Oh to have bought some when it was at such a lowly price….  Now that is has run up everyone seems to want some.

Bitcoin fits the profile an extremely speculative investment – is value is determined in part by the greater fool theory – hopefully someone will pay more for it than I bought it.  How do you determine it’s value?  I have no idea.

There will be a finite supply only 21m bitcoins will be able to be produced.  I believe there are around 11.5m bitcoins in circulation at the moment.  More and more computing power is now needed to produce a new bitcoin – thus leading to the development of botnet hacks to hijack computers to steal its functionality.

http://en.wikipedia.org/wiki/Bitcoin

Does the world need a stable currency – probably, is an electronic currency independent of central banks desired – absolutely, is bitcoin the solution no idea. JP Morgan has tried to patent such an item 175 times and failed 175 times.

http://www.zerohedge.com/news/2013-12-15/jpmorgans-bitcoin-alternative-patent-rejected-175-times

If you are considering an investment in bitcoin – I may council you to go to Vegas instead.  It will be a speculative trip. Call the casino ahead of time let them know you are comming and want some comps.  You may get great accommodation, food, travel and entertainment for free.  A guaranteed return!  You may also make and lose a lot of money at the tables – just like bitcoin.

Bye for now.

Seems to be a lot of rhetoric about the demise of economies with Fiat (paper based) currencies – they should all be “Gold Based”.

Statements are uttered to the effect that without a gold based currency we will head into a hyper inflationary environment just like Zimbabwe and the Weimer republic.  This isn’t to argue about the various “flations – more why Gold?

Gold is somehow perceived as a safe haven resource – it has no cash flow, no actual value except for the fact that it is pretty and the value is determined by what the next guy is willing to pay.

Gold has a distribution in the Earth’s crust of about 4 pp -k inda rare.  Platinum is at 5ppb.  Why isn’t Platinum considered a safe haven, about the same amount of it on the planet?  How about Rhodium – even rarer 1 ppb.  Maybe we could use that!

I think the difference is that Platinum was only “discovered” in 1748 and Rhodium in 1803. Gold has been around as a medium of exchange since 600 BC.

The rational for Gold as a reserve is based upon the belief that there is an accepted value of what it is worth.  Some would argue that it’s worth is subject to the great fool theory. Greater fools such as politicians – those that can manipulate its price and supply by political rhetoric or confiscation?

Having a currency backed by an asset that is potential subject to greater fools is no different to having a fiat currency.

The developed world does not suffer from a crises in the sense that there is no asset backing their currencies – they have a spending and entitlement problem.  That’s like saying a morbidly obese person is suffering from a weight problem because their clothes don’t fit – give them new clothes and the problem is solved…

Fix the spending and entitlements and the chatter about Fiat vs asset backed currencies goes away.  The supply of money should be linked to the per capita growth.  The more people in an economy the more money should be in circulation – fewer people – less money.

This isn’t an economic paper I could be dead wrong about this theory but its my blog and my musing.

Bye for now.