February 13, 2018 § 30 Comments
Every real world economy is filled with real people, and there are all kinds of people in the world. There are always criminals, grifters, scammers, market manipulators, thieves, frauds, and tax evaders. There are always financially ignorant monomaniacal idealists: people who don’t grasp the difference between reality and their beloved simulations and fictions; people who believe that messy human authority and fallibility can be dispensed with and replaced by machines. There are always substantial numbers of naive gamblers and bagholders, lured into getting fleeced by their own avarice and ignorance.
Cryptocurrency exchanges may represent a natural economic evolution, nature’s way of attracting many of these elements out of the real economy and into a buggy, hackable, scammable, get-rich-quick speculative open source video game.
You can think of cryptocurrency exchanges as a heat sink. A heat sink is a large thermal mass which carries destructive waste heat away from the parts of a system where that waste heat can do harm.
Cryptocurrency exchanges are like a heat sink, except for stupidity and vice rather than heat: they are economic stupidity-and-vice sinks. The real economy is doing very well at present, despite what is technically a very long running bull market. I wonder if that isn’t at least in part because a lot of the insanity which typically accompanies bull markets has voluntarily walled itself off in its own video game world. A lot of the craziness that we saw in the dot com era has literally locked itself away from reality inside an electricity-wasting computer game, at a cost of less than six billion dollars taken out of circulation.
Some people predict that the price of cryptocurrencies will soon go to zero; that they will shortly be left behind in the dustbin of financial history. Personally I have my doubts. I think society produces enough stupidity and graft to keep cryptocurrencies running indefinitely. They may well stick around for a long time, as the economy’s evolved way of avoiding sepsis from what amounts to an intestinal blockage of greed and stupidity.
December 20, 2017 § 171 Comments
In this post I will present an argument that it is immoral to sell digital pornography and/or bitcoin.
Premise 1: It is immoral to sell property for an unjust price.
Premise 2: Context can make particular property more or less valuable; for example, water is more valuable in the desert than in a mountain lake. Call this a context multiplier.
Premise 3: Personal preferences or needs can make particular property more or less valuable to a particular buyer. I like whiskey but I don’t care for wine. Call this a subjective multiplier.
Premise 4: It is possible for particular property to have zero or negative intrinsic value: for particular property to be literally useless or harmful. (Alternatively, it is possible for the typical and intended uses of a particular kind of property to have zero or negative intrinsic value. Call this “Premise 4 light”).
Premise 5: When property (or its typical use case: call this “Premise 5 light”) has zero or negative intrinsic value, neither a context multiplier nor a subjective multiplier can make its just price greater than zero.
Digital pornography has negative intrinsic value: its typical use case is destructive to the user. Unlike paper pornography it has no useful material substrate which enables atypical uses: paper pornography might be used as fuel for a fire, for example, but digital pornography cannot even be burned to produce heat. Purchasing copies of digital pornography might be justifiable when doing so is part of a plan to destroy it or to attack its production; but this limited warrant to purchase-for-destruction does not justify the sale of digital pornography to purchasers who are likely to use it for its intended purpose.
Pornography has negative intrinsic value because it promotes vice, a false picture of reality, and other disorders in relation to the truth about the good.
Bitcoin is also a digital product which promotes vice, a false picture of reality, and other disorders in relation to the truth about the good.
Therefore selling bitcoin is immoral. (“Light” version: therefore selling bitcoin to buyers who are likely to use it for its typical use cases, is immoral).
Obviously Premise 5 is doing the heavy lifting here, though Premise 4 may also be controversial.
September 25, 2016 § 110 Comments
The subject of money is pervaded by all sorts of unreal mysticisms. If you want to better understand economic reality it is important to hunt down these unreal mysticisms in your mind and kill them.
All economic exchange is barter. If you get nothing else out of this post, take this one concept to the bank. All exchange is barter.
Attempts to segregate property bartered in marketplaces into ‘money’ versus ‘other property’ is one of those fuzzy social conventions which is fine as long as it isn’t taken too seriously. Taking ‘money’ as something categorically distinct from property in general distorts and obscures reality. Any property at all might be used as money (sunk in exchange); and even property conventionally thought of as “money” — coins, bills, and the like — can be displayed or put to other uses than exchange. This was all perfectly obvious to Aquinas, but modern people are frequently incapable of seeing the obvious when it comes to the subject of money.
