Tag Archives: financial bubbles

Diary Blog, 20 February 2021

Radio 4, as heard this morning

Heard Ramblings, with horse expert and TV presenter Clare Balding: https://www.bbc.co.uk/programmes/m000s9rm.

The path (part of the now-called “Thames Path”) by the River Thames between Pangbourne and Goring, an area I myself know well, both in a childhood of the early/mid 1960s and early 1970s, and later, when I walked that same path in 1998. It was pretty overgrown in places at that time.

An area of England that has not changed much, superficially, in the past decades.

After that, Farming Today had an interview with a farmer who, starting several years ago, realized that his arable farm, farmed using modern chemicals etc, was losing all soil vitality. As a result, he has turned more to the once-common, but now rather rare, mixed farm model (decried by industrial farmers as inefficient).

Wise move. Rudolf Steiner said that the best model for farming was the mixed farm. Long term view, not short term. Environmentally-friendly.

As for economic efficiency, I do not think that anyone would claim that the Laverstoke Farm estate owned by ex-racing driver Jody Scheckter [https://en.wikipedia.org/wiki/Jody_Scheckter#Present] is not an economic success story! A massive success, “despite” being both mixed and biodynamic: https://en.wikipedia.org/wiki/Laverstoke_Park_Farm; https://en.wikipedia.org/wiki/Biodynamic_agriculture; https://www.laverstokepark.co.uk/

Radio 4 Today was then broadcast. They interviewed an expert in cryptocurrencies, who himself has made tens of millions of pounds from them. He expects a Bitcoin crash.

Bitcoin was invented in 2008, and at first had no real-world value at all.

I myself blogged about Bitcoin, over three years ago, in late 2017: https://ianrobertmillard.org/2017/12/10/thoughts-about-bitcoin/

I think that 1 Bitcoin was valued around £10,000 at time of blogging. Between then and now, the price has varied between about £2,600 at lowest and today’s recordbreaking peak.

As of today, 20th February 2021, 1 Bitcoin is valued at not far short of £40,000!

I expected a Bitcoin crash three years ago. Never happened, though the value did plummet before recovering and climbing further. Now, though, a crash is surely (?) inevitable.

I notice that Alison Chabloz accepts Bitcoin donations; I hope that she got some before the price rocketed, and still has them. If so, she may have a windfall. https://alisonchabloz.com/how-to-donate/.

Strange to think that an early investor or speculator in Bitcoin, who might have bought 100 Bitcoin for as little as £200 in 2011 (or only £20 at start of trading in early 2011, i.e. at about 20p each), would now be sitting on £4 million.

On the other hand, any value held in Bitcoin is like value held in chips at a casino. Until cashed in, they are only of notional value. The man or woman who bought 100 Bitcoin for £20 or £200 in 2011, and who is now sitting on £4M, may soon be sitting on £40M, or £400,000, or £4,000, or 4p…

I suppose that anyone who is in the fortunate position of owning £4M in Bitcoin today would be well advised to buy a decent country house for £2M or £3M and retain the rest in Bitcoin while the price travels ever(?) higher.

There will be a crash in the end. This is fool’s gold spun out of straw.

Any future and updated edition of the economic and psychological classic, Extraordinary Popular Delusions and the Madness of Crowds, will surely have a chapter on Bitcoin. https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds

Note: https://en.wikipedia.org/wiki/Bitcoin

Tweets seen

Anyone imagining that the “virus” hysteria and repression is all about “the virus” or public health is much mistaken. The health situation has been twisted and weaponized.

What we have seen over the past year is not complete as of itself, but a template for later repressions.

Worrying for sure that so many young British people are so brainwashed, but not an unexpected piece of news. After all, that is what the System aimed at and is aiming at, namely an unthinking, easily manipulated, cultureless, and eventually raceless population. The Coudenhove-Kalergi Plan. White Genocide.

This is happening widely. My own mother-in-law, aged about 95, was recently in hospital with a non-Covid problem. After about 2-3 weeks in hospital, her routine test was positive. She had, like so many, picked up “the virus” in hospital. She had no (and never developed any) symptoms at all (and is now back at her home), but had she died in hospital from her pre-existing problem, she would have been marked down as having died “with Coronavirus” or “within 28 days of having had a positive Coronavirus test”.

This is abuse of statistics (and hoodwinking of the public) taken to an absurd level.

I have recently blogged, though only briefly, about my experiences of Prague in 1988 and 1999.

Image

Well, this week I scored the same poor score as John Rentoul (4/10). I only knew the answers to questions 1, 2, 7, and 9 (and hit the post on number 4, being out about 2 inches).

Afternoon music

We need only one victory...

Moscow looked better then.

