Tuesday, December 3, 2013

The Absurd Attack on Gary North's Take on Bitcoin

 Paul Rosenberg is out with a rebuttal to Gary North's charge that Bitcoin is a Ponzi scheme. While I would classify Bitcoin as more of a pump and dump scheme than a Ponzi scheme, I agree with most of North's points.

All you need to know about Rosenberg's commentary is when he writes:
Here we see something sad and ironic: a man [North] who hates the Fed, trying to ruin the one tool that can actually slay the Fed.
Bitcoin is not important because its price is rising – it’s important because it takes the control of money away from the cartel.
1. Bitcoin is not going to slay the Fed.

2. It will not take control away from the money cartel. The legislation is coming that will:

A.  Make anonymizig of bitcoins a money laundering crime. 
B. Bitcoin processors will be required to accept chargebacks from users.
These two steps will make bitcoins less valauble to use than currency or gift cards, since all Bitcoin transactions will be trackable.

And this Rosenberg comment is just baffling:
Money out of digits isn’t true at all. Bitcoin is money made with cryptography – with mathematics. And as much as I like Gary’s preferred gold and silver, mathematics is eternal, built into the very nature of the universe. That’s hardly a soft foundation. Those who don’t understand mathematics may jump to the conclusion that Bitcoin is “unbacked,” but that position is simply ignorant.
What the hell does mathematics have to do with "backing"? Can I turn my Bitcoin in for an equation? This is probably the greatest indication that Rosenberg is caught up in voodoo thinking. How much will Rosenberg pay me for an equation? One plus one equals two. Hey Paul, send me my payment via PayPal.


  1. "How much will Rosenberg pay me for an equation? One plus one equals two. Hey Paul, send me my payment via PayPal."

    100% agree Robert, I hope this doesn't mean that I can no longer buy the drudge formula from you :(

  2. Stick with Gary North, Wenzel.

    Better the known devil than the unknown.

    And talking about unknown devils, who is this Paul Rosenberg from Cryptohippie?

    Who owns Cryptohippie?

    Might they have connections to TOR, Wikileaks, Assange, and/or the Internet billionaires (Zuckerberg, Brin, Thiel, Omidyar)? If so, can DARPA be far behind?

    How would we know since Bitcoin is so mysterious......

    In fact, how would we know if Bernanke himself wasn't moonlighting as an "anti-Fed" bit-coiner?

    Answer is we wouldn't.

    Also, what reason could there be for the inventor of an invention of this magnitude (purportedly) to coyly refrain from taking any credit or recognition?

    Another question, why does Julian Assange tout it?

    These are the things which must be investigated before anyone other than fools and gamblers will go near this scheme.

    1. Paranoia strikes deep
      Into your life it will creep
      It starts when you're always afraid
      You step out of line, the man come and take you away

    2. Oh boy, another one of those guys who thinks Julian Assange is in cahoots with the state.
      Ain't this circular reasoning swell?
      We need someone to expose the state. Someone does it. He is in cahoots with the state because he doesn't reveal what we want him to (because we assume he can). So he must be rejected. But we need someone to expose the state.

      In this psychological kindergarten, of course Bitcoin would be "suspicious".

  3. "How much will Rosenberg pay me for an equation? One plus one equals two. Hey Paul, send me my payment via PayPal."

    That's lol funny!

  4. When the government outlaws something, the price of it usually skyrockets.

  5. This may be one of the weakest posts by Wenzel ever. Paul Rosenberg's rebuttal was right on, which of course explains why Wenzel didn't make an honest effort to criticize it. Instead, he made the very same errors North did.

    I can't for the life of me understand why so many people, Wenzel and North included, get so worked up about BitCoin. They sound like the typical status quo statist and behave as if BitCoin was a personal insult to them.

    1. Because they pride themselves (get off) on "understanding" something so fundamental (money) that few others do. Yet, they both (including others like Schiff) missed the greatest thing to happen to money in millennium, maybe of all time (Even if they turn out to be "right" about it). Bitterness, jealousy, and regret are powerful human emotions. Takes a big man (Tucker, Woods, and others...) to admit they jumped to an incorrect conclusion and reverse their position.

