Yves here. The idea of government holding private currencies like Bitcoin is such an obvious grift that I’ve found too distasteful to discuss. Fortunately Richard Murphy was willing to do the heavy lifting.
By Richard Murphy, part-time Professor of Accounting Practice at Sheffield University Management School, director of the Corporate Accountability Network, member of Finance for the Future LLP, and director of Tax Research LLP. Originally published at Funding the Future.
I had this article in The Times yesterday.
A Bitcoin dealer offered an opposing view, which felt a little lame to me, but I do not have the right to reproduce it.
Should the government be allowed to hold crypto?No
Richard Murphy, a professor at Sheffield University Management School
The answer to whether the government should be allowed to keep or invest in bitcoin is a very resounding no. Bitcoin is economically meaningless and there is no value to it. It has no known use except to facilitate illicit transactions, very largely in illicit substances.
Those who claim it can be used to make payments always ignore the fact that when doing so, its value is determined by translating it into another currency such as the pound.
So, why is bitcoin worth so much? That is the power of modern marketing. The myth has been sold that people need privacy in their finances from the government and that cryptocurrency will help deliver that.
They are also told that bitcoin is a hedge against inflation — but its massive price volatility proves it is anything but.
And they are also told that because bitcoin is in scarce supply, demand means that its price will go up, and it might just do, so long as the hype is maintained. But one day the bubble will burst, spectacularly, as such bubbles always do. Bitcoin is something I would not invest £1 in and nor should the UK government.
There are strong political reasons for the government steering clear. As all bitcoin enthusiasts make clear, their excitement about it is based on the claim that it undermines the money issued by governments.
Those enthusiasts want to destroy the government’s control over the UK economy and deliver the services needed by its population.
That is bitcoin’s destructive political goal and the UK government should have nothing to do with it.
Not least, that is because almost all bitcoins have now been mined. And so if the government were to buy more, it would have to do so second-hand from existing owners. It is estimated that 90 per cent of bitcoin is owned by just 2 per cent of the people who own cryptocurrencies.
Bitcoin wealth is, then, intensely concentrated amongst a few wealthy owners who are now desperate to find someone gullible enough to part with good money in exchange for their spurious tokens.
For the government to buy bitcoin, or hold on to the bitcoin it has recovered from criminals, would, therefore, reward the wealthy with real currency in exchange for their worthless assets. That is the last thing that a responsible government should be doing. Bitcoin is a con and the government should not fall for it.
‘It has no known use except to facilitate illicit transactions, very largely in illicit substances.’
So maybe not the government itself hold Bitcoin but perhaps certain government departments – such as the CIA? Otherwise you will end up with the government being the ‘buyer of last resort’ to those Bitcoin corporations that end up in distress through their own scams. Come to think of it, if that ever happened the government should actually offer to give financial aid to those distressed Bitcoin corporations – but with payments being done with other Bitcoins.
Many of those illicit transactions will be done through the Chagos Islands which has its own internet domain and is under the complete control of the US and UK military.
https://thebitcoinnews.com/oecd-to-review-cryptocurrency-transactions-chagos-islanders-seek-control-of-popular-io-domains/
https://fundedjustice.blogspot.com/2017/12/diego-garcias-secret-bitcoin-laundering.html BITCOIN CHAGOS
Bitcoin is a con created by government.
Sounds from this as if Starmer’s fondness for cryptocurrency could be very good for the long-term health of the British economy, once the whole thing collapses and Starmer is hanged from Tower Bridge.
On the other hand, 2008-2010 is a fairly good counterexample. Maybe Starmer wants to get his friends the Tories back as soon as possible?
Maybe the UK government should just go all in shorting Bitcoin? After all it can always print money to cover any losses, I mean the government is not like a household and since the ones holding most Bitcoins are households albeit really rich ones, isn’t this like a guaranteed win on top of it being a moral victory?
I’ve just been watching Patrick Boyles fascinating history of the South Sea Bubble on YT (strongly recommended). What I hadn’t realised about the bubble is just how closely it was tied into quite sophisticated financial engineering by the English government at the time with the intention of reducing the national debt.
