Bitcoin Objections Overstated

This Business Insider article criticizing Bitcoin seems more bent on restating excuses for centralized monetary control that giving good reasons why Bitcoin would make an unfit currency.

The author writes:

To assume currency can be computer generated, run in a decentralized manner and outside of the central banking system and controls is farcical and economically dangerous.

For currency to be adopted as a medium of exchange there has to be trust in the ability to honor the underlying obligation and the ability for central banking policy to control inflation.

Yet, the dollar didn’t have a central banking system for most of its existence, and it’s suffered the bulk of its instability and inflation when it’s been more centrally controlled.

It’s not obvious what’s meant by “underlying obligation.” The only thing backing the dollar is “men with guns,” according to Paul Krugman, who are willing to carry those guns because of a promise to be paid in dollars, which they expect to have value (because the currency is backed by men with guns). When the dollar falls in value in relation to other currencies, it isn’t because fewer men are holding rifles. The truth is that there is no underlying obligation; it’s a farce.

He then disparages bitcoin for not having “intrinsic value.” Coming from a finance professor, he should know that value is relational. He also thinks bitcoin will fall with the onset of further regulatory controls, but that doesn’t have to do with the fundamentals of bitcoins as much as it does about those “men with guns” mentioned earlier.

I do laud the author for making a firm prediction: bitcoin will drop to under $10 in value within the first six months of 2014. We’ll see.

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