    2. Maybe they gain something personally from promoting Bitcoins? Credibility with the hacker-anarchist world, for instance. Maybe even money. How do you know?

      It takes a big person to stick to his guns, even when peer pressure might suggest otherwise.

    3. "Maybe they gain something personally from promoting Bitcoins?"


      How many people are pumping Bitcoin with or without altruistic intent? That's a question that will only be answered after time passes but an important one none the less.

  6. I agree that Rosenberg's rebuttal to Gary North's charge is week but what about this great rebuttal by John Mather http://libertarianstandard.com/2013/12/01/ponzi-logic-debunking-gary-north/#more-12719 in the Jeffrey Tucker's blog?

    1. I have read through Mather's rebuttal, North's answer and Mather's reply. Unfortunately, I cannot find anything in Mather's attempts that I would call "great". Rather, I find in his articles an unfortunate collection of falacies: cheap shots at North's person (pointing at North's Y2K prediction), red herrings bordering on the ridiculus (eg attacking North for his definition of a Ponzi scheme not conforming to wikipedia) and a complete failure to address North's point, namely that bitcoin's volatility makes it unsuitable as currency.

      I've been observing bitcoin on and off since last year and was sceptical, though so far just on a gut feeling. North made a rational point to confirm what the gut whispered. Mather's piece, far from rationally addressing the points, sounds like the hurt pitch of someone too emotionally invested in his favourite asset, like defenders of CMOs in 2007.

  7. What happens if the dollar collapses? Gold is difficult to exchange and and not the best medium for frequent transactions, that is how paper money came to be. If the dollar collapses people will lose all their safe money in banks, there will be a huge distrust for banks. Bitcoins might have more trust built up if this collapse happens.

    1. This is how paper money *backed by gold and silver* came to be, not how fiat paper money came to be, through government decree. The only thing that gives Bitcoin value is it's value as a medium of exchange, and the ease and anonymity for the users....but when government cancels that out, BitCoin will have no real value whatsoever.

  8. To previous Anonymous commentator:
    > How would we know since Bitcoin is so mysterious......
    How is it mysterious when the code is available for everyone to audit.. https://github.com/bitcoin/bitcoin?
    > Another question, why does Julian Assange tout it?
    Assange supports it because payment processors were pressured to stop all donations to Wikileaks.

    To Bob:
    > B. Bitcoin processors will be required to accept chargebacks from users.
    What Bitcoin processors? Most transactions are peer to peer, between the merchant and the customer, just like cash.

  9. You guys are still talking about "backing"? Google "Subjective Theory of Value" please.

    1. I agree with your point whole heartedly. Even further, I can suggest that the dollar has functioned(though not well) with no backing for some time now.

      Bitcoin is still in its infancy relatively speaking, where gold/silver has stood the test of time as a medium of exchange for thousands of years...so there's that to reflect on regardless of how people came to subjectively value gold, silver, or currently Bitcoin.

      I wouldn't underestimate the "tangible" characteristic of silver/gold compared to Bitcoin as a medium of exchange.

      Bitcoin proponents are arguing this tangibility as a deficit, and I can see their point, however you could also reasonably argue that the lack thereof is weakness as well.

      Rest assured that we will have our answer either way within 5 years tops in my opinion.

  10. Bitcoin should be celebrated, not denigrated, at least for the time being. But its risks should also be understood, and Mr. Wenzel points out some of these risks astutely. He will probably be vindicated in his prediction 2A: legislation will be passed making Bitcoin and other digital coin anonymity illegal. I'm less confident about about his prediction 2B, but 2A would be enough to ruin Bitcoin as a medium for tax-free, stateless transactions and evading capital controls. When crossing borders, the tax slave masters would know what each tax slave removed versus what each brought back in; if the difference exceeded the allotted capital control threshold, punishment could be meted out right at the border.