It has occurred to me watching it that even small countries have the basic firepower to play the markets in all sorts of ways beyond even the biggest individual traders. It rarely seems to happen, presumably because of the geopolitical risks. I’ve idly wondered if the whole AI thing right now is maybe connected with semi-official Chinese market playing (anyone who shorted AI players last week would have made billions). I’m sure there are a host of people behind Trump who hope to do this (not least Musk himself). Crypto is ideal for that type of national scale pump n dump.
The UK even minted coins with the South Sea Company initials on them not once but twice, kinda similar to FTX logos being on MLB umpire uniforms twice, as well.
https://en.wikipedia.org/wiki/SSC_coinage
I’ve always said crypto is for 4 kinds of people:
1. Scammers
2. Gamblers (scamees)
3. Criminals/drug dealers
4. Deluded libertarians
I have yet to meet a fifth type.
5: Desperate New Labour Ministers
6. Desperate New Presidents.
I was always amused by how my Libertarian friends would rant about government “FIAT”. And then turn around and tell me how wonderful crypto-currency was.
Is that not a subset of scammers?
A few years ago I had a conversation with my 29 year old nephew who is a USC grad. I asked him if he invested in crypto and he did and made some money and got out. Asked if others he knew had invested in crypto and he related he knew about 50 friends from school who had partaken.
It was a young adults game then, now all grown up adults are the dolts.
5. Starry-eyed bandwagoned go-along-with-the-crowd lemmings.
5. People in countries such as Venezuela that have been wholly or partially cut off from global finance.
6. People in countries such as El Salvador or maybe soon the US whose government signs them up for it without their consent.
7. People whose retirement funds “invest” in crypto.
Btw, these are significant sources of “fish” for the great scam.
very, very sad all around
You might just as well ask, “should the government be allowed to hold casino chips?”
” Should the government be allowed to sell billions or trillions of dollars-worth of bonds in order to hold billions or trillions of dollars ‘worth’ of casino chips?”
It sounds like the Mother of All Mafia Bust-Out Schemes. It sounds like something that would appeal to a Mafia-Culture-Adjacent real-estate hustler-operator like John ‘ the Creampuff Don’ Trump. Of course the Crypto Bros would pretend to believe in it. But notice how they would demand to be paid in tradmoney for their crypto casino chips.
Richard has announced his retirement (I’m not sure it has happened yet) and has been granted Professor Emeritus status.
”Bitcoin wealth is, then, intensely concentrated amongst a few wealthy owners who are now desperate to find someone gullible enough to part with good money in exchange for their spurious tokens.”
Of course the true value of bitcoin is zero but given that our governments serve the wealthy first and foremost, the fact that ”wealthy owners” hold almost all bitcoin tells me its price will continue to go up for some time.
I did a little exercise of replacing all instances of bitcoin with gold in the above text. I was going to paste it here but I’m pretty sure nobody will read it. Maybe you can explain to me how gold and bitcoin are different? In light of the relentless shrill arguments in favor of using only cash to avoid government scrutiny that I keep getting from this web site it seems kind of contradictory. You hate bitcoin. I get it. There is a lot to hate there. My base case for many years is that the developed world would use financial repression to inflate away debt of as much as 400% of GDP. Russell Napier has a whole song and dance about this:
https://www.youtube.com/watch?v=LyYXqeF7De8
It puzzled me how everything hadn’t fallen down and gone boom long ago until a few days ago I came across this guy Michael Howell:
https://www.youtube.com/watch?v=YHFPRnMhX2A
He explains patiently that absolute debt levels don’t matter anymore because paying down debt is passé. Nowadays we make minimum payments on loans. My experience of running up un-payable credit card debt in university showed me what will happen. The end game is hyperinflation not financial repression.
Incidentally Russell Napier thinks that Bitcoin will be banned, precisely because it allows one to circumvent government efforts to do financial repression. He doesn’t think gold will be banned. I think that is amusingly short sighted. Governments operate for the benefit of the rich. A lot of gold is owned by poor people in India. They will not let poor people benefit from currency revaluation (fast or slow).
