon everyone will be trapped in Perpetual Debt of Bitcoins. Yet, this is what many, including the inventors of crypto-currencies, promote as "sound money" and Max Keiser hails as "the revolution".

Reality
Unlike physical commodities with real constraints, and bank credit theoretically limited by our ability to pay it back in real economic activity, there will be NO LIMIT to the issuance of crypto currencies. There is nothing to stop countless Bitcoin imitators from emerging. In fact, this is already happening. All of these new crypto-currencies are completely worthless except in the perception of wide-eyed speculators seeking to get rich quick.

Thus, by taking the "single uniform commodity in limited supply" principle as its basis, and then making it possible to multiply these "limited supplies" to infinity, crypto-currencies have rendered this primitive concept of money an absurdity!

return to problem 6 / solution 1