Alasdair Macleod: "Bitcoin isn't Money"

Have you noticed how Bitcoin correlates to equities while gold doesn't?

Yours truly happens to be a member of an email thread that supposedly is made up of people who share the common belief in the legitimacy of Austrian Economics as opposed to the socialist/communist Keynesian school. Within the Austrian school there are many members who are of the mind that Bitcoin is the new gold and that it will replace gold in the modern world.

I seldom contribute my thoughts to this group but like to see what others are thinking. Now that the equity markets have entered “melt down mode” a lively discussion on whether Bitcoin is actually money or not is taking place. With Regard to the question of whether Bitcoin qualifies as money or not, I think Alasdair Macleod makes a case that only gold, silver and copper have the properties to qualify as money. Here is what Alasdair wrote late last week.

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“Whether bitcoin is used as money is simply a matter for consenting parties. The question really is about its wide adoption in that role. If so, there are a number of hurdles that need to be addressed.

“Legally, bitcoin is not money. In common law, that role is reserved for physical gold, silver and copper, firmly established through juristic rulings following Rome’s twelve tables and consolidated into Justinian’s Pandects a millennium later, and confirmed in the Basilica in 892 AD. These findings defined money, credit and their different characteristics and are the basis of common law in all the Roman Empire’s successor nations, which colonized the world, including America. Giving BTC the same legal status is not a simple matter, and so far as I can see, hodlers seem to think that a fiat collapse will sweep away these considerations. It would require the ultimate anarchy, and even then BTC’s future role would be uncertain.

“There is a crucial difference in law between fungible goods (ie coin, banknotes and credit generally) and more permanent property with respect to recourse in cases of theft. The former cannot be recovered once consumed or entered into general circulation, while the latter possession is unchanged and is recoverable without compensation. The blockchain identifies every fragment of BTC, which makes it property recoverable without compensation if stolen from any previous owner, or demonstrated, or even suspected, to have been the proceeds of crime. If the courts back this ruling (as they seem to be bound to do) then it renders BTC useless even as a store of value.

“It must be admitted by enthusiasts that the global population prepared to use BTC as money is miniscule compared with those that still hoard gold and silver for monetary purposes.

“There is a common misunderstanding that legal money circulates. It only does so as a last resort. It is credit which circulates, and it is hard to see how BTC based credit can function, when what is demanded by businesses is price stability as the basis for economic calculation. This would appear impractical with tightening bitcoin supply over time. If BTC was to become the monetary standard, we would almost certainly be plunged into the economic conditions that existed before the Industrial Revolution.

“I have seen these manias before. Admittedly this one is different, but so were tulips, so was John Law’s scheme. At some point in the future, I expect a latter-day Charles Mackay will add a riveting chapter to Extraordinary Popular Delusions and the Madness of Crowds.”

Now lets see how Bitcoin is faring as the equity markets are apparently beginning to melt down. Last week this so called modern money didn’t fare very well. In stead it followed the same pattern that has become common. It correlated well equities. By contrast, U.S. Treasuries, gold and silver all gained while virtually every other asset category with the exception a few gold mining stocks and a company named GoldMoney rose in value relative to the U.S. dollar.

Of course one week of data doesn’t prove much nor does one year’s worth. But if a safe haven is what you have in mind, Alasdair’s argument for gold combined with what I see over the past year in the performance of Bitcoin/USD and gold/USD, I firmly on Alasdair’s side.

Of course in the end, non of this matters. Why? Because as Holy Scripture declares and is obvious to anyone who faces reality, “Everything in this life passes away.”

Yesterday, Bishop Robert Barron of the Roman Catholic Church reminded us that we are to first and foremost work for things eternal while attending at the same time to the demands of this life. Also Pastor Marque of Christ Lutheran Church in Queens, where I attend provided his version of the same message yesterday.

Bishop Robert BarronPastor Alex Marque

We live in a very troubled world and one in which the western world is apparently moving rapidly toward totalitarian rule. To the extent that remains obvious, the messages yesterday of both Bishop Barron and Pastor Marque will ring increasingly true for a growing number of people. The Christian message is one of hope because in it life extends beyond this fallen world as Jesus demonstrated during his time living among us.

Best wishes,

Jay Taylor

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