    If Mr. Wenzel's predicted 2B legislation comes to pass, that would ruin most of what remained of Bitcoin's advantage over fiat. Even then Bitcoin might retain utility as a store of wealth, but only if demand for it stays strong. It might deserve a small place among a diversified portfolio of other assets, at most.

    The question is, would de-anonymizing legislation be enforceable? Not entirely, to be sure, but probably enough to make it inconvenient and risky to exchange Bitcoin anonymously. Either an inconvenient amount of cyber-security will have to be used to exchange Bitcoin, or face-to-face transactions with trusted parties. These limitations will not necessarily kill Bitcoin as a medium of free exchange, but will greatly limit its adoption unless some convenient and secure technical solution emerges.

    There are reasons for cautious optimism about Bitcoin's future, but I worry most about governments making Bitcoin or a government substitute mandatory. So long as the best and brightest computer scientists and engineers are seduced or intimidated by governments' apparent coercive control over their well-being, there will always be a threat that digital currency will be subverted into an instrument of oppression instead of freedom. http://jakespake.blogspot.com/2013/11/bitcoin-is-making-my-leg-tingle.html

  11. @Tony.

    Re Assange.

    No circular reasoning. Proven connections to Soros, major media promotion.
    Very limited "exposures" that suit power elite goals.

    Massive alternative support based on flimsy grounds.

    Read and think, instead of being blinded by media hype.

    Childish are those who run after heroes, promote libertarian though-control, and jump on band-wagons, while claiming to be intellectuals.

    1. You would be more effective at arguing your position if you backed up your claims with evidence. Links to research would suffice. Just a tip.

    2. It's really funny that i'm blinded by "media hype" as if the media has actually been kind to Assange. LOL. Last i checked, Assange has been labelled a "traitor" even though he is not American, and called upon to be charged, imprisoned or even assassinated. Some 'promotion'.

      No, i'm just not one of those paranoid conspiracy thinkers who always manages to find some "link" to refuse to accept good actions so they can continue to see themselves as isolated completely. Just as i'm not one of those who actually jumps on the libertarian bandwagon of worshipping Ron Paul (or ANY libertarian icon for that matter) or believing the Twin Towers were brought down by explosives.

      A bandwagon jumper is the least i am. I just don't think EVERYTHING is a false flag operation.

      And as Edward said: provide evidence for your assertions. And when i mean evidence, i mean evidence. Not suspicions, opinions or assertions.

    3. Libertarianism is nothing more than intelligent "paranoid conspiracy theory." (Power-elite analysis).

      Even the law permits circumstantial evidence and preponderance of evidence, but libertarian message boards want signed confessions from Mossad and CIA.

      Keep waiting.
      And keep posting.
      Ever heard the term useful idiot?

    4. @Tony

      You ask critics for evidence. But you don't ask bitcoin for evidence. Then you accept that no one knows who Nakamoto is. I bet you don't understand his algorithms either. You believe them because of media hype and peer pressure from fellow anarchists.
      ou prove with every word you are what is called, with all due respect, a useful idiot.

    5. "Libertarianism is nothing more than intelligent "paranoid conspiracy theory."

      Libertarianism is not against the state because it does what it claims it is not doing. It is against the state because it does what it does openly as if it is moral when it is not. Libertarianism DOES NOT NEED the revelation of secret evils. The open behavior of the state is more than enough. It is a philosophy based around the twin concept of the non-aggression principle and private property rights. Even if the state did *exactly* what it claims it will do and politicians never broke their promises, they would still be an immoral institution.

      But nice try, though. Better luck next time.

    6. @Tony
      Ah - losing your cool. Not clever.

      I know very well what libertarianism is.

      I said power-elite analysis is essential to it.

      That (power-elite analysis) is what statists themselves call paranoid conspiracy theory and you use the same language.

      It is not enough to parrot truisms and dogma like those Bible-thumpers you disdain.

      If the state is operating secretly and you choose to only observe the overt actions of the state then you are, I repeat candidly, and with NO RESPECT this time since your response shows you deserve none, you are a USEFUL IDIOT.

      Now I will quit this ridiculous thread.

