Cryptocurrency bubbles and money
July 8, 2017Posted by on
This week on Facebook: Debasement of the coinage was rare in Greek history with the notable exception of Dionysius of Syracuse. The Byzantine economy was assumed to have a sound fiscal policy but in the eleventh century emperor Michael VII earned the nickname “Parapinaces” or “minus a quarter”, because the gold nomisma was debased by that amount but little is made of the continuous debasement of the Roman denarius, The enforced sale of the monasteries failed to solve King Henry VIII’s financial problems, earning him the nickname ‘old copper nose’ during his great debasement. In a fiat money world debasement by fiscal policy is the norm and has perhaps in part (if not entirely) accounting for the intended use of cryptocurrency as fiat.
One thing is clear, we can be sure that the likes of Dionysius and old copper nose will always be with us. That our public administrations, if not seduced by the promises of a present day John Law continually emulate a great fiat money debasement. Like the Mississippi Bubble and all other economic bubbles, at some point the cryptocurrency bubble will also burst. Nevertheless, a public administration’s inflationary fiscal policy that fiat money allows, ensures that cryptocurrency (like gold) remains a phoenix to the speculators who influence sovereign credit rating.
Bubbles upset an economic cycle and many comparisons regarding cryptocurrency are being made to historic economic bubbles with Monday’s article referring financial instruments, be they futures as in tulip bulb mania, the fiat money of the Mississippi bubble or stocks in the South Sea bubble.
Tuesday’s article compares the rise in cryptocurrency valuation to those of the schemes that occurred during the South Sea Bubble, complimenting Wednesday’s article that cryptocurrencies are an economic bubble fed by a mania for high returns on an investment. Thursday’s article also refers to historic economic bubbles but takes a more optimistic view of the cryptocurrency bubble bursting.
Friday’s article gives a very brief history of money and opines that the introduction of cryptocurrency raises the philosophical questions: Does money still exist? And if so, what gives it its value? To my mind these are questions that have always existed and while money continues to evolve such questions will remain forever moot.
Money as it is generally understood only exists as a value of exchange and history constantly reminds us that be it a hard or soft currency, the fiscal policies introduced by a public administration are invariably inflationary. Today speculators on the global currency markets are able to mitigate the inflation of fiat money and challenge the established global economic order using cryptocurrency. It is only the financial markets that determine a value of exchange, be it cryptocurrency or any other the form of asset.
Monday 26/6/2017 Cryptocurrency Is A Bubble: There will always be bubbles, history is full of them. Greed drives bubbles, and when people see fortunes being made from apparently nothing they ultimately jump in blind to get while the going is good.
Tuesday 27/6/2017 Cryptocurrency Investment Cues From the South Sea Bubble: Given the chance, investors will rationally jump at the opportunity to be the second greatest fool. And to promote long-shot schemes over modest and humble endeavours. Whether bitcoin itself goes the way of the South Sea Company has yet to be determined. But what is certain is that, if and when the SEC chooses to restrict the growth of this sector, much like British parliament’s enactment of the Bubble Act of 1720, prices for these ‘undertakings of great advantage’ will quickly fall. to zero
Wednesday 28/6/2017 BitMania — why cryptocurrencies are having a bubble: Criminals selling drugs on the darknet will see the currency delivering the same kinds of profits today as the sale of cocaine. But will it deliver the same rush, and the same addiction – and will it end with cardiac arrest? There is no doubt that bitcoin is right now exhibiting all the signs of being a bubble.
Thursday 29/6/2017 What if the bitcoin bubble bursts? Ascents this steep are rarely sustainable. More often than not, the word “bitcoin” now comes attached to the word “bubble”. But the question of what has driven up the price is important. Is this just a speculative mania, or is it evidence that bitcoin is taking on a more substantial role as a medium of exchange or a store of value? Put another way, is bitcoin like a tulip, gold or the dollar—or is it something else entirely?
Friday 30/6/2017 Rise of Cryptocurrencies like Bitcoin Begs Question what is Money? In the 20th century, most central banks and governments stopped backing up their currencies with precious metals, and yet banknotes maintain fluctuating values, with some in high demand as media for exchange both domestically and internationally. Dollars and euros are highly regarded and preferred currencies for international commerce, as well as for stocking private bank accounts.