Posted On: Tuesday - August 27th 2024 8:17PM MST
In Topics: Global Financial Stupidity Preppers and Prepping Economics
Note first that, of course, one really can't take a picture of a bitcoin, so these ones looks like, well, gold coins..
After being disappointed by the 2 hour debate by 4 Big-Finance guys discussed earlier, I'd like to present some of the arguments of Gold v Bitcoin here. I hope this, and the comments that flow forth, are more elucidating, and it will only take you 10 minutes!
Firstly, my disclaimer is that I don't hold any Bitcoin or any crypto currency at all, but I can't say the same for gold and/or silver. The former is NOT, mind you, due to any solid, absolute opinion about crypto. I am not one of those early adopters of anything - hell, I just found out that Redbox is out of business, yet I never got around to getting a video out of one of them red boxes yet. That woulda' been cool...
I'm not a mathematician, and neither are those 4 finance guys, most readers here, I'd guess, and 99.something % of crypto holders (the latter just based on number of mathematicians in the population). Therefore, I can't claim to understand the Blockchain algorithm/technology that underlies all crypto. Is it hackable? I'm sure all businessmen involved and avid adherents would tell you "hell no", but do they know? The math guys may have their proofs that would prove nothing to me because admittedly, I couldn't understand it. Could there be something missing in the understanding of the brightest of them, to where some other bright math guy will, or has already cracked the blockchain? That'd be like finding some alchemy that worked, transforming used beer cans into gold.
Said mathematician, if he were wise as much as he's bright, would probably "let it ride" for a while - if really savvy, he'd convert his new"found" crypto slowly into assets that couldn't be "recovered" by courts or the Government, then, well, he'd be just bursting with pride, you know, so sometime he'd let it out and get on Tucker Carlson. Your "money" would evaporate.
So, let's just "let this ride" ourselves and go with the assumption that the Blockchain algorithm is as immutable as Newton's Laws of Motion. Let's talk about the similarities and differences of gold v bitcoin in their value as money. There are a handful or even a dozen properties that must be fulfilled to give something worth as REAL MONEY. I've read a book on that, but I don't want to write one now. We'll touch on some of them.
To be a store of value a currency must not be easily reproducible. The way the blockchain algorithm works, for every additional Bitcoin made, many calculations must be done by computer. (With modern computing power as fast as it is, this must be A LOT.) It takes more and more computations for each additional coin, meaning that one cannot just buy a bigger computer and make millions. The process of number-crunching to make more bitcoin is called "mining"*.
Though, no, it's not physical mining, there's a parallel between this property of not-easily-reproducible gold and bitcoin. It takes energy to physically mine gold, what with large earthmoving machines, drilling for placement of dynamite, pumps and transportation of chemicals, etc. Energy costs may go up or down a little, but you must expend a lot to get "the precious" (gold or bitcoin). What else could change the costs for each, something which would lower the value of the currency? For gold, a new, simpler chemical process maybe, but for bitcoin, well, what about quantum computing? It's even more likely for bitcoin that "mining" costs could take a jump down, because faster computing power is not something just developed for bitcoin. It's important for other uses.
I'll say here that, were little Greta to complain about this energy wastage, I couldn't really argue. It does seem silly to run computers to where they'll heat up Adam Smith's house in the north Georgia winter just to get some algorithm to spit out a virtual "coin". Real mining, notwithstanding the actual environmental damage involved (and gold requires a lot), seems less silly. Still, after all, we're pulling tiny bits of one element out of massive amounts of rock to allow us to store the value of our labor. If I think of it that way... but what else is there? (To please Greta, I'd at least locate my computer racks directly under my windmill.)
Let me digress just a bit to another property of money, its LACK of practical value. I was very surprised to hear Peter Schiff get this wrong, but he was just in the midst of trying to badmouth bitcoin I guess. "But gold has industrial uses!" he shouted over the din of the argument. Whaaat?? No, that's not a good thing. Silver, for example, has more industrial uses. Back when cameras used film, with silver as one component, it was worth something based on that alone. As industrial uses change, the demand goes up or down, changing the value of, say, silver, as a currency. Bitcoin has no other practical value - do you need a piece of blockchain to scrape the ice off your walkway? That's a point in its favor.