    7. "You ask critics for evidence. But you don't ask bitcoin for evidence."

      Innocent until proven guilty. Ever heard of that? The onus of proof is on the critics/prosecutors.
      Bitcoin does not have to prove its innocence from allegations that themselves are baseless without a case.

      "Then you accept that no one knows who Nakamoto is. I bet you don't understand his algorithms either. You believe them because of media hype and peer pressure from fellow anarchists."

      This is what i call a "base, stupid and unsubstantiated assertion," as well as a strawman.
      If i succumbed to peer pressure from anarchists why am i contradicting them? Wenzel to the best of my knowledge is an anarcho-capitalist. Furthermore i never hesitate to say "support ideas, not people" and unlike many anarchists do NOT worship the ground that Rothbard or even Von Mises and Ron Paul walk on. And since we were talking about Assange, i'm not aware that anarchists put peer pressure on me about him. It's funny they even would if Assange is an "agent" as you insinuate. Would that not compel anarchists to be suspicious of him like you are? So despite this, and the fact that media hype about Assange has been mostly negative, they somehow compel me to be too trusting of Assange? Your logical contradictions are flying fast and hard. If you told me i got "peer pressured" by minarchists you at least would make more sense.

      This is too easy, man. Can't you give me a challenge? Thus far the decrepit level of your "arguments" is disappointing even for me.

      "You prove with every word you are what is called, with all due respect, a useful idiot."

      Some more great "arguments". First you sling out some complete BS about me being "peer pressured" or influenced by media hype, then you come to the conclusion, ala 'non sequitur' that i am a "useful idiot". So add the ad hominem to your arsenal of weak retorts.

      By the way, have you found that evidence yet? I'm still waiting. The accused is about to walk out of the courtroom.
      Your response of "if they dont have to prove they're innocent, i don't have to prove they're guilty" is wholly underwhelming, as you may understand by now.

    8. "Ah - losing your cool. Not clever."

      You flatter yourself.

      "I know very well what libertarianism is.
      I said power-elite analysis is essential to it."

      No you didn't.
      Try as i might, the word "essential" does not show up in your post. And furthermore, you said "Libertarianism is NOTHING MORE (emphasis mine) than intelligent "paranoid conspiracy theory."

      Don't you understand how stupid you look trying to weave falsehoods in a forum where your previous posts are for all to see?
      And no, libertarianism does not need "power-elite analyses". The latter is not "essential". It merely applies its standard of non-aggression and private property to all across the board, government included. It does not *need* to say anything about the "power elite", even if it does.

      "It is not enough to parrot truisms and dogma like those Bible-thumpers you disdain."

      Huh? What?

      "If the state is operating secretly and you choose to only observe the overt actions of the state then you are, I repeat candidly, and with NO RESPECT this time since your response shows you deserve none, you are a USEFUL IDIOT."

      Ah. Losing your cool. Not clever.
      And yet another false assumption. I never said i choose only to observe its overt actions. I said libertarianism DOES NOT NEED the revelations of secret evils. This in reference to your claim that "Libertarianism is nothing more than intelligent "paranoid conspiracy theory."

      You are now mishmashing several different points of argument together and even in doing so don't manage to avoid blatant misrepresentations. What a troll you turn out to be.

      "Now I will quit this ridiculous thread. "

      Of course you will.
      Would be unwise to embarrass yourself even more.

  12. It's maddening to see so many inept attacks on *and* defenses of bitcoin.

    "Bitcoin has no intrinsic value and is therefore a scam!"

    "Not uh! Bitcoin is totally backed by math, brah!!"

    Both sides need to man up and lrn2economics or this conversation will never go anywhere. (Of course, there have also been many skillful rebuttals of North's anti-Bitcoin drivel, but none of them were covered by EPJ.)

  13. Mr. Wenzel, a few more of these useless posts on bitcoin and I'm just going to ignore anything else you have to say. If you have real legitimate concerns I wish you would express them clearly not ad-hominem attacks. The quality of your posts on bitcoin has gone south faster than a Ponzi scheme.