Late tweets

Pressure groups posing as “think tanks”. 150 such “think tanks” (including those two) were founded by a suspected Jew or part-Jew called Fisher, whose grand-daughter is married to David Cameron-Levita’s one-time crazed “adviser”, Steve Hilton: https://en.wikipedia.org/wiki/Rachel_Whetstone#Personal_life; https://en.wikipedia.org/wiki/Antony_Fisher

Late music

Thoughts about Bitcoin

First Remarks

I am not an economist; neither am I, at least in terms of occupation and/or formal training, an historian. I say that from the outset simply because it may be objected that, especially in terms of economics, I have no intellectual locus standi, despite the fact that most predictions made by economists turn out to be inaccurate. Also, “two economists, three opinions”…

Bitcoin

So, Bitcoin. Bitcoin was invented in 2008, possibly in Japan, by someone (or a group) whose provenance and even real name or names remain unknown:

https://en.wikipedia.org/wiki/Bitcoin

What is Money, in any case?

Money is an almost metaphysical thing. Different societies have used seashells, precious metals etc as money, the key characteristic being the relative rarity of the commodity used. In China (in the 7th Century under the Tang dynasty), paper currency was invented, and later more widely introduced in the 11th Century (Song Dynasty), where it was encountered by Marco Polo and others, who introduced the idea to Europe.

https://en.wikipedia.org/wiki/Banknote

Paper currency was, at first and for a long time, backed or notionally backed by precious metals, notably gold. Paper money only became generally acceptable in Europe a thousand years after its invention in China. The natural scepticism of the people was overcome both by its convenience and by its credibility, that credibility not only bolstered by its supposed convertability into gold or silver but also by the draconian penalties visited upon those who counterfeited the notes.

These factors underpin all money, credibility or popular belief in its value being the core.

Speculative Bubbles

One could go wider and say that credibility and belief underpin all valuation of assets, whether money assets, real property or other property in which the population is impelled to invest. Time and again there have been speculative bubbles: in currencies, in shares, in housing, in undeveloped land, in metals and even in such things as tulip bulbs (17thC Holland).

A good history of these bubbles and other mass events of the sort was penned in 1841 after the South Sea Bubble and was reprinted after the Wall Street Crash of 1929: Extraordinary Popular Delusions and the Madness of Crowds (and reprinted since, eg in the early 1980s)..

https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds

Since that book came out, since its 1930s reprinting, other bubbles have come and gone. Among the more noteworthy was the “Silver Bears” bubble of the 1970s

https://en.wikipedia.org/wiki/Silver_Thursday

and also many and various real property bubbles across the world.

Bitcoin Goes Viral

At first, back in 2008, Bitcoin was valueless, worth nothing at all. It was just electrical impulses on a machine, effectively. It was still of small value three years later:

“The price of bitcoins has gone through various cycles of appreciation and depreciation referred to by some as bubbles and busts.[129][130] In 2011, the value of one bitcoin rapidly rose from about US$0.30 to US$32 before returning to US$2.[131] In the latter half of 2012 and during the 2012–13 Cypriot financial crisis, the bitcoin price began to rise,[132]reaching a high of US$266 on 10 April 2013, before crashing to around US$50.[133] On 29 November 2013, the cost of one bitcoin rose to a peak of US$1,242.[134] In 2014, the price fell sharply, and as of April remained depressed at little more than half 2013 prices. As of August 2014 it was under US$600.” [Wikipedia]

Wikipedia continues:

“Ponzi scheme and pyramid scheme concerns

Various journalists,[79][144] economists,[145][146] and the central bank of Estonia[147] have voiced concerns that bitcoin is a Ponzi scheme. In 2013, Eric Posner, a law professor at the University of Chicago, stated that “a real Ponzi scheme takes fraud; bitcoin, by contrast, seems more like a collective delusion.”[148] A 2014 report by the World Bank concluded that bitcoin was not a ‘deliberate’ Ponzi scheme, but that it did thus far meet the “standard definition of a speculative bubble”.[149]:7 The Swiss Federal Council[150]:21 examined the concerns that bitcoin might be a pyramid scheme; it concluded that “Since in the case of bitcoin the typical promises of profits are lacking, it cannot be assumed that bitcoin is a pyramid scheme.” In July 2017, billionaire Howard Marks referred to bitcoin as a pyramid scheme.[151]

On 12 September 2017, Jamie Dimon, CEO of JP Morgan Chase, called bitcoin a “fraud” and said he would fire anyone in his firm caught trading it. Zero Hedge claimed that the same day Dimon made his statement, JP Morgan also purchased a large amount of bitcoins for its clients.[152]

Speculative bubble dispute

Bitcoin has been labelled a speculative bubble by many including former Fed Chairman Alan Greenspan[153] and economist John Quiggin.[154] Nobel Memorial Prize laureate Robert Shiller said that bitcoin “exhibited many of the characteristics of a speculative bubble”.[155] Journalist Matthew Boesler in 2013 rejected the speculative bubble label and saw bitcoin’s quick rise in price as nothing more than normal economic forces at work.[156] Timothy B. Lee, in a 2013 piece for The Washington Post pointed out that the observed cycles of appreciation and depreciation don’t correspond to the definition of speculative bubble.[131] On 14 March 2014, the American business magnate Warren Buffett said, “Stay away from it. It’s a mirage, basically.”[157]