*Sigh*
Is this serious? Gold has real world uses such as in industry, dentistry (gold restorations are the best, the most like original tooth but hard to do so dentists don’t bother) and for jewelry. Bitcoin does not. And it consumes enormous amounts of energy.
Bitcoin is safe since 2010, gold since 2010 B.C.
I have yet to see Ancient Roman Bitcoins. Also, Bitcoin is still lacking a place in the periodic table of the elements.
https://en.wikipedia.org/wiki/Periodic_table
The closest would be the severely debased small coins of the late 3rd century, but even those had some value for their metals.
When my phone battery dies, or the WiFi is down, I can still use my gold. If I want to transfer $10 million to someone, I need a truck.
And there is no permanent public record of all my gold transactions.
I loves me some Bitcoin watching, it’s a money about nothing!
If there was a Seinfeld episode involving George Costanza and the Yankees, George would hold the Yankees website hostage after hacking it, and wouldn’t release it until Steinbrenner paid $20 million in Bitcoin.
That is bitcoin’s destructive political goal and the UK government should have nothing to do with it. Consider taking this one step farther. What power does a government wield if it loses its treasury?
Ask France in 1720 after John Law ruined everything…
https://en.wikipedia.org/wiki/John_Law_(economist)
Ha. There is a difference. This time there’s a currency with a regime to go with it waiting in the wings.
How come every article I read on Bitcoin has to have a photo of a round metal coin that somehow fills in for the real thing?
To come round circle (of bunched oats ‘n honey), I’d rather be finding a bitcoin in my box of Cheerios. There’s more than hint of breakfast cereal premium around the artwork.
A round metal coin that looks suspiciously like gold. It’s almost like they want to make people think that gold and Bitcoin are not different.
“”Ceci n’est pas une pièce de monnaie ”
Paraphrased from ‘The Treachery of Images’,Magritte.
> This time there’s a currency with a regime to go with it waiting in the wings
A libertarian regime. See here…
Sweet Baby Jesus, let’s hope not.
Look, it’s not about putting people in prisons. It’s about people getting what they deserve.
Just one of many unfortunate quotable uh quotes it turns out. Dude is in seance mode, channeling some ghost.
Tax the holder at 90+ percent on the highest price during the year basis payable in the pound, euro, dollar, yen…
If those who use crypto or other vapor money think it so great….then they should not mind a one hundred million gain instead of a billion.
I don’t think a duel monetary system of any kind is anything more than stupid… And of digital currency..it also sets up a dual currency; one for those whose access requires computer chips, software, a device to contain the aforementioned and electricity storage with communications infrastructure identity protocols and no ability private or public to interference…good luck, and, for those who hope to earn a buck, a pound or a yen in order to chuck a pound of hen on the fire.
And for those who wonder, how can Trump raise or lower taxes or do such and so on? Just look to those politicians who make the laws..that is how he may do all those absurd things. After all, he can only veto or sign and all the gaslighting executive order bs.. what a Congressman’s dream dodge to point this way or that but never at himself. I know Kennedy is a bit brain wormed but, you got to give him some chops for admitting to the bear in the park…I had only hoped that some others had the strength of character to own up to their f-ups…. like supporting genocide, making college loans non dischargeable in bankruptcy, standing between certain people and a crowd with pitchforks, repeal of Glass-stagall……..back to Kennedy – I thought Warren went a little grandstandish and could have pinned him on what swears what he will do instead of what he has said in the past….I mean, the guy dropped a dead baby bear with a bicycle ..lol…that’s enough yammering on from me I think…thanks for bearing with me.
Obviously the number of people who remember the massive blackouts in New York in the 1970s or even Hurricane Sandy (where we had to set up a residents committee to person the electronic fob- operated doors 24/7) is dwindling exponentially.
How will people spend their bitcoins in times of power outages?
Curious minds would like to know.
I wouldn’t be able to sleep well at night if I had a substantial amount of wealth tied up in an ‘asset’ with zero intrinsic value controlled by a few ‘whales’ who hold 98% of that ‘asset.’
Care to explain why the hash rate keeps increasing exponentially?