I believe this type of view shows a profound misunderstanding of the nature of government. Government is a dumb bureaucratic beast but it is incentivized to be good at coercion.
If before the United States dropped bombs on Nagasaki and Hiroshima, a Japanese scientist warned that the US was developing an atom bomb and that people should get out of top Japanese cities that might be targets, a Japanese libertarian,who understood half of Mises, might have piped up, "You are wrong. Government is too incompetent to succeed at anything."
Things would not have worked out well for him.
The commenters to my posts often point to the failed drug war as an example of how government has failed. True, the government has failed at preventing the end of drug use, but that's not the full story.
According to the Justice Policy Institute:
The United States leads the world in the number of people incarcerated in federal and state correctional facilities. There are currently more than 2 million people in American prisons or jails. Approximately one-quarter of those people held in U.S. prisons or jails have been convicted of a drug offense. The United States incarcerates more people for drug offenses than any other country.The government is losing the war on drugs, but that doesn't mean it hasn't forced the drug industry underground and that it doesn't flex its muscles in a way that results in many drug users/sellers ending up in prison.
Bitcoin is never going to become a major currency if the government decides to regulate it at the point of retail sales in a manner that makes it even less useful than it is now. The world is very complex and instead of thinking in terms of broad poorly thought out generalities, when it comes to government force, what must be examined is the nature of government force and how it can be applied in different situations.
It doesn't matter what super-sophisticated mathematical equations are part of Bitcoin, those looking at the equations are simply being mesmerized by the math and fail to understand the nature of government coercion and the impossibility of the mathematical equations solving the Bitcoin retail-government regulation problem.
If the government institutes complex regulations that make it illegal to accept bitcoins in certain ways, Macy's, Target, Overstock, Virgin Air and mom and pop stores are not going to defy those regulations. The risks of getting caught are too great, with upside for breaking the law negligible.
Jamie Dimon, the CEO of JPMorganChase, is a crony capitalist, but that doesn't mean he is stupid. He knows that Bitcoin threatens part of JPM.
The comments he made as Davos about Bitcoin, some of which I have already quoted in earlier posts and deserve repeating, should be worrisome to every Bitcoin holder. According to FT, he said:
The question isn’t whether we accept it. The question is do we even participate with people who facilitate Bitcoin?Note that he gets very well the weak point of Bitcoin. It is not the math, the weak point is "people who facilitate Bitcoin." Those people can be regulated.
FT goes on:
The JPMorgan boss said: “Governments put a huge amount of pressure on banks, and so, to know who your client is, anti-money laundering, did you do real reviews of that? Obviously it’s almost impossible with something like that.”
Ultimately, Mr Dimon said, Bitcoin would be subjected to the same regulatory standards as other payment systems and “that will probably be the end of them”This isn't idle chatter on Dimon's part. He has been talking to the top US financial regulator, Treasury Secretary Jack Lew. FT, again (my highlight)
Jack Lew, US Treasury secretary, said: “From the government’s point of view, we have to make sure it does not become an avenue to funding illegal activities or to funding activities that have malign purposes like terrorist activities.Got that? Dimon and Lew have discussed Bitcoin. The regulations are coming. It will not be good for Bitcoin. At best for Bitcoin, government regulates it so that all users are identified at the point of
“It is an anonymous form of transaction and it offers places for people to hide,” Mr Lew said in an interview with CNBC at Davos.
Mr Lew seemed to agree with the JPMorgan boss, saying: “I’ve talked to Jamie Dimon about it. I think he and I both share a certain incredulity about the whole phenomenon.”
The only good thing I can see in this is it's evidence BTC isn't a FedGov blackop.
ReplyDeleteAnonymous wrote, "The only good thing I can see in this is it's evidence BTC isn't a FedGov blackop"
DeleteNot necessarily: Problem, Reaction. Solution.
Have you heard of that before?
- PanarchistamericanHelot
government has failed at preventing the end of drug use?
ReplyDeleteJW:Troll
DeleteBeat you to it Mike ;)
Yet it hasn't failed at throwing millions of people in jail for drug use.
DeleteBeat you to it Mike ;)
DeleteLol. Yup. To me that's all he is so it's the only response he deserves. Oh, and before I forget:
JW: Troll.
Government is supremely incompetent--at doing the jobs that are its justification in the minds of its naive advocates. You know, all those things that come under the rubric of "public service". It is supremely competent at its real job, which is transferring public money into crony pockets.
ReplyDeleteThe main function of western governments these days is not transferring money to "cronies".
DeleteThe main function of western governments these days is transferring money to welfare dependents.
No, welfare dependents are there to provide reliable voting blocks to support the crony system.
