Bitcoin Bugs’ Belief

Bitcoin Bugs

From time to time something odd happens to the gold price – it goes down. This is usually a shock to the advocates of anti-fiat money who’ve been squirreling away the shiny stuff against the inevitable day when nation states collapse. They get quite cross when they discover that the said nation states may in fact be flogging their gold at historically high prices and driving the price down. Apparently the thought that countries might resist collapsing hadn’t occurred to the gold bugs.

In the meantime we’re seen the rise of Bitcoin, one of a number of cryptocurrencies that offer freedom from central regulation. Bitcoin and its ilk isn’t backed by anything, which makes it more than ordinarily a punt on the perverse willingness of people to believe in ephemera. And that, of course, is simply another case of history repeating itself. Have we learned the lesson?

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Europe, Taxed by Tobin

1808 and All That

The soap opera that is the Eurozone continues unabated, as the intransigence of the UK has caused a split that seems likely to cleave the European Union in two. Regardless of the rights or wrongs of the situation the British appear to have approached the negotiations over Europe’s finances with the finesse of a bulldozer and the subtlety of a sledgehammer.

The UK has calculated that agreeing to the latest half-baked plan to save the Euro, which they’re not part of, is not in their national interest. As this “national interest” appears to be that of the UK’s financial sector, which helped caused most of the problems in the first place, this looks a bit strange. What’s even more strange is the main issue is the imposition of a so-called Tobin tax on financial transactions: which is peculiar mainly because the British already have such a thing and have had it since 1808.

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Stuck In A Weimar World?

Rich and Poor

In many ways the problems of the Eurozone are hard to understand: as the US Secretary of State Timothy Geithner has pointed out:

"The problems that they are facing there in Europe are complicated to solve, but well within the resources that Europe has."

So the sight of the rich asking the relatively poor Chinese to bail them out, or attempting to put the squeeze on the IMF is perverse.  The Chinese wonder, if the weaker Euro countries are such good investments, why don’t the Europeans put their money where their begging bowl is?

Of course, if you delve deep enough, the problem is psychological, and is magnified because the Eurozone is made up of independent countries following their own paths. But at the heart of the problem is Germany, the country that has benefited more than any other from the euro and which is now unwilling to accept the consequences of its Faustian pact. For the Germans it’s heads they win, tails we all lose, because they're stuck in a Weimar world.

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Fear and Loathing in the Eurozone

Gonzo Economics

The journalist Hunter S. Thompson popularised a style of journalism that came to be called “gonzo”, operating on the theory that “fiction was the best fact”. If Thompson were still alive today and inclined to cast an eye outside of the USA towards Europe he’d probably be wondering how exactly to make the car crash that is the Eurozone sound like fact.

In fact the history of currency unions is replete with examples of spectacular failures and if the euro experiment does fail it won’t be for lack of prior example. Yet history also shows that collapse is not inevitable, assuming strong leadership and a common purpose. So we’re probably all doomed.

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