Tuesday, January 7, 2014

Eric Posner: Bitcoin Is Not Money

Eric Posner, the Kirkland & Ellis Distinguished Service Professor of Law and Aaron Director Research Scholar at the University of Chicago, is pretty much in line with my thinking on Bitcoin.

He says people should stop thinking of it as a money.

"It's more like a payment system that people can use to transfer dollars from one place to another, and the way you transfer your dollar is you buy a Bitcoin, ship it through the internet, and then the other person gets it and converts it into a dollar," Posner says.

He also hits the nail on the head with regard to the regulation of the middlemen exchanges.  In similar fashion to what I see, he sees that all government needs to do is control the exchanges and for all practical purposes it controls major commercial use of Bitcoin.

Here's the full interview.


  1. Keep trying Wenzel. Eventually, the whole world will see it your way...hahahahahahahahahahahahahahahahaha.

    You are adding nothing. You have no original thoughts on the subject. You are wrong. STOP!!!!!!!!!!!!!!

  2. Posner's argument is retarded. For Posner's argument to be valid, it has to be assumed that retail adoption of bitcoin will not continue growing. There's no reason why retailers can't accept bitcoin as a means of payment unto itself. When retail adoption becomes widespread enough, it will be possible, even likely, that employees will demand payment for their services in bitcoin, at which point currency conversion would cease.

    If I can get paid in bitcoins, and buy everything I need in bitcoins, it would be pointless to convert bitcoins into some other currency. It's only a matter of time until this becomes possible. And once it becomes possible, the advantages to being paid in bitcoin (no taxes, massive tax evasion possibilities, borderless, no inflation, etc.. etc.. ) will ensure it drives state issued currencies out of existence.

    1. And if the government tells Macy's not to accept Bitcoin, they are going to ignore the government? Dream on.

    2. How effective would the government's prohibition on bitcoin be if the government currency implodes?

      What happens if the world were to suddenly wake up and sell all the dollar bonds they are holding? The government can only keep a ban on bitcoin in place as long as their money is capable of paying off the thugs who are responsible for enforcing the ban.

      Further, this doesn't need to take place in America. It can take place in some shithole no-name country. That country will become the next Hong Kong.

    3. US Gov would have to go "full totalitarian" for this to happen as there are many legal challenges that can be brought in the United States.

      For sake of argument thought, if they did ban cryptocurrencies entirely there could still exist a demand for a method of transferring value securely and privately across distance without middlemen. This would be a modern version of Hawala and Bitcoin could serve this need especially when the privacy enhancement tools are utilized.

      Another possible outcome of a government ban is an increased demand via the "Streisand Effect".
      When you tell someone they can't have something they tend to want it more.

      Either way, it will be an interesting drama to witness - probably one of the most important in our lifetimes. My money is on the freedom-fighters hence I own and support Bitcoin.

    4. "US Gov would have to go "full totalitarian" for this to happen"

      lol...sometimes I wonder how libertarians can underestimate the willingness of gov't to control.

    5. @ Anonymous January 7, 2014 at 8:55 PM

      Believe me, the creators of bitcoin didn't underestimate the government power. That is why the created it as resilient as it is. Any suppression by governments will simply push the wealth and opportunity to more welcoming climes. At the worst case, bitcoin will serve as a underground currency.

      In my view, the benefits to society are so great that as these benefits become more apparent we will see an open revolt should governments press too hard against their adoption.

    6. ""US Gov would have to go "full totalitarian" for this to happen"

      lol...sometimes I wonder how libertarians can underestimate the willingness of gov't to control."

      If libertarians are afraid of pissing off government if and when it goes "full totalitarian", then they may as well shut up, get down on their knees and say: "Thank You, Lord State for all your blessings."

      Besides, if government goes "full totalitarian", then i wish you good luck on using your precious gold and silver. So it's a retarded argument to make against Bitcoin.

    7. "Besides, if government goes "full totalitarian", then i wish you good luck on using your precious gold and silver."

      I'm going to have far better luck at it than Bitcoin holders if/when it comes down that way...and if you truly believe otherwise than good luck and that's what makes the world go round(difference of opinions).

      I have 5000 years of history backing my store of value choice...you have chosen something with 4 years history. Let the chips fall where they may.

      By the way, my choice has nothing to do with licking the boots of the state, I made it not based on emotion(like many that chose Bitcoin), but instead based on what I believe will protect me best.

      I equally hate the state as much as any Bitcoiner, but I'm not letting that emotion rule my financial decisions.

  3. If you can exchange $ for bitcoin, transfer the bitcoin, then exchange bitcoin for $, why should bitcoin not be considered money? Is bitcoin money? No, but then the $ is the obligation of an insolvent bank, how can that be considered money? Yet you Miseans make no distinction there, why hate on bitcoin?

    And if the government tells Macy's not to accept gold, does that mean gold is not money? Money is what the government says it is?