Back to the property of irreproducibility, what about a new source? With gold, I do wonder about the eventual mining of it from asteroids. Instapundit recently had a link to a story, but I haven't read it. Also, Peak Stupidity discussed this possibility 4 years ago in Gold found on an asteroid? Should I buy, sell, or hold? What about a new source of bitcoin blockchain, if one even puts it that way? All I could see is that hacking of the whole mathematical concept, as discussed at the beginning here. Otherwise, I don't see how.
One thing that's not much a factor with precious metals - there are gold, silver, and a few others that are all known and established - is the various and sundry other cryptocurrencies besides bitcoin. In general, what I write here is with the understanding it applies to all of them. However, if you do put lots of your savings into one of them, say, bitcoin, will others take over the market in currency, as VHS beat out Betamax? There are lots of them. Mr. Voorhees stated that competition in currencies is good, but does that apply to Joe Blow who doesn't have the time or inclination to watch this stuff day-in/day-out? Personally, I'm fiscally Conservative, so I'd feel more comfortable myself knowing there was one major crytpo-currency accepted all over, and the speculation phase in it was over. There' s no worry about this factor with gold.
Divisibility is another property of real money. I've heard something written about gold which I simply think is flat wrong. "Gold is no good because there's not enough of it. To back all the currency out there we'd need..." making this up because I don't know the money supply (Which money supply? There are a bunch of them!) " ... gold would have to be $95,000 an ounce. My responses to that are:
1) Zippedy doo da! My, oh, my, it's a wonderful day!
AND
2) So what? Who says we'd have to stick to troy ounce coins? In the made-up case above, gram coins would be worth $3,050 a piece. Well, that's a lot to be carrying around too! Why not make an alloy of 5% gold in other metal, so the coins could be bigger for a smaller value? That would require some trust though.
That's an interesting thought about divisibility with gold, but it sure IS divisible. What about bitcoin? I am really not sure about this. A coin is a coin, but can there be small fractions of coins in software, or does this have to be done within the purview of a bank of some sort? The crytpo banks have introduced some bad publicity for these currencies, as hacking of these banks cost people their savings, and many people may confuse that with the hacking of the crypto concept itself. OTOH, banks used to get robbed pretty regularly, especially when one thinks back to the days when there was real money in them!
Privacy in buying and selling was not so much a property of money, as described years ago in books, as we didn't have so many organizations prying into our business. It's surely important now, and in fact, much of the impetus for the gold AND bitcoin proponents. Bitcoin however, from what I've read, is NOT private in that the blockchain contains info. on every transaction that's. been made. OTOH, they all tell me, as Mr. Roubini got all worried about, that it's hard for an entity like Government to get involved. This has to do with the lack of banking required to use it. Gold, of course, has the same benefits, at least if it is used ACTUALLY as a currency, not as an investment measured in dollars, to be taxed if bought and sold within the CC and banking systems.
The real worry about all money is its suitability as a "store of value". One may work for years and see his savings get eaten alive by inflation. 20 ounces of gold is still 20 ounces of gold, 5, 10, 50, 100 years later.** It is easily recognizable, possibly with some inexpensive test methods required, depending...
For bitcoin, that's the big bugaboo. Is it a good store of value, if we can't really see it, or know we have it, without a computer and the internet? The 4 debaters didn't get into that, but with all but one being financial doomers and a couple seemingly prepper types, a discussion on a SHTF situation would have been helpful. With the caveat of a working internet or at least electrical power, bitcoin's use as a currency is better than gold for payments to far-away places. That was Mr. Voorhee's major point in favor of bitcoin. One can buy and sell away from Government and banking systems that make one subject to regulation and taxation. Gold is good for this too but only for local transactions. When the SHTF, well, that's all there'll be. We can talk about .22LR rounds and cans of Campbell soup another time. (Show me the man who can't use another milk carton of .22LR and doesn't like Campbell's Bean & Bacon?)
The anecdote from wiki I pasted in last post illustrates one more thing: Sorry, but with this REAL MONEY, you do have to watch your money - don't lose it! There was a news story about a guy whose bitcoin password got accidentally thrown in the trash, with the money behind it being worth millions in dollars. He went to the dump, and last I heard from a friend, BOUGHT the dump, to be on the safe side. Well, one could hide some gold really well, too well, and never find it again. Them's the breaks. Or, be on the "safe side". It's either keep real value or take one's chances with the old system, the solid chance that the value of one's money in the bank steadily declines from inflation*** and the less solid one that this bank will not be too big to fail, so bye, bye, bye... Oh, the FDIC right, that works if it's just a few banks.
