Home Community The Economist, famously wrong on just about everything, disses Bitcoin

The Economist, famously wrong on just about everything, disses Bitcoin

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I was waiting for The Economist to diss Bitcoin. Now that it has done so, I feel it is safe to buy. This smug, establishment BS factory is at it again. Reg Rumney tears into them here. Back in the 1980s, what was their solution to apartheid South Africa? Dump gold everyone! That’s real activism for you. Drive down the price of gold and the racists will surrender. This ship of fools just keeps on sailing, talking into the establishment bubble that is its base. How they have kept going so long with a track record as miserable as their’s is one of the wonders of our age.

The magazine that is famously wrong on just about everything is a trader’s best friend. You cannot take them seriously on anything. When it says go long, it is a dead certainty that the reverse will happen. The crypto naysayers have been at it for a decade, and they have been wrong every time.

Now listen to two guys who actually know a thing or two about cryptos, Marco Wutzer and Doug Casey. The real risk for everyone alive today is the sustainability of the fiat currency ponzi scheme that has made everyone poorer.

Understand this: there are those who are mortally threatened by cryptos. After reading this you would be a fool not to own some.

From International Man:

Nick Giambruno: I always tell my readers that owning Bitcoin lets you escape the matrix… the financial prison that governments have erected with fiat currencies, central banks, and privacy-killing regulations serving as the bars on the door. It’s like a Swiss bank account in your pocket.

Unlike paper currencies, Bitcoin is an inherently international asset. It has incredible utility as a value-transfer mechanism. You can take any amount of it in and out of any country. You don’t need permission from any government.

Bitcoin’s resilience to government interference terrifies politicians. This is why it’s such a disruptive and exciting technology. Still, not everyone thinks it’ll last.

Can the U.S. government—or any government—shut down Bitcoin?

Marco Wutzer: Governments can outlaw the use of cryptocurrencies such as Bitcoin in their respective countries and go after businesses and individuals that trade them.

However, no government on this planet has the power to shut down a globally decentralized and distributed network, such as Bitcoin.

That would involve coordinated and sustained action in all countries on the planet simultaneously. The notion that any entity can shut down a global network like Bitcoin is a fairy tale.

The unstoppable nature of cryptocurrencies is what makes them so powerful in the first place, and is one of the main reasons they are so superior to fiat currencies.

There are certainly third world countries that have outlawed cryptocurrencies. But these countries are, for the most part, completely irrelevant to the world economy and will simply fall further behind.

On the other hand, there are plenty of governments that realize the importance of cryptocurrencies and are actively trying to attract crypto businesses and investment funds to their countries. Switzerland, Singapore, Japan, the United Kingdom, the Netherlands, and Denmark are a few examples that come to mind.

Doug Casey: It’s important to remember that the real risk lies in the fiat currencies issued by governments. Not only can they be issued in unlimited volume, but they probably will be—because almost all the world’s governments are bankrupt, and are almost forced to print money to pay their bills. A correctly chosen crypto obviates that problem. Cryptos serve the same function as gold in many ways, but have considerably more upside. You must, however, choose the right ones…

Furthermore, any national currency can be “blocked,” making it impossible, or very costly, to move it. People forget that as late as the 1980s this was common even in advanced countries—forget about backwater countries. Cryptos, however, allow you to transfer your money anywhere.

Nick Giambruno: On that note, I think it’s instructive to look at BitTorrent, the file sharing software, to appreciate why governments can’t stop Bitcoin.

BitTorrent is a similarly decentralized technology. It’s commonly used to download pirated digital content.

BitTorrent has been around for over 15 years. It’s easily accessible to anyone, despite the U.S. government’s best efforts to shut it down. There’s no reason to expect the government would have any more success eradicating Bitcoin than it’s had with BitTorrent.

A somewhat related idea that’s floating around out there is that the U.S. government could try to co-opt Bitcoin to create its own state-backed cryptocurrency.

What are your thoughts?

Marco Wutzer: A government-sponsored cryptocurrency is nothing more than a digital fiat currency. The whole idea is a joke.

The premise of cryptocurrencies is that they are immutable and decentralized with no single entity in control.

Let’s see what this would look like with a government-issued cryptocurrency…

It is not immutable. The issuing government can change the rules on a whim.

We have already seen this with Venezuela’s cryptocurrency which is called the Petro. When it was first announced, the rules for it changed on a daily basis, even after they had already started selling it.

The Petro is supposed to be linked to oil prices, but the Venezuelan government has defined no method for how this is supposed to be done.

It also isn’t decentralized. The Venezuelan government can do with it what it wants.

The whole project is really laughable. There is nothing the corrupt scum that makes up the Venezuelan government can do to give this project even a sliver of credibility.

On the other hand, I can certainly see other governments creating their own “cryptocurrencies” and mandating tax payments in them. At best, such a token becomes a hot potato and people buy just enough to pay their obligations.

Ask yourself this: If you can be your own bank and be completely self-sovereign with your money by using something like Bitcoin, why would you buy a government sh*tcoin instead?

Doug Casey: I’d rather be my own bank—which is possible with cryptos—than use conventional commercial banks. Due to the universal adoption of fractional reserve principles, there isn’t a genuinely sound bank in the world today. I don’t doubt that during the next crisis there will be a number of governments who force customers to “bail in” their bank—forfeiting their deposits above the insured amounts—such as happened in Cyprus a few years ago.

Nick Giambruno: I would add that there is a world of difference between a government cryptocurrency, which is forced upon people with legal tender laws, and Bitcoin, which grew voluntarily around the world. Bitcoin’s adoption didn’t require government coercion.