  14. By the way, about your alleged legislation soon to be implemented/passed B will never happen. You should know why if you did your research. A is so unlikely that it won't happen either but not impossible.

  15. The only thing absurd is that Wenzel continues to do exactly what Rosenberg and North accuse each other of doing: of pretending that mere suspicions are facts on which to base the rest of their thoughts on Bitcoin.
    This and Wenzel's utter one sidedness in his presentations of articles, as well as his ad hominem articles about Bitcoin, clearly prove he has no interest in being genuinely honest and objective, and should therefor be dismissed by anyone not being led by emotions or personal interests EVEN IF he turns out to be right in the end.

  16. @edward

    You don't have the time and energy to google Julian Assange and Open Society or Assange and Rothschild or Assange and CIA or Assange and intelligence or Assange and Soros.

    You don't have time to search threads like - is bitcoin a government operation or is bitcoin easily tracked or who is Satoshi Nakomoto.

    But you have time to post on message boards and rush after every fad.
    You prove my point.

    1. Let's say that there is actual evidence (rather than mere assertions, opinions or suspicions) in the links you suggest we find with Google.

      It is baffling you are here to convince us that Bitcoin is a nefarious government operation yet are yourself too lazy to provide us with direct links.
      Why on Earth should we do YOUR work for you?
      You're the one with the claims, yet we should do the work to find out if you're not just blowing smoke?

  17. @Tony

    Innocent until proven guilty is A LEGAL PRINCIPLE.
    Are we in a court of law?

    Asking for proof from the one who proposes a paradigm change or hypothesis or new model (Assange, Wikileaks. Bitcoin) rather than from doubters and dissenters is a PHILOSOPHICAL PRINCIPLE

    Applies to argument, science, and philosophy.

    I repeat, Useful idiot.

    1. Why don't you just stop embarrassing yourself by coming up with manifold lame excuses for the simple fact that you appear to be doing nothing but talk out of your rear hole?

      You don't have any evidence to provide. When i ask for it, instead of providing it you whine that i don't ask the same of Bitcoin. When i tell you why i would have no reason to do that (innocent until proven guilty; assuming the good nature/intent of something or someone that is acting contrary to the interests of the state, until provided with a solid reason to believe otherwise), you then ramble yet more about what are, or are not "legal principles" or "philosophical principles" or paradigm changes or hypotheses or new models, blah blah... As if i give a damn.

      There are two things you will need to convince anyway of your view. And that is either evidence, or solid logic. You possess neither and are even unable to correctly represent someone's statements. So pray tell, why should i give your assertions the time of day?

      And yes, you are repeating yourself. Speaking of parrots...

  18. Here is a well-argued rebuttal of North's Ponzi article and its follow-ups, by Peter Surda, another Austrian economist: http://www.economicsofbitcoin.com/2013/12/gary-north-is-clueless-about-bitcoin.html

  19. Alan Greenspan stated that BitCoin was a bubble and that he was unable to see any intrinsic value in it.

    I'm sure Schiff, North and Wenzel feel vindicated now, when the Great Maestro agrees with them. On the other hand, Wenzel agreed with a person whose main point was that BitCoin needs a central bank, preferably with Ben Bernanke as its chairman.

    Now of course, it is possible that Greenspan is correct about BitCoin. However, considering that he's been wrong about every single thing in his career, even about the US dollar, which, presumably, he had some knowledge and understanding of, it seems pretty unlikely that he'd be right about something he quite obviously doesn't know the first thing about.

    And even if the value of BitCoin does come crashing down to Earth, so what? Housing prices came down too, does that mean we shouldn't use houses? That houses are in general a bad idea? Or that houses is a nefarious scheme of the state?

    The future will tell the tale of BitCoin. I don't see any reason for why it wouldn't be able to become a globally used currency. No reason at all. And no one, not a single person has provided any argument for why it would be impossible for BitCoin to become a globally used currency. All the critics have talked about is its lack of "intrinsic value", how it is out of line with Mises' regression theorem, how volatile it is, how it may or may not be subject to government regulations etc. How is any of that even relevant?