Feb 19, 2016

What Is A Bitcoin? A Microscopic Magnetic Field On A Computer

Common Sense Commentary: Hugo Salinas Price is one of my favorite authors. He is an humble, intelligent Mexican billionaire, with common sense, who does his best to influence Mexican politicians to make wise decisions. He is also a generous philanthropist and a very decent man.



What Is a 'Bitcoin'?



A "Bitcoin" is a microscopic magnetic field on a computer memory. The inventors of the "Bitcoin System" allow a person to purchase one or more Bitcoins for fiat money and to move the purchased Bitcoins around the world, from one computer to another, free of interference by any governmental agency.
Those who promote the Bitcoin System sing the Bitcoin's praises as being a money that is free of any interference or influence by any government agency or monetary authority, and the owner's Bitcoin property is known to no one but the owner. Secrecy and privacy are the Bitcoin's great merits.
Additionally, Bitcoins are promoted as free of inflationary risk, for the fanciful reason that the Bitcoins are "mined" - evoking the strenous labors of the gold-miners in their dark caverns - by specialists who must rack their brains to "mine" Bitcoins and produce new, additional Bitcoins to contribute to the Bitcoin System as their property. This is a reminiscence of the old, discredited doctrine that "Labor is the source of all value."
Thus the Bitcoin is supposed to be a great triumph of technology favoring the rights of the individual to his property and privacy, and these claims are undoubtedly true. But, does this make the Bitcoin a new type of money?
The answer is "No".
"Commerce" or "Trade" is the indirect exchange of goods and services between individuals or companies.
All commerce today involves indirect exchange; that is to say, we sell something in exchange for something else, which is money, and then we use the money to exchange it for what we wish to purchase.
The money we once used - gold or silver - was simply the commodity which allowed those who participated in indirect exchange to effect their exchange at the lowest possible cost to both sellers and purchasers.
Gold and silver are the commodities whose marginal utility falls at the lowest rates - gold first, followed by silver - of any commodities known to man. This is the reason that they were used as money, once upon a time.
When they were used in indirect exchange, both the sellers and the purchasers of the exchanged goods did so at the lowest possible costs to themselves.
The Bitcoin is not a commodity. It is a magnetic field on a computer. It cannot have "marginal utility" because it is not a thing, but an idea represented by a magnetic field.
The fundamental idea touted to enhance the "value" of the Bitcoin is that "Bitcoins are scarce", as if simple scarcity is the source of value. The fact is, that scarcity does not necessarily make a thing valuable. Would you like to purchase a packet of my hair, cut recently? It's extremely scarce, you know.
There is a reason why the Bitcoin has obtained a measure of success. The reason is that all Bitcoins are microscopic magnetic fields on computers, just as all "money" today, in banks around the world, are microscopic magnetic fields on computers. So the Bitcoin is one scam offering a new, self-proclaimed imaginary "money" competing with another huge, established scam also offering only imaginary "fiat money".
The Bitcoin is merely a new-arrival on the scam scene, as an alternative to the established scam scene of exclusively fiat money in all the world's banks.
For the time being, the established scam has the upper hand, because a) fiat money (in about 174 varieties around the world) is the "owner in possession" of the perversion of the original system of real money, which perished in 1914, and b) people are accustomed to it, since they have been using it for a century.
You own Bitcoins? Have fun! You will be crying, at some point down the road, but you will be able to cry secretly and privately, with none the wiser -and with your losses safely in your hands, of course.

A second article on Bitcoin also by Hugo Salinas Price.

Suppose someone wished to sell his house, way back in the 1890's when gold was used as money, and somebody came to that person and said, "I'll give you "x" ounces of gold for your house", and suppose the offer was accepted. This was a commercial operation, where goods traded hands - the owner of a house sold a house, and received gold; the other party delivered some gold and purchased a house.
When, bygone days, a house was sold for gold coins, all that the seller had to regard was the quantity of gold in the coins offered and whether that quantity was satisfactory or not. Gold was recognized as money!
Now suppose you wish to sell your house today, and someone offers to pay for it in "x" number of Bitcoins. The quantity of Bitcoins - unlike a quantity of gold in yesteryear - would mean absolutely nothing to you. You would have to relate the Bitcoins to something else, namely the dollar. You would want to know for how many dollars you could exchange your Bitcoins. The answer would determine whether or not you sold your house.
It is quite clear that the Bitcoin can only aspire to be aderivative of the dollar. It cannot aspire to anything greater: to have an independent, sovereign value, since, unlike gold, it is not something - something that has a physical existence.
The dollar is presently rising in its exchange value against all other currencies. But no one can deny that the dollar is itself a fiat currency, and that in all history, absolutely all fiat currencies have ended in the total collapse of their value in exchange.
What future awaits the Bitcoin when the fiat dollar finally crashes? Without a dollar to refer to, what is a Bitcoin? It is "the shadow of a dream".
What I am getting at is that the Bitcoin is a non-thing. It will never be able to have an independent, sovereign value on its own, because it is a non-thing, just like all currencies in the world today are non-things, including the (temporarily) Almighty Dollar, which became an absolute non-thing precisely on Sunday, August 15, 1971.
The creators and promoters of the Bitcoin are perhaps acting in good faith, but they are individuals enthralled with technology. The Bitcoin may indeed be a technological marvel, but the creators and promoters of the Bitcoin do not understand money, and they do not understand that the creation of money cannot be accomplished by technology, no matter how sophisticated it may be. The ignorant public of today is also bewitched by the marvels of technology and has been thoroughly deceived by false economists about what money is and must be, and this opens the way for such fantasies as the Bitcoin.
I stand by my opinion that the Bitcoin is, in fact if not in intention, a fraud; it is an attempt to muscle-in on the enormous scam of universal fiat money, which is a curse upon mankind. And as a scam, it will go to the dust-bin of History, along with the world's present fiat money system.



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