And don't put that bitcoin PW OR your PMs in one of those "safety" deposit boxes. If that bank closes or the government gets a wild hair up its ass, again, buh bye!
I tell ya. My money don't get no respect... no respect at all in country that doesn't keep a sound currency.
* I personally HATE the use of physical terms by the computer types to represent things that should have their own computer lingo, as mentioned within this post.
** It takes a change in mindset to really get this. "Man, I could have bought these 20 oz at $325 20 years ago, but I paid $1,100 apiece! Now they are worth $2400 each. I could have made more money." Money, what exactly is the money of which you speak? Nope, that's not the point. One could rightly bemoan "I could have gotten 60 something oz 20 years ago and had 60 oz now, rather than 20!" Yes. Just don't look at precious metals as "an investment". Think of how many of those approaching-worthless pieces of green paper or bits on a bank computer they'll take for an ounce ... of MONEY.
*** BTW, in addition, even with the lousy 4% interest they're throwing us now, that gets taxed as income at your highest marginal rate, I found out that the penalties for early withdrawal are more severe than they used to be. For me, it was 6 months of interest, and for a new CD, they go back and take out principal to get it too! They didn't used to be like this.
Comments:
J1234
Thursday - August 29th 2024 8:13PM MST
PS
I'm not worried about the debt/deficit. I trust this lady. She looks really sincere.
https://www.youtube.com/watch?v=1JpZZcD8C4M
https://en.wikipedia.org/wiki/Stephanie_Kelton
We're pretty close to spending more on deficit interest than national defense, and we spend more on that than the next ten largest militaries combined.
I like our moderator's idea of low content gold alloy coins for practical daily use after everything breaks. Probably more practical than half gram specks in blister cards. Maybe Goldbacks are on option, too? A year ago I thought they were stupid, but not so much anymore, though I still haven't acquired any.
I'm not worried about the debt/deficit. I trust this lady. She looks really sincere.
https://www.youtube.com/watch?v=1JpZZcD8C4M
https://en.wikipedia.org/wiki/Stephanie_Kelton
We're pretty close to spending more on deficit interest than national defense, and we spend more on that than the next ten largest militaries combined.
I like our moderator's idea of low content gold alloy coins for practical daily use after everything breaks. Probably more practical than half gram specks in blister cards. Maybe Goldbacks are on option, too? A year ago I thought they were stupid, but not so much anymore, though I still haven't acquired any.
Moderator
Thursday - August 29th 2024 6:04AM MST
PS: Interesting comment, O.S. Thank you. I know you are not exactly "day trading", maybe week- or month-trading, but I'll tell you that a friend of mine was making a few thousand bucks in a day (1999 money = about double the $$ now) during that dotcom 1.0 time. However, that was with his brothers' money. When he did the same with his - he was not getting a big salary at the time, and was perhaps more conservative - he didn't do well at all. I know he was doing that margin trading thing too.
I don't know much about it. I've stayed out for 20 years. Part of that - the last 15 - were due to my thinking it's all coming down "any day now" - well, it is! - but the other reason is that I don't have the constitution for it. You almost always could have sold higher and could have bought lower. It's just not for me.
I also read the WSJ thoroughly for about 1 or 1 1/2 years. I'd get the paper copy at the newsstand store each day. I enjoyed some of the business articles, but the "market" section on the stock trading bored me. That's probably because I had no money in it. Additionally, I liked the 2 page "opinion" section, saving it for last after my forced reading most of the rest. However, there was one real idiot leftist on it - Hunt was his name, IIRC, and then I eventually realized I didn't like their open borders stance. So, I had a great excuse when the newsstand price went up by either 1 or 2 quarters (a significant increase, either 33% or 50% or something) to just quit cold turkey.
Post about it here:
Taking the Wall Street Journal, ass-backwards
https://www.peakstupidity.com/index.php?post=888
I don't know much about it. I've stayed out for 20 years. Part of that - the last 15 - were due to my thinking it's all coming down "any day now" - well, it is! - but the other reason is that I don't have the constitution for it. You almost always could have sold higher and could have bought lower. It's just not for me.
