This is not (only) why bitcoins are a bad idea

The USD value of bitcoins decreased by 30% in one day on Friday.

This isn’t the only problem with bitcoins, but it is a natural result of not having a central bank / government behind the currency saying “we are committing to this currency and requiring it to be accepted as legal tender”.

There are too many other reasons why bitcoins are an irrelevant distraction from genuine monetary policy issues. There may be value from an anonymity perspective. Unless you’re a genuine privacy freak or a drug-dealer, these are not in your top 100 priorities.

I’m also not sure whether it makes the depreciation better or worse that it manifested on the biggest bitcoin exchange, but not others. So much for credibility of a “currency” when it’s so difficult to even determine its value.

If you’re looking for a dissenting opinion, there are plenty.  A suggestion though: When reading these stories, consider whether the writer has any credibility to know what they’re talking about when it comes to economics, finance or monetary policy.  Please send me a link to any article that actually comments on whether or not the rate at which bitcoins can grow long-term is the correct rate to support economic growth.  It’s not even that I need the bitcoin supporters to agree with my view, but it’s depressing that they haven’t even considered the issue from an economic perspective other than “inflation bad”.  Then again, the head of the ECB has similar short-sighted views about the dangers of inflation at the expense of everything else in the economy.

It would also be useful if, when considering the ability of governments to tax in a theoretical (and by the way, not gonna happen) bitcoin or cryptocurrency future, there is absolutely no appreciation for regressive versus progressive tax systems.

Published by David Kirk


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