DeleteWatch for Darkcoin and Darkwallet. Chop one arm off and it grows into another. Bitcoin is getting sold out thanks to those who want to "cooperate" with the authorities.
ReplyDeleteThe USSR prevented people from international travel, prevented the exchange of Rubles for hard currencies, and prevented trade with the west (for any private citizen or entity). N. Korea and Cuba accomplished similar feats of control.
ReplyDeleteThe question is, is it worth it to the powers that be? Those countries had to incarcerate large numbers of political prisoners, had to execute millions of their citizens, had to control all media, had to endure a declining standard of living for decades. If other countries are gaining customers, jobs and prosperity because they deal in the new currencies will the United States:
institute capital controls for its citizens and businesses
prevent businesses from reincorporating in other jurisdictions
prevent Americans from transacting in bitcoin when outside of the USA
prevent international travel, renunciation of citizenship
prevent foreign branches of US companies from transacting in bitcoin creating a competitive disadvantage
This assumes that bitcoin does win in the marketplace of ideas/services/products. Will the US become an economically isolated backwater just so the fed can set prices?
Given their previous track record(s), I think you can bank on it.
DeleteI'll bet the powerful people in the US liked things better before the Internet. When academia, the mainstream media and government controlled the narrative. I am sure President Clinton did not like the power of Drudge.
DeleteAlthough they have laws and police and guns, they cannot shut off the Internet. Not because they lack the competence to do so, but because they would be destroying the country to rule the country. The USG isn't a monolith, there are lots of different groups and power centers that like to make money, participate in world commerce, and engage in research, etc.
It would be easier to rule a people if the printed word were outlawed. That's why there were laws against teaching a slave to read and write. No modern country is going to outlaw literacy. If they outlawed literacy, or the Internet or cellphones in the US, China or the EU or Japan would rapidly become the world hegemon and the US would become a backwater.
If bitcoin becomes a competitive advantage, no country could afford to out law it.
"Is Government Really Incompetent?"
ReplyDeleteDoes a bear shit in the woods?
Actually any decent bear uses a public restroom, uses baby wipes and bathroom spray, cleans up the stall, and washes his paws before leaving.
DeleteHe does however piss in the woods...
[Thought you knew.]
I have quite a few bear friends who would be offended by your remark. And, for the record, the preferred nomenclature is Fuzzy American.
DeleteThe Arizona Freedom Summit is coming up in 3 weeks and I will not attend this libertarian event because the people who head up this event fervently believe that anarcho-capitalism is spreading to Millennials, and the Internet Generation. That may be true, but the spread of liberty is not keeping pace with the boot our crony capitalist state is thrusting on our necks. How can we be considered to be winning the battle for freedom when the TSA groped over 630,000,000 Americans in 2013?
ReplyDeleteThe vast majority of liberty lovers believe government is incompetent, but will refuse to talk to you in the future if you point out a few obvious facts that create a vivid picture of what is happening as we are nudged into the abyss.
If the elite wanted to roll out a ready made solution to nonsecure digital exchange of currency, would they use the following tragic examples of ineptness and state sponsored meddling to nudge us to their preferred solution?
#1 Over 94 percent of ATM in America use Windows XP as their operating system, which is no longer serviced or updated with new patches by Microsoft.
#2 Allow insecure networks used by major retailers to be hacked by a Russian/American teenager and his code to be sold for $2,000 a pop to his fellow thieves who now have access to well over a 100 million American's so-called private data.
#3 Use debit cards in the U.S. that are seriously out of date in the security features they utilize and lack the chips that Europeans debit cards have used for years.
#4 Slam the price of gold using naked shorts when the volume on the exchanges is low and the monkey hammering of the gold price can be most effective. Look the other way as the segregated gold accounts of people like Gerald Celente are emptied while John Corzine escapes a perp walk because of his connections to the executive branch.
#5 Allow digital currency Bitcoin to rocket over a period of several years, while slamming the price of physical gold and silver during the same period of time.
#6 Push cities and states to mandate the tracking of precious metals sales within their borders to private parties.
#7 Use the low interest rates, and purchases of mortgage-backed security by the Federal Reserve to pump up real estate and asset prices despite the economy suffering from the lowest worker participation rate in a generation.
#8 Allow a crony of Michelle Obama to oversee the code used for the Affordable Health Care Act's website that ensures users will have their data stolen when they log in to purchase their mandatory health insurance.
#9 Allow the FDIC to have a tragically insufficient emergency fund while secretly planning with Canadian banks how bail-ins would handled in the event of a confiscation of accounts like the citizens of Crete suffered recently.