We typically think of money as a special kind of thing which can be easily transferred and exchanged. That is fine as long as the term “money” denotes property with the further connotation that the property is easily transferred and exchanged. Money can be thought of as a kind of property fuzzily distinguishable from other kinds of property by its ease of exchange. But it becomes insanity when “money” is viewed as categorically distinct from property in general.
The term “money”, then, does not really describe a specific thing or class of things. It describes a role that some property takes on, some of the time, in economic life. Some property is more suitable in this role than other property. If you transfer or spend some property – exchange it for different property – that property takes on the economic role we call “money”.
The property actually exchanged in barter falls into one of two categories: securities and non-securities. (As it happens, securities are for the most part very easily transferred and exchanged versus most non-security property).
Securities derive their value from the property they impair and the rights involving that property which they assert, as opposed to ‘the paper they are written on’. Yes, ‘the paper it is written on’ can be a kind of property in itself, or a sort of meta-property. But you can’t drive your car’s pink slip to work.
Non-security property derives its value from its own objective attributes.
Bitcoins and other cryptocurrencies are not a security. They are like virtual gold, except that unlike actual gold they have no useful objective properties at all other than the value intrinsic to authenticated records of wasted computation. Bitcoins are a kind of digital fool’s gold, entitling the owner to nothing other than the pleasure and bragging rights of virtually possessing them, rather like the high scores on your favorite video game.
Now it is true – because human beings are both ignorant and irrational much of the time – that you can often trade worthless things for valuable things under the ‘greater fool’ theory, based on fad and fashion and deluded/false economic theories and the like. Whether someone wants to apply the label ‘money’ to the worthless things traded to ‘greater fools’ is neither here nor there when what we are after is an accurate understanding of reality: it doesn’t turn those actually worthless things into actually valuable things.
Like the market price of gold, the market price of bitcoin is radically distorted when measured against its objective attributes qua property. The difference in the case of bitcoin is that the market price has even less reality baked into it: at least gold actually has objective attributes which anchor its economic value in reality, and has been used as a raw material for making artifacts for thousands of years. Cryptocurrencies are not an escape from the moral and ontological anti-realism of modern finance: they are its apotheosis.
This brings us to the subject of workers and wages. All exchange is barter, and the exchange of work for pay is no exception.
As I explain in the Usury FAQ and elsewhere, a worker is owed wages not simply for time elapsed but for what he, through his own powers exercised under agreement with his employer, makes actual. Because we are finite beings and can only do so many things in our lifetimes, one might poetically refer to wages as representative of human life. It is true enough that cheating workers out of their just wages is wickedness several times over, an unholy combination of robbery, dishonesty, fraud, taking advantage of the good will and often inferior position of one’s fellow man, and destroying his chance to do something different with his finite time alive in this world. (A sudden calamity preventing payment of wages is a different story of course).
But poetry about money representing human life probably obscures more than it reveals here. Burning cash or destroying other kinds of property isn’t murder.
Consider a car mechanic. He works on your car for agreed rates. Until you pay him he retains (whatever the positive law may assert) the moral equivalent of a “mechanic’s lien” against your car, the property into which he put his labor.
Consider a barber who just cut your hair. The tacit agreement is that you have money in your pocket to pay him. If you don’t, then see Question 49 of the usury FAQ for the different kinds of scenarios.
Examples can be multiplied, but note that none of this imparts mystical spiritual human qualities to some particular kind of financial security (e.g. fiat dollars), or to some other etherial being labeled “money”.
Setting aside assertions of the positive law (taxes, etc), there is no moral requirement for a worker to barter for fiat dollars in exchange for his work. Any property – or even trading one kind of work for another – will do. The idea that there is something super special about certain securities labeled ‘money’ that make them ‘wages’ and thus ‘a fungible representation of human life’ is really just errant nonsense, if it is taken literally.
Finally, we come to the idea that inflation or deflation in the market price of currencies versus other kinds of property is a moral travesty, a sin against workers, an offense against the common man: in short that people (as long as they are not wealthy) are morally entitled to have the purchasing power of their property preserved over time as long as that property is of the mystical class ‘money’. This atrocious idea really needs to be hanged in the city square where everyone can see, its broken and destroyed body beaten and desecrated to make it clear how utterly stupid and destructive it is. (It does not follow that ‘currency debasement’ is never immoral, of course).
In general people who think that they are entitled to the magical preservation of the buying power of their own property against the relentless tide of the second law of thermodynamics are in the grip of usurious entitlement. Someone ought to slap them out of it, for the sake of both the common good and their own good.