Shifting gears to another common concern… What are the ramifications and risks of quantum computing for cryptocurrencies?

Marco Wutzer: That’s a popular myth. People are worried that quantum computing could crack the encryption of Bitcoin or other cryptocurrencies and make them worthless.

In other words, people fear quantum computing would make blockchains hackable.

This is simply not true.

Cryptocurrencies are based on something called hash functions. A hash function is a complex, mathematical puzzle that can only be solved in one direction. It’s like a one-way street.

There are many different hashing algorithms, most of which are quantum secure. It’s just a matter of using the right hash function.

In other words, a quantum computer cannot crack the hashing algorithm of a blockchain.

Plus, hashing algorithms are undergoing constant development… and faster, more efficient, and even more secure ones will be available soon.

Not only is the timeline for the commercial availability of quantum computers up for debate, but quantum computers are no threat to cryptocurrency wallets and blockchain technology in general.

Doug Casey: Hacking is just a sophisticated form of theft. And theft—in its many forms—has always been a risk to anybody’s assets. That’s not going to change. But, to me, it seems more likely that your account can be hacked at a conventional bank than a crypto wallet.

Nick Giambruno: The Bank for International Settlements, or BIS—which acts as a sort of “central bank of centrals banks”—recently issued a much-ballyhooed report criticizing cryptocurrencies.

The report was nothing more than a collection of easily debunkable canards with an academic veneer. Such as…

“Bitcoin uses up too much electricity and is bad for the environment.”

“Bitcoin is decentralized and doesn’t have a central institution, like a central bank to manage it.”

“Bitcoin can’t scale to handle as many transactions as Visa.”

What are your thoughts on the BIS and these claims?

Marco Wutzer: It just goes to show how stupid and slow-moving big government institutions are. These criticisms were already refuted many years ago.

Technological development is moving so fast that once cryptocurrencies become easy for anyone to use and we hit mass adoption, governments will lose their control over money. With it, they will lose their own power faster than they can understand what has happened to them.

But for the benefit of those that are new to blockchain technology, let me briefly answer these criticisms brought up by the BIS.

One: Bitcoin uses up too much electricity and is bad for the environment.

This argument is ridiculous on so many levels.

Which amount is too much electricity? Who gets to decide what is too much and on what authority?

Pretty much everything we humans do consumes energy.

Driving a car uses a lot of energy and is bad for the environment. Does that stop you from driving a car? Of course not.

You can just sit around and do nothing, and your body consumes energy.

You need to eat to stay alive. Pretty much all the food you eat these days is produced by large-scale farming operations that are bad for the environment. Does that stop you from eating food? Of course not.

There are obviously enough people on the planet that think the value they get from the Bitcoin network is higher than the cost of the electricity they buy to support the network.

Mining Bitcoin is also completely location-independent. That means Bitcoin mining operations are being built where electricity is abundant and cheap.

And why is the electricity cheap in those locations? Because demand doesn’t meet the supply.

If the BIS thinks that Bitcoin mining somehow affects areas with limited energy availability where prices are already high, I suggest an Economics 101 class and learning about the relationship between supply and demand.

But more importantly, the so-called “Proof-of-Work” algorithms that mine Bitcoins are already outdated and will eventually go away. There are already next-generation blockchains that don’t need any mining with energy-intensive hardware.

These blockchains will be the big winners of the future.

Onto criticism two: Bitcoin is decentralized and doesn’t have a central institution, like a central bank, to manage it.

That is the entire point.

Oppression comes from centralized power. The solution isn’t to change the people in power. The solution is to decentralize power and return responsibility back to the individual.

Let me quote Satoshi Nakamoto, the anonymous inventor of Bitcoin:

“If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry.”

And criticism three: Bitcoin can’t scale to handle as many transactions as Visa.

That is a well-known flaw in Bitcoin, and there are several new, high-speed blockchains that have already solved this problem. Those who invest in these leaders of tomorrow stand to make a lot of money.

Doug Casey: I’m not personally a computer jock. I use the things as simple tools, for convenience. Since I believe in specialization and division of labor, however, I outsource a lot of things, so I can concentrate on what I do well, and what I enjoy. And the fact is, Marco, that you’re my guy in this area…

Nick Giambruno: What are some of the most exciting developments in the crypto space?

Marco Wutzer: Like I just mentioned, transaction speed is a key deciding factor of which projects will become big and valuable in the future. There are a number of exciting new projects that are, in many ways, better than Bitcoin.

With Bitcoin, the focus is on money. But Ethereum is also facing similar limitations.

In the case of Ethereum, it is more about decentralized computing. In other words, building a world computer that anyone can upload applications to. These applications are guaranteed to be available and cannot be censored.

But Ethereum is also slow, expensive, and insecure. There have been many high-profile hacks where hundreds of millions of dollars’ worth of ether have been stolen.

The race is on for the next Ethereum. A new and improved version of a world computer that is cheaper, faster, and more secure. And there are several projects out there that are working to solve all three of those issues.

Doug Casey: I follow your arguments for a new wave of profits in the area, Marco. I don’t know if we’ll see 10,000 to 1 returns, as happened over the last five years. But it’s pretty clear to me that this is a revolutionary area. And there are bound to be lots of crypto plays that go up many, many times in value over the next five years. I know you stay on top of it, Marco, and I’m counting on you to direct my capital to the right places.

Editor’s note: Clearly, there are many strange things afoot in the world. Distortions of markets, distortions of culture. It’s wise to wonder what’s going to happen, and to take advantage of growth while also being prepared for crisis. How will you protect yourself in the next crisis? See our PDF guide that will show you exactly how. Click here to download it now.