#10 Slowly but inexorably eliminate cash, personal checks, and cashiers checks as legitimate currencies of exchange for apartment rent, mortgages, and utility bills.
That list is one hell of a nudge in the direction of a draconian digital police state where physical exchange is outlawed by the state. Congratulations Cass Sunstein, state approved digital currencies are the new gods of exchange and we must submit to the new state religion.
Now Bob, I agree with what you are saying here, but I remember a certain ALERT where you responded to a subscriber asking if you thought the government botched the healthcare.gov website on purpose. And you said you chose to believe they were just incompetent. And that's a project you'd think they would have wanted to succeed.
ReplyDeleteIt sounds as though you are missing my point. As I wrote in my post: " The world is very complex and instead of thinking in terms of broad poorly thought out generalities, when it comes to government force, what must be examined is the nature of government force and how it can be applied in different situations."
DeleteWith emphasis on "different situations." If the government has guns, which it does, and makes regulations for Bitcoin, it is not going to have difficulty enforcing those regulations against Macy's etc.
The incentives for healthcare.gov were entirely different. Government is often good at coercion but little else---healthcare.gov is about crony payoffs---an entirely different situation than Bitcoin.
So you are distinguishing between healthcare.gov and Obamacare as a whole. Fair enough. I figured the government would want to do this well to so the public would build up some confidence in them. But I can see why you would separate the two.
DeleteThat does not answer how they are unable to stop Torrents, downloading music, weed, homeschooling, etc. All examples of guns being the enforcement mechanism and still complete failures. Answer that one Wenzel.
DeleteThis post is dead on correct. Sure there may always be a niche for unapproved digital crypto-currencies, but even say 20% acceptance cannot happen in opposition to government mandate. Take gold as a great example. Gold was money until the day that governments decreed otherwise. Now it is not. Regardless of how universally used and accepted, regardless of how anonymous gold can be, and regardless of the fact that gold still has great value and is owned and used by many people, it's no longer money.
ReplyDeleteAnd its true that government cannot just decree that something SHALL be money, but it is very good at enforcing decrees that something shall NOT be money. The reason is that the vast majority of people, even hard-core libertarians, just want to stay out of trouble. It's the same reason they pay taxes. Even now, every single bitcoin transaction is a taxable sale with the gain or loss on every single bitcoin transaction, small or large, itemized on one's tax return. Sure there are a few, commendable, rebels, who delight in the fact that they can transact in bitcoin and not report it, and not pay taxes on it.
And maybe some day the masses will rise up, like they did in Russian at the fall of the Soviet Union. But if that happens, that mass rejection of government, like in Russia, will change the government mandate against bitcoin, in which case bitcoin can be used, not against government mandate, but because that mandate has been dropped. But as long as the mandate against bitcoin still exists, the vast majority will follow the government regulations and will not use bitcoin.
Why am I not surprised that now you're arguing that irrespective of the technology, the government will win because it's good at coercion!?! Yes, it is rather good at coercion but that hasn't stopped people or business from reacting in their own SELF BENEFIT. You use incarceration and the drug wars as example of this but I guess you haven't realised that it serves the interest of the government and the banks to have drugs being illicit because if it was not, the banks would have even less money in their coffers than they do presently!!! Duh!!! Along with those 0% loans from the fed, it's the only thing keeping the banks alive. So of course banks want to keep the party going, because when you has outsized liabilities (in tens of trillions of dollars), what else can you do? The banks power is illusory because a little forensic accounting can show that all the big banks are insolvent and what is termed making money is primarily from reserve releases of the money they just borrowed from the fed and the funds provided from drug sales and terrorism! Can you say HSBC? How many billions have they made from handling money from drugs and terrorist yet only received a fine of a hundred or so million. Note they made BILLIONS and they were fined MILLIONS!!! They are not making any money from traditional banking activities. Most if not all large firms avoid the banks completely when they need money for investment and use their own cash hoard or issue bonds. Yet your opinion about what is coming for bitcoin is based on a system whose built on a foundation of fraud, theft, drugs and terrorism and you believe that the dollar is going to have some major role to play in the future of the economy as a currency?!?
ReplyDeleteOne last point is that the government went after Silk Road not because it facilitated the drug trade but because it eliminated the governments and banks cut from the activity especially as one could transact and hold one's funds in bitcoin.
