'...The nature of money is highly complex. As the Cambridge sociologist and political scientist Geoffrey Ingham wrote in 2004 in The Nature of Money, “perhaps the greatest paradox is that such a commonplace as money should give rise to so much bewilderment, controversy, and, it must be said, error. It is not well understood.” Ingham reports that Joseph Schumpeter, who has become the patron economist for digital disruption, could not sort out his own ideas about money sufficiently to complete a monograph about it, despite trying for much of his career. Yet cyberlibertarians continually write as if money is simple, straightforward, that any attempt to delve into its complexities is disinformation propounded by central bankers, and so on—despite themselves being unwilling even to investigate the basic parameters of the thing they claim to have bettered.
The most florid claim of Bitcoin advocates is that Bitcoin poses “an existential threat to the nation-state,” because nation-states supposedly live in fear that their hold on monetary policy via central banks like the Federal Reserve is threatened by the existence of alternatives to money. But as many economists have pointed out, alternatives to national currencies abound—from frequent flyer miles to credit card bonus point programs, from grocery-store coupons to high-value goods like fine art, precious metals, and gems—and it is only in this trivial and colloquial sense that Bitcoin is money. None of these alternative currencies pose any threat whatsoever to national sovereignty over money, a fact that Bitcoin advocates seem unable to process. In fact, they make continual reference to the superiority of gold-backed money, despite the fact that governments fixed even the price of gold at many moments in history to tame volatility, and in the face of current stories about gold and silver prices being part of the actually conspiratorial LIBOR price fixing scandal. This preference for gold versus what they somewhat inaccurately call the “fiat currency” of nation-states only shows the ideological nature of their assertions, since gold exists right now, is widely traded and untraceable, largely resistant to counterfeiting, and yet is mostly used by the very nation-states that Bitcoin advocates dislike.
The comparison with gold opens the door to the cryptopolitics that underlie too much writing and thinking about Bitcoin. Many of its most vociferous advocates rely on characterizations of the Federal Reserve as a corrupt idea in and of itself, a device run by conspiratorial bankers who want “the state to control everyone’s lives.” These claims are grounded in rhetoric propounded in the US and across the world by far-Right politicians like Ron Paul, a vocal advocate of Bitcoin, whose bald declarations about the Federal Reserve are far more ideological than substantive in nature. Paul claims to want the abolition of the Fed and a return to the Gold Standard, as if this would result in the kind of absolute economic freedom libertarians demand. Yet history shows that Gold Standards themselves are regulatory in nature, and no more free from manipulation, derivation and speculation than are any other currencies; gold itself provides clear evidence of this, in its recent price volatility.
Such beliefs require one to ignore the direct evidence of one’s own eyes. Precisely because it is outside of regulatory structures, Bitcoin is particularly prone to the kinds of hoarding, dumping, and manipulation that characterize all instruments that lack central bank control and regulatory oversight by bodies like the SEC. Contrary to the advocates’ claims, unregulated securities instruments are everywhere in contemporary finance; there is convincing evidence that the inability of the Commodities Futures Trade Commission to establish regulatory authority over CDOs and CMOs is the proximate cause for the economic crisis of 2008. Now the lack of regulation of Bitcoin means that hoarders (as of Dec 2013, half of all Bitcoins were owned by approximately 927 people, such fight-the-power revolutionaries as the Winklevoss twins of Facebook infamy among them) can use all sorts of sophisticated trading methods to manipulate the market. It means that fly-by-night operations can come and go, stealing huge amounts of Bitcoin for themselves (as the operators of the short-lived Silk Road drug supermarket replacement ironically called the Sheep Marketplace appear to have done), or being emptied out by others, all of which may be the story of Mt. Gox....
http://harvardpress.typepad.com/hup_publicity/...-david-golumbia.html -----------
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