Valueless Valuables

By Heisenberg

Ok, I’m feeling like today is a day when I should try and vex as many readers as absolutely possible, and there’s no better way to maximize the hate mail than to deride gold and Bitcoin in the same post.

Last night, we excerpted the latest from Eric Peters, who offered the following exceedingly hilarious and exceedingly accurate characterization of carefully-polished doorstops (gold) and make-believe space money (Bitcoin):

James Marshall discovered gold at Sutter’s Mill on Jan 24, 1848. The California gold rush sparked the largest mass migration in American history; 300k dreamers flocked west between 1848-1855. They toiled to unearth 750,000 pounds of yellow metal in those 7yrs; worth $15.4bln at today’s price. Satoshi Nakamoto invented Bitcoin on Halloween 2008, and released his creation into the ether. $100bln of cryptocurrency has been magically mined in these 9yrs; equivalent to 4,860,000 pounds of gold. And both are at once valuable despite being valueless. 

Yes, “both are at once valuable despite being valueless.” We couldn’t have said it any better ourselves.

People have a demonstrable tendency to lose track of common sense and nowhere is this more apparent than with gold and Bitcoin. I’m sorry, but gold has zero inherent value once you strip away humanity’s natural predisposition to love things that are pretty and shiny. You can’t eat it, you can’t burn it, you can’t do a damn thing with it other than caress it, stare at it or, if you’re Scrooge McDuck, swim backwards in it. Yes, there’s a finite supply of it, but there’s a finite supply of all kinds of things that no one would ever characterize as “an inflation hedge”. It has value precisely because you think it does and if you ever find yourself having to survive in an inhospitable environment, it will be completely useless. That’s common sense.

As for Bitcoin, it’s make-believe. Someone made it up. And people are making it up again all the time and calling it something different. One day, governments are going to ban it. And that will be the end of that. That’s also common sense.

There’s a reason why gold fanatics and Bitcoin cheerleaders tend to demonstrate an aversion to governments and central banks and I’ll tell you what that reason is. The reason is because it grates on those folks’ nerves that a centralized authority can print pieces of paper that have value simply because the government says they have value. It’s true that printing pieces of paper out of thin air is nonsense and that it should, in the end, lead to hyperinflation. It’s also true that when the Treasury prints I.O.U.s and sells them to the people across the street at the Fed (with one degree of separation), that the government is engaged in a massive, circular, self-referential ponzi scheme that should by all accounts be doomed to collapse on itself. The reason this nonsense “works” is precisely because the government says it’s going to work and that drives some people absolutely crazy.

The more money gets printed out of thin air without causing hyperinflation and the longer the ponzi scheme persists without triggering an epic collapse of the system, the crazier the gold fanatics and, more recently, the Bitcoin crowd gets. The government’s power to legitimize something profoundly illegitimate is an affront to a lot of people and so they cling to myths about the “inherent” value of a yellow metal or the “revolutionary” characteristics of a make-believe electronic payment system.

It’s true that eventually currencies fail. It’s true that empires eventually collapse. But in the meantime, railing against the system by regaling yourself and others with fairy tales about the magical properties of what, in the final analysis, are just twinkling paperweights and digital exchanges that will eventually be shuttered by government decree, is tantamount to tilting at windmills.

On top of that, it’s by no means clear that human beings will always be entranced by gold. It could very well be that when society plunges into the next dark age, people won’t be fascinated by gold anymore. Maybe people decide “yellow” isn’t their thing and instead choose a different colored scarce object as a store of value .

So my message to you on Monday goes something like this. If your plans for this evening include riding a horse to a local farm and transacting with the farmer for produce using golden nuggets pulled from your deer-hide pouch or else by promising to send him a fraction of a Bitcoin in exchange for some bushels of corn, then by all means, tell us all about the virtues of the barter system and about how governments are on the verge of collapsing under the weight of their own fiat fantasies.

But if your evening plans involve buying your corn from Jeff Bezos at Whole Foods and paying with your debit card, then please, spare me your disingenuous lecture about globalism and worthless dollars.

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