Bitcoin, The New Toy for Dummies

Bitcoin That New Toy for Dummies<p>Bitcoin That New Toy for Dummies</p>

If you want to know whether Bitcoin can become the perfect currency, don’t ever read the amount of nonsense circulating on the Internet.

Bitcoin is an electronic coin whose supply is determined by a secret algorithm -which is considered a marvel by some ignorant people, even though it has been widely proven that an economy can’t be stabilised with a monetary supply of steady growth (regardless what happens with the remaining elements). Even Milton Friedman renounced this initial principle.

Bitcoin has a supply that grows according to a formula; however, its demand is completely speculative (as happened with gold and the so-called gold standard), which means that it goes up and down creating volatility so, therefore, it is defective as an official currency.

Just imagine a coin whose price goes up by 100% one day, and then it plummets by 70% in goods and services paid with it. Economy would fail until someone with common sense found another different formula.

Bitcoin, a currency whose supply is defined by an algorithm, can’t provide a stable value in relation to the economy’s general price level. The same happened with the gold standard.

The function of money is to keep the general price level stable, so that it can be predictable on the long term for the agents of market. And this can’t be achieved with automatisms. There are unexpected forces that can modify the demand of money and, if they are not controlled with a contrary move of the money, then the ups and downs of the demand will be transferred to the economy, thus causing incontrollable bubbles.

In that sense, we are talking about a blind and automatic force, which emphasizes the cyclical forces and the financial unbalances. Balance and stability are not to be found in the currency value, but rather in an indicator able to show the economic stability, price level or the national GDP.

Bitcoin has a regulated, perfect and blind supply. But its demand is fickle, and it’s ruled by speculation.

About the Author

Miguel Navascués
Miguel Navascués has worked as an economist at the Bank of Spain for 30 years, and focuses on international and monetary economics. He blogs in Spanish at: http://http://www.miguelnavascues.com/

4 Comments on "Bitcoin, The New Toy for Dummies"

  1. What a complete bunch of nonsense. Please go regurgitate your uninformed drivel elsewhere, where nobody has to be exposed to it.

  2. If you were going to wire money and went to a service that offered Western Union, Moneygram, etc and they also offered Bitcoin but Bitcoin was half the cost and the transaction was near instant would you still pay for slower, more costly Western Union? Bitcoin cannot and will be a “currency” first. It will be a faster, cheaper way to send money. Some people here in the USA still use stamps and the post office even thought we have had email for 20 years. You’ll catch up soon. I knew you this was poor journalism when I saw “ignorant”

    Condemnation Without Investigation Is The Highest Form Of Ignorance

  3. wowwwww nonsense is right.. well said Mike.

  4. Has this guy even bothered to look at the block chain? I heard the source code is safe from many people on the internet and I now believe bitcoin will replace the dollar by next year. Bow to the block chain or be stuck in the dinosaur age holding dollars.

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