Robert Shiller of the Case-Shiller Index explains why Bitcoin will fail just like all other past attempts to “revolutionize” money…
One must bear in mind that attempts to reinvent money have a long history. As the sociologist Viviana Zelizer points out in her book The Social Meaning of Money: “Despite the commonsense idea that ‘a dollar is a dollar is a dollar,’ everywhere we look people are constantly creating different kinds of money.” Many of these innovations generate real excitement, at least for a while.
New ideas for money seem to go with the territory of revolution, accompanied by a compelling, easily understood narrative. In 1827, Josiah Warner opened the “Cincinnati Time Store” that sold merchandise in units of hours of work, relying on “labor notes,” which resembled paper money. The new money was seen as a testament to the importance of working people, until he closed the store in 1830.
Now we have something new again: bitcoin and other cryptocurrencies, which have spawned the initial coin offering (ICO). Issuers claim that ICOs are exempt from securities regulation, because they do not involve conventional money or confer ownership of profits. Investing in an ICO is thought of as an entirely new inspiration.
Each of these monetary innovations has been coupled with a unique technological story. But, more fundamentally, all are connected with a deep yearning for some kind of revolution in society. The cryptocurrencies are a statement of faith in a new community of entrepreneurial cosmopolitans who hold themselves above national governments, which are viewed as the drivers of a long train of inequality and war.
And, as in the past, the public’s fascination with cryptocurrencies is tied to a sort of mystery, like the mystery of the value of money itself, consisting in the new money’s connection to advanced science. Practically no one, outside of computer science departments, can explain how cryptocurrencies work. That mystery creates an aura of exclusivity, gives the new money glamour, and fills devotees with revolutionary zeal. None of this is new, and, as with past monetary innovations, a compelling story may not be enough.
The entire post is a good read, but I just wanted to highlight some of the key points to make comments on them.
Yes, attempts to re-invent money happen all the time. That is, in essence, fiat currency.
And they always fail.
Then there are the local currencies which Shiller discusses, or new takes on currencies, such as “time units”, and those always fail too.
The bottom line is that people think that money has changed, or that it is something fluid and dynamic, when it’s really not.
Gold and silver are money.
They beat out all those other thing that people who do not own gold & silver like to point out, such as sea-shells and coffee beans.
There is another constant here, however, that Shiller does not point out.
The people will return to gold & silver.
They always do.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.