I also read the WSJ thoroughly for about 1 or 1 1/2 years. I'd get the paper copy at the newsstand store each day. I enjoyed some of the business articles, but the "market" section on the stock trading bored me. That's probably because I had no money in it. Additionally, I liked the 2 page "opinion" section, saving it for last after my forced reading most of the rest. However, there was one real idiot leftist on it - Hunt was his name, IIRC, and then I eventually realized I didn't like their open borders stance. So, I had a great excuse when the newsstand price went up by either 1 or 2 quarters (a significant increase, either 33% or 50% or something) to just quit cold turkey.
Post about it here:
Taking the Wall Street Journal, ass-backwards
https://www.peakstupidity.com/index.php?post=888
Moderator
Thursday - August 29th 2024 5:54AM MST
PS: Alarmist, a bitcoin on a thumb driver or a PW on a piece of paper is even easier to lose in that proverbial unfortunate boating accident than PMs are. After all, they can go searching with new technology for your PMs (that are not actually down there), but the PW on paper and thumb drive disappearing forever are very plausibly deniable.
Yeah, question though, can you make a copy of YOUR bitcoin, as in the same 1 coin, but a copy on another thumb drive?
Yeah, question though, can you make a copy of YOUR bitcoin, as in the same 1 coin, but a copy on another thumb drive?
Moderator
Thursday - August 29th 2024 5:51AM MST
PS: SafeNow, a 100% increase in the amount of this metal through your lifetime isn't too bad. It was a lot harder to do that than to make the last few Trillions of dollars (each about every 4 months or so) recently. Technology gets better, but than the low-hanging fruit is gone first. (Asteroids, as I wrote, or any extra-terrestrial source, are another story.)
I don't see "price increases" I just see ounces of gold and silver taking more of the increasingly worthless dollars to obtain. The increase in the "price of gold" is just a demonstration of the devaluation of the US dollar (and/or other currencies).
If thing get really bad for you during the SHTF, you can take out one of those crowns and buy, who knows, maybe 2 cases of Campbell's Bean & Bacon soup and a milk carton of .22LR. After all that, you can still eat the soup and fire the ammo. ;-}
I don't see "price increases" I just see ounces of gold and silver taking more of the increasingly worthless dollars to obtain. The increase in the "price of gold" is just a demonstration of the devaluation of the US dollar (and/or other currencies).
If thing get really bad for you during the SHTF, you can take out one of those crowns and buy, who knows, maybe 2 cases of Campbell's Bean & Bacon soup and a milk carton of .22LR. After all that, you can still eat the soup and fire the ammo. ;-}
Old Soldier
Wednesday - August 28th 2024 5:23PM MST
PS
Thank you for the column, makes perfect sense for me and I totally agree...I'm also fiscally conservative. You certainly highlighted all of my concerns and issues with Bitcoin, and crypto in general. I appreciate your efforts and thoughts, and they pretty much parallel my own.
I learned finance by reading the Wall Street Journal while in the military in Germany. I would watch 20 - 40 stocks, how they seemed to randomly move up and down and I eventually came to the profound conclusion that a guy could make a living on those up and down movements. And so I have.
Those up and down movements apply well to several stocks that I trade nowadays. I just play the bounce, though I wouldn't recommend this for anyone else at all - it just works for me. I play some Bitcoin ETFs and stocks, setting aside any profit for "real" stock purchases. I don't own or play any Bitcoin outright, it just doesn't work for me - I want something heavy in my hand. I do my investing and finance in my Roth IRA so that I don't have to deal with the IRS. My self-taught investing is just a comfortable little niche that I've carved out for myself. Letely, I'm dabbling in 'single-stock leveraged ETFs' just for more entertainment.
Blockchain understanding? Forget it. I tried, I honestly tried, to grasp it but it just didn't stick, so I'll leave that to the math brain types. Seventh grade math still works well for me.
So I've turned to certain stocks as surrogates for crypto that I can play with, in small amounts instead. Hasn't been very profitable so far but I'm learning. And when my sell orders execute, I can get something heavy in my hands if I want.
But I'm aware that the interest on the national debt will soon be the largest item in the federal budget, consuming 40+% of federal revenue. This is unsustainable. And several factors will lead to a rejection of the dollar as the world reserve currency. When that occurs, there will be a major economic crisis unlike anything this country has seen since the Great Depression. So I'm always looking for alternative ways to protect my family, especially the kids and grands.