Two lead software developers of bitcoin, Gavin Andresen[158] and Mike Hearn,[159] have warned that bubbles may occur. David Andolfatto, a vice president at the Federal Reserve Bank of St. Louis, stated, “Is bitcoin a bubble? Yes, if bubble is defined as a liquidity premium.” According to Andolfatto, the price of bitcoin “consists purely of a bubble,” but he concedes that many assets “have bubble component to their price”.[53]:21 Speculation in bitcoin has been compared to the tulip mania of seventeenth-century Holland. Comparisons have been made by the vice-president of the European Central Bank, Vítor Constâncio, by JPMorgan Chase chief Jamie Dimon,[160] by hedge fund manager Ken Griffin of Citadel,[161] and by former president of the Dutch Central Bank, Nout Wellink.[162] In 2013, Wellink remarked, “This is worse than the tulip mania […] At least then you got a tulip [at the end], now you get nothing.”[163] On 13 September 2017, Jamie Dimon compared bitcoin to a bubble, saying it was only useful for drug dealers and countries like North Korea.[164] On 22 September 2017, a hedge fund named Blockswater subsequently accused JP Morgan of market manipulation and filed a market abuse complaint with Financial Supervisory Authority (Sweden).[165]

The Guardian, CNBC, Forbes and Evening Standard compared bitcoin to bubbles such as the South Sea Bubble, the Wall Street Crash, the sub-prime mortgage crisis and the Dot-com bubble.” [Wikipedia]

Current Situation

Bitcoin started to reach escape velocity in late 2016, going from hundreds of U.S. dollars to thousands. At time of writing (December 2017), a single Bitcoin is valued at over $14,000 [USD], or £10,500 [Pounds Sterling]. People who “invested” less than £100 several years ago have seen their stock suddenly rise to be “worth” as much as £100,000. Those who have risked more (in some cases a million pounds or more) now find themselves in theory able to buy small or even medium-size nation-states lock, stock and barrel.

What Do We Know About Bitcoin?

  • Bitcoin’s origins are obscure, to the extent that journalists and others have researched, investigated and written about the names of possible founders and organizers without having come to a definite conclusion;
  • Bitcoin is almost useless as a popular currency: its explosion in “value” has made it unusable for any transaction not involving, at the least, tens of thousands of pounds;
  • Bitcoin, though supposedly limited in overall amount or number, has seen security breaches which, at the push of a button (putting it simply), have at least briefly increased the supply of Bitcoin.

Conclusion

Bitcoin is a classic speculative bubble or, alternatively and perhaps even better put, pyramid scheme. The people who got in early and stayed in are sitting on mirage-fortunes; those who have “invested” more recently will probably lose everything they put in. At the moment of writing, Bitcoin is probably nearing its peak. When it starts to fall rapidly, the panic will probably wipe it out entirely.

The surely inevitable collapse of Bitcoin will take down more than just Bitcoin itself. It may affect the stability of the economy more generally. Beyond that, if (as Bitcoin proponents and/or “investors” say–and their anger at any criticism is perhaps born of subconscious desperation), Bitcoin is as “credible” as any “ordinary” currency (and that is Bitcoin’s strongest point), then the upcoming crash of Bitcoin could take with it much public confidence in the value of the world’s major currencies too. Our major currencies are no longer backed by gold or silver and have only the value we put upon them. We exchange stones for bread. Our currencies are themselves castles in the air and “such things as dreams are made on”.

We recall the hyperinflation of early 1920s Germany, and I myself saw, on several visits to 1980s Poland, how the slide of the zloty affected that country politically and socially. The fate of Bitcoin is not just about Bitcoin.

Update, 23 November 2018

https://www.independent.co.uk/life-style/gadgets-and-tech/news/bitcoin-price-crash-cryptocurrency-mining-bankrupt-china-bitmain-giga-watt-a8646821.html

Update, 18 February 2019

The course of Bitcoin trading in 2017 is examined (below)

https://www.coindesk.com/900-20000-bitcoins-historic-2017-price-run-revisited

At the time of writing of my own 2017 blog article, a single Bitcoin was “worth”, i.e, valued at, about £10,500 pounds sterling. At time of writing today, 1 Bitcoin is worth just over £2,853 pounds sterling, somewhat above a quarter of the former figure, and only about a sixth of the 2017 peak.

Update, 19 November 2020

I update my post purely because, in the uncertain conditions of 2020, I see that the article is receiving more hits. Sign of the times?

I have nothing to add to the article itself, but as of today, Bitcoin is trading at just under £13,398 (pound sterling) and at USD $17,730.

Update, 26 November 2020

Update, 20 February 2021

Radio 4 Today interviewed an expert in cryptocurrencies, who himself has made tens of millions of pounds from them. He expects a crash. I expected one three years ago. Never happened, though the value did plummet before recovering and climbing further.

As of today, 20th February 2021, 1 Bitcoin is valued at not far short of £40,000!

I notice that Alison Chabloz accepts Bitcoin donations; I hope that she got some before the price rocketed, and still has them. If so, she may have a windfall. https://alisonchabloz.com/how-to-donate/