As for businesses, they want to survive and to a certain extent they will play the game and do what the government wants in terms of regulation. But where you show a huge gap in your understanding is that in the present environment of massive levels of regulation, a government mandated currency that is unceasingly losing more and more value everyday, capital controls being put in place, diminishing consumer base because fewer have decent paying work and because the funds that they have in dollars is worth less and less and a corrupt financial market with exorbitant transaction costs you seem to think that irrespective of all this that corporations are making money hand over foot and not going to look at an area where their costs are ever growing?!? Maybe if people believed in the dollar as a store of value, trusted the financial system and transaction costs were low then your statement would be true, but that's not the case. As I mentioned yesterday, if you've ever talked to people who have lived in argentina or zimbabwe to use to obvious examples, businesses will do what they need to survive and survival includes paying bribes to the right officials to stay in business and TRANSACTING IN BLACK MARKET CURRENCIES!!! And note Robert, the same applies to individuals!
As I stated yesterday, bitcoin is an idea whose time has come. The government has two choices. It can accept it and adjust its behaviour or it can push it underground. Given that it is inevitable that the dollar will blow up at some point in the not too distant future, and that those who don't have gold and silver stashed in another country will have it confiscated in the future. Bitcoin will be a major part of the financial landscape for the foreseeable future whether you like it or not.
Government IS incompetent. Even at the applying brute force. USSR had all kinds of totalitarian controls on circulation of hard currency. People still used it to buy and sell imported over semi-official channels goods like VCRs, jeans, and records. Few people got caught and imprisoned, but everybody knew that "fartsovka" (illegal trade with Westerners or in western goods) is alive and well.
ReplyDeleteThe only thing which keeps governments in place is intimidation - the willingness of people to stay intimidated. So the real proficiency of the government is not coercion but intimidation. Once you understand that you realize that if you're not completely stupid you can do pretty much anything you wish as if the government does not exist. The government agents are catching only the stupid "criminals". In fact every and each of their supposed strengtha (for example the total electronic surveillance) can be used to evade them with relatively little efforts. Just fill their spying machines with electronically generated junk - and communicate offline. Their paranoid suspicion of everybody keeps them spreading their forces thin, trying to harass harmless sheep, so the real dangers to their existence can grow under the radar.
Just remember Solzhenitsyn's "Don't Trust [them], Don't Fear [them], Don't Ask [anything of them]". Millions of people survived Stalin's terror with this attitude, and, frankly, compared to communists, American liberal fascists are pussies.
Reading Solzhenitsyn's "A Day In The Life of Ivan Denisovich" in high school set me on the path to anarcho-libertarianism. I wish more schools required it as part of the curricula.
Delete"In December 1973, Solzhenitsyn published 'The Gulag Archipelago,' a literary study of all aspects of the labor camps. The publication of this work caused him to be arrested for treason on February 12, 1974. He was stripped of Soviet citizenship and sent into exile. Solzhenitsyn eventually settled in Cavendish, Vermont, in 1975, where he raised his family. In 1980, he published a study of Soviet literature, translated into English as The Oak and the Calf.
DeleteIn 1994, after the demise of the Soviet Union, Solzhenitsyn returned to his homeland, settling in St. Petersburg. There he became a vociferous critic of Western values, including the excessive emphasis on independence. Skeptical of democracy, he began to favor a compassionate authoritarian government based on Christian values. He greeted the presidency of late-1990s Russian leader Vladimir Putin with great optimism, but then retracted his support, criticizing Putin’s policies loudly." From http://www.sparknotes.com/lit/denisovich/context.html
Mic-
Delete"Atlas Shrugged" and REASON Magaine were also influential in my journey to Anarcho-libertarian views and finding Mises and Rothbard via lewrockwell.com. Should I disavow the former as well, even though they were seminal in my discovery of Austrian economics?
Nope. I just posted the summary because I found it interesting. He suffered the worst the state has to offer and still couldn't imagine life without it. I am grateful for his work, and that you and I are awake without the abuse. That he isn't awake confuses me.
DeleteThe way I see it, government is mostly incompetent, but the power of the printing press in combination with the huge amount of money they take for people eventually brings about some level of "competence" via private sub-contractor, etc.
ReplyDeleteWhen government has more money than God, that by itself will allow it to buy a certain amount of competence.
I think the big question for government and its cheerleaders is where to allocate those dollars best to overcome government's inherent incompetency.
It's so very interesting that the very thing that brings about its ability to overcome some degree of its incompetence is the very thing that will probably end up killing it(via endless QE).
What about the government's failure to contain the spread of homeschooling, concealed carry, peer-to-peer filesharing, or open-source implementations of "munitions-grade" cryptography? All of these things threaten the state in a fundamental way, so who says we can't have major victories once in a while?
ReplyDeleteAdditionally, your repeated insistence that the "super-sophisticated mathematical equations" in Bitcoin are some sort of elaborate distraction or flim-flam just speaks to your own invincible ignorance. Do you believe that anything you don't understand must be easy to do?