I'm supposed to be retired, I swear that I am. But lately real estate, rental properties and other things, PLUS 'single-stock leveraged ETFs' have crept into the picture for me. And as I look around I see more and more opportunity, so who knows what I'll be doing next year.
Thanks, again, for the financial information. It is appreciated
Thank you for the column, makes perfect sense for me and I totally agree...I'm also fiscally conservative. You certainly highlighted all of my concerns and issues with Bitcoin, and crypto in general. I appreciate your efforts and thoughts, and they pretty much parallel my own.
I learned finance by reading the Wall Street Journal while in the military in Germany. I would watch 20 - 40 stocks, how they seemed to randomly move up and down and I eventually came to the profound conclusion that a guy could make a living on those up and down movements. And so I have.
Those up and down movements apply well to several stocks that I trade nowadays. I just play the bounce, though I wouldn't recommend this for anyone else at all - it just works for me. I play some Bitcoin ETFs and stocks, setting aside any profit for "real" stock purchases. I don't own or play any Bitcoin outright, it just doesn't work for me - I want something heavy in my hand. I do my investing and finance in my Roth IRA so that I don't have to deal with the IRS. My self-taught investing is just a comfortable little niche that I've carved out for myself. Letely, I'm dabbling in 'single-stock leveraged ETFs' just for more entertainment.
Blockchain understanding? Forget it. I tried, I honestly tried, to grasp it but it just didn't stick, so I'll leave that to the math brain types. Seventh grade math still works well for me.
So I've turned to certain stocks as surrogates for crypto that I can play with, in small amounts instead. Hasn't been very profitable so far but I'm learning. And when my sell orders execute, I can get something heavy in my hands if I want.
But I'm aware that the interest on the national debt will soon be the largest item in the federal budget, consuming 40+% of federal revenue. This is unsustainable. And several factors will lead to a rejection of the dollar as the world reserve currency. When that occurs, there will be a major economic crisis unlike anything this country has seen since the Great Depression. So I'm always looking for alternative ways to protect my family, especially the kids and grands.
I'm supposed to be retired, I swear that I am. But lately real estate, rental properties and other things, PLUS 'single-stock leveraged ETFs' have crept into the picture for me. And as I look around I see more and more opportunity, so who knows what I'll be doing next year.
Thanks, again, for the financial information. It is appreciated
The Alarmist
Wednesday - August 28th 2024 4:39AM MST
PS
The problem with Bitcoin is that aside from boat accidents, it is too easy to lose.
๐๏ธ
The problem with Bitcoin is that aside from boat accidents, it is too easy to lose.
๐๏ธ
SafeNow
Tuesday - August 27th 2024 10:07PM MST
PS
All of the gold mined in the history of the world, if melted-down, would form a cube 71 feet on each edge. In my youth, way back, that figure was 56 feet. And so, the amount of gold in existence has almost exactly doubled during that historically minuscule time frame. (Volume of a cube = edge length to the third).
My conclusion is that modern technology has radically improved in detecting and extracting the stuff. Thus, the price increase will be constrained. Good news for me, because I recently learned that when one puts a crown on back teeth where it is not visible, itโs best to use gold and not porcelain. My dentist recently told me that thatโs what his fellow dentists do to their own teeth and so thatโs what I did. And so, assuming I live long enough to need another crown, I will be able to afford gold. The price this time was the same as porcelain would have been.
All of the gold mined in the history of the world, if melted-down, would form a cube 71 feet on each edge. In my youth, way back, that figure was 56 feet. And so, the amount of gold in existence has almost exactly doubled during that historically minuscule time frame. (Volume of a cube = edge length to the third).
My conclusion is that modern technology has radically improved in detecting and extracting the stuff. Thus, the price increase will be constrained. Good news for me, because I recently learned that when one puts a crown on back teeth where it is not visible, itโs best to use gold and not porcelain. My dentist recently told me that thatโs what his fellow dentists do to their own teeth and so thatโs what I did. And so, assuming I live long enough to need another crown, I will be able to afford gold. The price this time was the same as porcelain would have been.
The Deficit Myth by Stephanie Kelton (2.9mb .pdf)
https://tinyurl.com/474xmnpt
Cheers! โฎ๏ธ