The analysis in “Is Bitcoin Standing In For Gold?” is partly wrong with two false assumptions:
1- All crypto-currencies are equal
2- Crypto-currencies are created, circulated for the same purposes in the same mode as fiat money.
These two assumptions are false.
The reality is, cryptocurrencies are not equal. Each has its own advantage and disadvantage and independent from one another. ( as off June 2017 there are more than 800 different Crypto currencies in the market) Unlike fiat money with which people are forced to used by brute force of Government, Cryptocurencies are freechoice. Their circulation depends on users ‘ voluntarily agreement and concencus on each type of “coin”s own advantage over the others’.
Crypto currency will die only when people no longer see any benefit in using it as mean (medium) of exchange and in defying government centralized control.
Different type of Crypto-currency can be introduced into the market at any time as market demands, They will either co-exist and compete with one another by users’ free choice and consensus without coercive laws and national borders. This means the least satisfying “coin” will be eliminated, and the most efficient “coin” will be widely used. Therefore cryptocurrencies are not inflationary in any case and at any rate. This is an ideal and desirable situation, not a problem of crypto-curremcies.
-Fiat money is created by the State absolute power to control and enslave people for the interest of the few. Crypto-currency exists by people free will and for liberty.
As for Bitcoin, technically, since Governments still exits and manipulates the market with laws and regulations-taxation, many business must convert Bitcoin to fiat money for many important transactions, therefore by exclusive infinite printing power, Government can hoard and dry up Bitcoin by buying all the Bitcoin (any crypto-currency) and “forget” about the password.
However, this act not only is futile but will inflate fiat money even more, while different type of “crypto-coin” can be created at any time to fill the gap.
Don’t forget that Bitcoin ( and Crypto currency in general) is deflationary by design. That means purchasing power of a Bitcoin will increase overtime whereas fiat money is inflationary, its purchasing power decreases overtime.
A bit coin has 100 million Satoshi. Thus the Satoshi will be the basic unit for daily transaction.
-Crypto-currency is enemy of the State. Therefore government sabotage should be expected.
-More crypto-currencies will be introduced into the market, they will co-exist and compete with one another to serve people liberty. Each type of cryptocurrency is finite and can even be rejected out of existence by users at any time. So they are not infinite in term of inflationary as fiat money. Therefore this is desirable, not problematic.
Crypto-currency exists by and for the free will of the people. The existence of the State with its absolute coercive power is the problem, not the free will of people.
Is Bitcoin Standing In For Gold?
Is Bitcoin Standing In For Gold?
Paul Craig Roberts and Dave Kranzler
In a series of articles posted on http://www.paulcraigroberts.org, we have proven to our satisfaction that the prices of gold and silver are manipulated by the bullion banks acting as agents for the Federal Reserve.
The bullion prices are manipulated down in order to protect the value of the US dollar from the extraordinary increase in supply resulting from the Federal Reserve’s quantitative easing (QE) and low interest rate policies.
The Federal Reserve is able to protect the dollar’s exchange value vis-a-via the other reserve currencies—yen, euro, and UK pound—by having those central banks also create money in profusion with QE policies of their own.
The impact of fiat money creation on bullion, however, must be controlled by price suppression. It is possible to suppress the prices of gold and silver, because bullion prices are established not in physical markets but in futures markets in which short-selling does not have to be covered and in which contracts are settled in cash, not in bullion.
Since gold and silver shorts can be naked, future contracts in gold and silver can be printed in profusion, just as the Federal Reserve prints fiat currency in profusion, and dumped into the futures market. In other words, as the bullion futures market is a paper market, it is possible to create enormous quantities of paper gold that can suddenly be dumped in order to drive down prices. Everytime gold starts to move up, enormous quantities of future contracts are suddenly dumped, and the gold price is driven down. The same for silver.
Rigging the bullion price prevents gold and silver from transmitting to the currency market the devaluation of the dollar that the Federal Reserve’s money creation is causing. It is the ability to rig the bullion price that protects the dollar’s value from being destroyed by the Federal Reserve’s printing press.
Recently, the price of a Bitcoin has skyrocketed, rising in a few weeks from $1,000 to $2,200. Two explanations suggest themselves. One is that the Federal Reserve has decided to rid itself of a competing currency and is driving up the price with purchases while accumulating a large position, which then will be suddenly dumped in order to crash the market and scare away potential users from Bitcoins. Remember, the Fed can create all the money it wishes and, thereby, doesn’t have to worry about losses.
Another explanation is that people concerned about the fiat currencies but frustrated in their attempts to take refuge in bullion have recognized that the supply of Bitcoin is fixed and Bitcoin futures must be covered. It is strictly impossible for any central bank to increase the supply of Bitcoins. Thus Bitcoin is standing in for the suppressed function of gold and silver.
The problem with cryptocurrencies is that whereas Bitcoin cannot increase in supply, other cryptocurrencies can be created. In order to be trusted, each cryptocurrency would have to have a limited supply. However, an endless number of cryptocurrencies could be created that would greatly increase the supply of cryptocurrencies. If entrepreneurs don’t bring about this result, the Federal Reserve itself could organize it.
Therefore, cryptocurrency might be only a temporary refuge from fiat money creation. This would leave gold and silver, whose supply can only gradually be increased via mining, as the only refuge from wealth-destroying fiat money creation.
For as long as the Federal Reserve can protect the dollar by bullion price suppression and money creation by other reserve currency central banks, and as long as the Federal Reserve can keep the influx of new dollars out of the general economy, the Federal Reserve’s policy adds to the wealth of those who are already rich. This is because instead of driving up consumer prices, thus threatening the US dollar’s exchange value with a rising rate of inflation, the Fed’s largess has flowed into the prices of financial assets, such as stocks and bonds. Bond prices are high, because the Fed forced up the price by purchasing bonds. Stock prices are high, because the abundance of money bid prices higher than profits justify. As the US government measures inflation in ways designed to understate it, the consumer price index and producer price index do not send alarm systems into the markets.
Thus, we have a situation in which the Fed’s policy has done nothing for the American population, but has driven up the values of the financial portofilios of the rich. This is the explanation why the rich are becoming more rich while the rest of America becomes poorer.
The Fed has rigged the system for the rich, and the whores in the financial media and among the neoliberal economists have covered it up.