Posted by: John Vandivier | May 11, 2013

Why Bitcoin Sucks

With all the positive talk out there about the new digital currency called bitcoin, I thought I would write a bit about why bitcoin sucks. Keynesian economics is really great in case you haven’t noticed. All the success in Europe and the US is of course due to brilliant work by governments to allow for better-than-free-market economic performance. Obama’s stimulus curbed the recession or depression or whatever it was, and Bernanke’s Quantitative easing via the Federal Reserve helped out even more! These guys got their degrees from really classy universities and, no surprise, they were taught the leading economics of the day, Keynesian economics.

Keynesian economics basically says that you spend money to get an economy going and it has a multiplied effect in the economy as a whole, eventually ending in drastic growth! There are several ways to get this round of spending going. Ways to push the snowball if you will. One way is simple government spending! Like Obama’s stimulus. Once people have more money they will spend it and when they spend it the people who get it will also have to spend it! It will start a snowball.

Another way is through inflation. If the Federal Reserve prints more money inflation will result. That means all the old money they already printed is now worth less and the truth of inflationary spending is proven by the “quantity theory of money.” This creates a cost of holding money. If I don’t but my pizza for $10 today then it will cost $11 tomorrow! I better buy it now! This starts the ball rolling.

The third way is through legal regulation. The government doesn’t really have to cause inflation or spend money themselves as long as they have a way to force other people to spend money on each other. This is a win-win because the government gets to punish people they don’t like and help people they do like at the same time! For example the government can make people get a certification or license. Sometimes the government issues the license themselves. This is more like a tax. Other times they allow a private firm to issue the certification. Those are the times I’m talking about. For example they do that with teaching, insurance, starting certain kinds of businesses and more! In these cases they are making people spend on each other and getting the ball rolling.

Bitcoin sucks because it encourages hoarding money. Not spending money is bad. How can we start the snowball? These people are like people in the great depression that put all their money in a mattress. How stupid is that. Bitcoin is also anonymous. How can the government get any taxes or fines this way? Lastly, bitcoin is decentralized. How can the government help us with inflation now? Clearly Bitcoin is very stupid. The money multiplier will never work like this!

In case you can’t tell I have been talking sarcastically. There is no money multiplier and this is one of many foundational weaknesses in Keynesian economics. The snowball effect does not exist. Unless you are talking about the reverse-snowball effect created in governments with the power to print money and tax. In the reverse snowball effect they steal your money, waste some of it, give less of it back to you and start over. Then they tell you what you’re allowed to do with it, “Or else.” Like a school yard bully; the kind that needs a kick in the teeth.

Bitcoin will be the final nail in the coffin of these primitive and corrupt government and financial systems. Of course they’re going to whine about it. Smart people pay that no attention.

Here’s some icing on the cake, a great video uncovering many flaws in Keynesian thinking in under 5 minutes:

If you valued this article John would appreciate your support by way of comment, like, share or tip!
Litecoin – LWghE5cAP3HKXNoXbfDSW6qUjCscJuPof4
Bitcoin – 1HT3ykSwHM6oHCjSvQVC9gwdXdHtWnjNkp

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Responses

  1. Hey John, I have a rather long response to your guest post on mineforman, but Neil still hasn't approved it so it's sitting in moderation jail atm. I'm just curious if you ever visit Bitcoin-related IRC channels on freenode. Your insight would be highly valued there (well if people would listen). I don't know if you've ever talked with Luke Jr. before (probably most well known for development of BFGMiner as well with other projects) but it sounds like you two would get along. Regardless, I hope Neil approves my post I'd like to hear your thought. – Tony R./D(ee)BG

  2. Hey man! Although he still hasn't released the comment I was able to read it. It essentially boils down to should you stay with LTC/BTC or diversify to other coins such as FTC correct? I would recommend in the short run stick with LTC/BTC but keep a close eye on FTC. I will be doing the same. You are right that leadership plays a huge role and while I have seen some in LTC I have seen very little in FTC. Finally, there is the possibility that FTC may be many times more secure and faster than either of the other two but I won't go into that it's complicated and technical. Just watch it and perhaps mine it a little since the difficulty is still low but don't bet the farm on it so to speak.


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