Bitcoin, Cash and the Need for a Happy MediumTheodore Iacobuzio |
Payment Perspectives certainly generated a flurry of activity in our reporting on Bitcoin, the virtual currency backed up by the full faith and credit of everybody else holding Bitcoin. One commenter proposed that what was behind Bitcoin was “one, huge worldwide asset: the internet”; which seems to suggest cyberspace ought to have a seat in the U.N. General Assembly.
Other commenters contend that fiat currencies (i.e., every currency on the face of the planet since at least 1972) are as flimsy as Bitcoin, or more so; though it is only fair to report that bitcoin “specie” must be “mined”—virtually, of course (hence the scare quotes).
All this is newsworthy, and worthy of comment again, because Bitcoin just topped $200, most likely as a result of panic reverberating out of Cyprus. And since Bitcoin closed at $138 at the end of last week—under murky circumstances (a prominent bitcoin trading site was likely the target of hackers), that’s a weekend’s gain of $62.
At the other end of the spectrum, as a distinguished New York Times blogger points out, there’s another non-gold reserve that’s been around a lot longer, and is experiencing a new popularity: Bruce Bartlett had a provocative headline on his April 9 post that “America’s Most Profitable Export Is Cash” (Pat Buchanan please copy). And by that Bartlett means paper money, the kind you can fold in two, specifically $100 bills.
It’s no secret that an enormous among of U.S. currency—the actual paper—resides abroad, sometimes in the hands of very scared and honest people who don’t have confidence in local fiat money, and sometimes in the hands of crooks: as Bartlett notes, the Federal Reserve reports that 61 percent of $100 bills are held abroad, in part for less than honest purchases.
In addition, one analyst is now proposing taking 500 euro notes out of circulation, both to weaken the euro and so loosen up trade, and to decrease its value to both hoarders and crooks.
So what’s it all add up to? Again, uncharted waters. What would you say, pre-crisis, about a scrip that gained 30 percent in value over 72 hours? That’s hardly what’s usually meant when employing the term “cashless society”.
Topics: Payments Strategy