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13th December 2017

On the 13th December VCL published its monthly notes. This included the publication of VCL's CEO, Martin Wood's monthly comment, this month's four resource stocks of interest, plus a topical cartoon which can be seen on the Short Note page.

Money is just an accounting system and fans of blockchain will tell you that blockchain is just an accounting system, but is not controlled by the state, so is honest.  I happen to think that for just this reason, Blockchain will end up as an integral part of our global payments system. Blockchains strength is that it is honest. How it will operate once Bitcoin has been discredited I don’t know!


Bitcoin on the other hand……for me, the weakness of Bitcoin is that it is honest and if we are honest with ourselves we would have to admit that we like the dishonest nature of our global fiat currencies. We like that governments constantly print more money and circulate more of it and although we are not actually richer, we like having more of the folding in our pockets today than we did yesterday (even if it buys less). We like that interest rates are adjusted and currencies fluctuate so we don’t have to lose our jobs to harder working people overseas.


Bitcoin is too honest, it can't be debased (once we get through this current South Sea Bubble style mania) and therefore only the hardworking and worthy will end up with it. In reality most people are lazy spivvs looking for an angle (civil servants on their fat pensions and short working weeks are the worst culprits for maximising money in for minimum work done by the way). Simply put Economic Man wants to do as little as possible for as much as possible and constantly debasing our fiat currencies is what allows us to continue in the pantomime that we are achieving this.


Bitcoin, if it is to survive must remove its finite nature. But if it succeeds in achieving the fiat / spivv nature of money then no one will want it. All the new ICO’s are to some extent reducing the ‘finite’ nature of Bitcoin, (allowing the Ponzi scheme to grind on), but in doing so each new ICO is adding to the tacit admission that Bitcoin collectively is just another fiat currency with high transaction costs.


Which leads us to the other issue that bothers me with Bitcoin. – One of the major claims of its strength is that no government can interfere with it. We have just shown that ICO’s are doing the job of a Fed printing press, so what is this mythical ‘interference’ from Central Banks we need to avoid? Could it be setting interest rates?


But setting / moving interest rates actually protects economies which are out of kilter structurally, so losing this adjustment mechanism would be a disaster for economies which would have to adjust by losing jobs – just look at the devastation inflicted on the South of Europe by the Euro. Bitcoin as a ‘one size fits all’ currency has the ability to do this on a global scale.

So I suppose the question I am really asking is ‘Bitcoin – What’s the point?’"