  4. why would anyone waste their time and $ with bitcoins? there is just too much volatility and too much controversy. never mind the fact it can be stolen with no recourse. also, no one really even uses it compared to the dollar. I know the dollar is shit but at least it's accepted by everyone.

    1. "never mind the fact it can be stolen with no recourse."

      So one should only bother with anything when the state approves of it?
      Great libertarian message.

      Obviously, people using Bitcoin are well aware of the downsides, but to them it's WORTH it.
      So i find it ironic that a libertarian would try to dissuade them by basically giving them a statist line of reasoning.

      "I know the dollar is shit but at least it's accepted by everyone."

      So is the existence of government. So let's stop trying to find alternatives?

    2. "I know the dollar is shit but at least it's accepted by everyone"

      So Chris B, if that's your definition of money, if bitcoin becomes ever more accepted, you will also accept it in payment of debt? Even if bitcoin is still no different in whatever characteristics it possesses now?

  5. Posner is right on in his assertion that govts. will not give up monetary float level manipulation, something they readily with their santioned fiat currencies. Thus, only a digital currency they approve of (and can manipulate) will be 'blessed.' Also, I read that the block chain that supposedly contains every bitcoin transaction is growing exponentially. If the idea was a peer to peer payment system, where everyone stores the block chain on their system, how will this all work out when the block chain becomes Terabytes in size?

    1. While I am not the expert, the concern about the blockchain size has been addressed elsewhere and shouldn't pose a problem. Google "blockchain pruning" for some insight.

      In regards to government censorship, they will ultimately fail (in my opinion) as Bitcoin is the 800 lb. gorilla that will soon be calling the tune. Any government that seeks to remain relevant will need to get on board or be left behind.

  6. Most of the bitcoin service providers are/will be backed by main stream Venture Capitalists who have a vested interest in not subverting their respective governments. It is easy to throw around the word "Government" as if it is a separate species of animal. If you complain about people not taking the time to study bitcoin, you should also take the time to study human nature over the course of history. This world is far more complex than "decentralized is better" You can scratch out all the corrupt governments that you like, unless you are planning on getting rid of all people as well, I think you will run into the same greed/power related problems you have now...albeit on a different playing field with different tools. If you think the corporate rulers of the internet are no different than the government...you've got another thing coming.

  7. You're fighting the good fight, here, Wenzel.

    BTC is likely yet another espionage and manipulation tool. A year or so from now, we'll get the "oops, we forgot to tell you" memo, when it will be too late.

    Just a simple question.

    Do you think the royal families of Europe and their bankers, the greatest business houses and richest people in the world are storing their savings in the form of Bitcoins?

    Do you think those people would rather own land, houses, businesses or BTC?

    If you can't see them turning their fortunes into bitcoins, ask yourself why the media is trying to convince you to turn your bank account over to it.

    Ask yourself why the BTC is being promoted heavily in Africa?
    Ask yourself how encryption can function in countries where the internet fails a lot of the time.
    Remember the west is heavily and extraordinarily policed compared to most third-world countries. They may be socialized in many ways, but they do not have the police state in full dress that we have here; they don't have the manpower, the money, or the equipment for it. So if BTC can be involved in scamming here, it can be involved even more in them elsewhere, where the governments are much less powerful compared to the population.

    (Yes, you thought this was the freest country - think again. It's one of the richest, which gives you the greatest illusion of freedom - which is entirely different).

  8. More on policing in India:

    Per capita police rates:

    India's rate is about 76 for 100,000 people (2007) versus US (about 250) in 2010 and UK (about 300) in 2010


    And to make it worse, a substantial section of the police in India are allotted to protect VIPs.
    So, the rate is more like 30-50 police per 100,000.

    That is why libertarian generalities and abstractions are futile. You have to look at the real numbers, the real facts, the real history.

    On the ground, India feels much freer.

    There's bureaucratic red tape and poverty, filth, and muddle, but you don't feel you have to look over your shoulder all the time, you don't feel spied on, you don't have crushing thought-police monitoring every word or tone; you don't have the kind of "deep structure" graft that there is in the US.

    The graft in India, is cruder, more obvious, and worse for ordinary living.

    But, in more fundamental ways, it's LESS damaging than the graft in the US, which is invisible to superficial observers and absent from day to day- life.

    Graft in the US is the corruption of the thought-process and of language itself. It's Orwellism in the media and double-think in the law. It's corrupt plea-bargaining and suborning of perjury. It's falsification at a very high level.

    But that corruption is now beginning to bear fruit in ordinary life, so it's gradually becoming visible here as well.

    I think these observations tend to support classical liberal theory (minarchist) of a paleo bend not an-caps or left-liberals.

  9. http://en.wikipedia.org/wiki/List_of_countries_by_number_of_police_officers

    Far fewer police per capita in India, most of them diverted to protect VIPs.