 This of course is not (and is not intended to be) a complete characterization of, or even a particularly adequate partial characterization of, economic value. It is merely an observation that any attempt to characterize the economic value of property accurately must take into consideration the objective attributes of that property. In general, economic value cannot be reduced to nothing but subjective human preferences as expressed in current market prices.
September 19, 2016 § 36 Comments
This blog is syndicated into a few feeds here and there, and I sometimes read and very occasionally comment on other blog posts in those feeds. Here is a recent discussion involving bitcoin and cryptocurrencies which some of my own readers may find of interest. This post started as a comment in that thread.
Cryptocurrency hopefuls fail to grasp the fundamental fact that (unlike stock, bonds, demand deposits, fiat dollars, and the like) bitcoin is not a security: ownership of a bitcoin does not entitle the owner to anything at all other than possession of the bitcoin itself.
The basic suggestion is that ‘currencies’ in general (understood ambiguously), and therefore bitcoins in particular, represent a promise. But this raises the question of who in particular has promised what in particular to whom. An abstract ‘promise’ from nobody in particular, to nobody in particular, backed by no specified property at all, is no promise at all. If nobody will buy your bitcoins you don’t have anyone to accuse of breaking their promise; and there is no pool of property which you can reference, claiming entitement to a share in virtue of this ‘promise’.
Cryptocurrencies are only ‘promises’ when every day is opposite day. Bitcoins are a commodity not a security. They are not promises made by anyone in particular: they are simply themselves, that is, they are cryptologically authenticated records of wasted computation.
One of the sociological oddities of cryptocurrencies is that software people really ought to grasp the difference between references to objects and objects in themselves. Somehow when it comes to financial securities the intellectual capacity to do basic dereferencing goes out the window. With this sort of confusion it is no wonder that the ‘smart’ locks on my car seem actually rather stupid.
The conflation of references to property with actual property often serves the interests (no pun intended) of usurers and other financial hucksters, so it is no surprise that this conflation is fostered by ‘the powers that be’. Cryptocurrencies propose to ‘fight the power’, if you will, by reinforcing these same basic errors. I think the kids these days refer to this as being ‘cucked’.
That other people may or may not willingly trade for something – beads of necklaces and the like – does not make that something a security (whatever vocabulary we want to use for editorial purposes: ‘pointer’, to you software nerds, and you know who you are). Willingness to trade at this particular moment is not the same thing as title/entitlement to property. That someone is willing – at the moment – to trade for insulin or tulip bulbs is not the same thing as (for example) a bond which entitles you to regular payments backed by a pool of property recorded on a balance sheet. The latter is a pledge of property made by the owners of that property; the former may as well be a pledge made by a Pokemon. It is as real as that cartoon character you see in your smartphone.
Cryptocurrency cucks aren’t alone of course. Most modern economic theorists (Keynesians, Austrians, MMT, etc) labor under the shadow of metaphysically anti-realist error. That is just modern life in between the event horizon and the singularity.
October 29, 2015 § 29 Comments
 But Jesus knowing their wickedness, said: Why do you tempt me, ye hypocrites?  Shew me the coin of the tribute. And they offered him a penny. And Jesus saith to them: Whose image and inscription is this?
 They say to him: Caesar’ s. Then he saith to them: Render therefore to Caesar the things that are Caesar’ s; and to God, the things that are God’ s.
All paper or electronic currencies (other than bitcoin and the like) have intrinsic value, because they are all options which entitle the bearer/owner to something else – something other than the currency itself – which is (that something else) of value. Fiat currency entitles the bearer to settlement of tax liabilities. Bank deposits entitle the owner to on-demand access to fiat currency, backed by the balance sheet of the bank. Gold-backed sovereign currency entitles the bearer to settlement of tax liabilities and, at least notionally, a quantity of gold. Stock (often used as currency) entitles the owner to profits from a business and liquidation value of any excess over liabilities. Stock options entitle the owner to the purchase of stock at a particular price. Etc, etc.
Bitcoins entitle the owner to nothing at all. Their ‘value’ actually is purely conventional, based on the deluded notions that people trading in them have about money. They have approximately the same intrinsic value as a photograph of someone doing something stupid.
Note: I am sure there are old posts here, which I leave in place for the record, where I accepted the fairly conventional view that money is ‘nothing in itself’: that it was simply based on a vaporous ‘full faith and credit, so use it dammit’ assertion by the sovereign. I was never especially comfortable with that view, and in recent years I’ve come to better understand why.