Detlev Schlichter is ambivalent on Bitcoins, probably because his argument has some fatal errors... in favor of Bitcoins he says:
Again, just like gold. If widely accepted as a medium of exchange – and that’s a big ‘if’ – it could become a store of value, unlike state paper money, which is always and everywhere a political tool and is issued for the purpose of ongoing debasement – with grave consequences for the entire economy.
This "store of value" is a problem for economists. Money emerges from a commodity as Schlichter himself in this article notes, quoting Menger. The store of value is in the commodity, not in the money. Money or not, a commodity is, more or less and among other things, a store of value. "State paper money" fiat currency, is neither money nor a commodity. Bitcoins is neither money nor a commodity.
Few people today appreciate just how anachronistic local state fiat monies are in a world of increasingly global trade.
This is strange too... fiat monies (he means currencies) are actually rather modern (dilution being the ancient sin). Currency started as warehouse receipts for gold and silver. Some wicked warehousemen would issue more receipts than there was gold and silver in storage, and eventually the fraud would be discovered and various people financially ruined. So this was outlawed. Next, what was outlawed for us the government began to do itself. The Bank of England was created to print more more currency (warehouse receipts for gold and silver) than stocks thereof warranted. This leads to inflation, which is a tax on the poor and middle class.
Fiat currency worldwide or local is a problem, a one world currency may be more efficient, but it is still fraud. If the market supported one million gold and silver warehouses, and thus we had one million different currencies, what would it matter? Thus spake the market.
Further, possibly the freest, most provident, peaceful and prosperous political economy on earth today, compliments of the Communist Party of the People's Republic of China, is Hong Kong. In Hong Kong, three separate private companies issue unique currency for Hong Kong, a nation state of seven million, comparable to Switzerland. The government does get to issue one note for minor purposes... but it is so suspect that it is not expanded to more than the one $10 note. Transactions among the three private currencies are frictionless. In the USA we have the legal fiction that there are nine private companies issuing currency, but no one believes it. To match the Hong Kong ratio of private currency, USA would have to have about 45 separate companies issuing currencies. USA has been there, but it was outlawed.
Perhaps few people appreciate how anachronistic multi-fiat currencies are because it is not anachronistic, and more important, it is irrelevant.
The gold price has skyrocket in recent years not because of any rising demand for gold in industrial application but because of its use as a monetary asset.
Let me correct this be re-writing it: "Gold as priced in fiat currency has risen, not because of rising demand for gold in industrial application, but because of the profligate printing of fiat currency in recent years." You see gold has not changed in value much if any, an ounce still buys a good suit of clothes, two silver dimes still buy a gallon of gas, just as when a gallon of gas was 20 cents 50 years ago. The buying power of money has not changed, the quantity of fiat currency has changed. More currency chasing the same amount of gold commands more currency for an ounce of gold.
Bitcoins is not money nor currency. It is either an accounting system for barter or it is a kind of virtual reality video game.
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