Greenspan Baffled Over Bitcoin ‘Bubble’: “To Be Worth Something, It Must Be Backed By Something”; Ron Paul: Bitcoin could ‘destroy the dollar’; Bitcoin Boom Spreads to IPhones With Mobile-Payment Apps

Greenspan Baffled Over Bitcoin ‘Bubble’: “To Be Worth Something, It Must Be Backed By Something”

Tyler Durden on 12/04/2013 19:07 -0500

“In order for currencies to be ‘exchangeable’ they have to be backed by something,” is the remarkably ironic initial comment from none other than debaser-of-the-entirely-fiat-dollar Alan Greenspan when asked about the “bubble in bitcoin,” by Bloomberg TV’s Trish Regan. Unable to “identify the intrinsic” backing of Bitcoin (or see bubbles in equity, credit, real estate, or greater fools) Greenspan is, apparently, capable of identifying Bitcoin “as a bubble,” because “there is no fundamental means of “repaying’ it by any means that is universally accepted.” The farcical double-speak continues as the Maestro does a great job of making Bitcoin (which Ron Paul earlier noted could be the “destroyer of the dollar”) look even better than the readily-printed fiat we meddle with every day.Greenspan explains…

“when we were on the gold standard, [currencies] had intrinisc value which made people willing to exchange their goods and services with no question.”

“Alternatively, when we went into “currencies”, it was the “backing” of the issuer of the currencies… whose “great credit-standing meant his checks could circulate as money.”“

So either its backed by real physical metal with intrinsic value – or the promise of someone…(increasingly politicians of course) with good credit (or a big army)?

“I do not understand where the backing of Bitcoin is coming from. There is no fundamental means of “repaying’ it by any means that is universally accepted.”

Like fiat currencies (just ask the Venezuelans)…

“Individuals with very high net worth and great reputations could create their own currency… because people would be willing to exchange their checks with each other at par.”

So coming soon the BuffettCoin or MuskCoin (oh wait reputation), or the GatesCoin?

But, Greenspan sums it all up…

“I haven’t been able to identfy the intrinsic value of Bitcoin – maybe someone else can…

but if you ask me if this is a bubble in bitcoin… yeah it’s a bubble.

Which ironically (perfectly circular) is exactly what Bernanke said about gold…

BERNANKE SAYS `NOBODY REALLY UNDERSTANDS GOLD PRICES’

So – after that – go buy his book!?

And some more color from Ron Paul on Bitcoin as “destroyer of the US Dollar”:

Via Mike Krieger’s Liberty Blitzkrieg blog,

While we believe it is the Federal Reserve that is systematically destroying the US dollar, Bitcoin could merely be the preferred conduit through which fed up citizens decide to express their displeasure with the incredibly corrupt corporatist-facist state being shoved down our throats by a handful of insane and greedy oligarchs. Interesting comments nonetheless. From CNN Money:

Imagine a world in which you can buy anything in secret. No banks. No fees. No worries inflation will make today’s money worth less tomorrow.

The digital currency Bitcoin promises all these things. And while it’s far from achieving any of them — its value is unstable and it’s rarely used — some have high hopes.

“There will be alternatives to the dollar, and this might be one of them,” said former U.S. congressman Ron Paul. If people start using bitcoins en masse, “it’ll go down in history as the destroyer of the dollar,” Paul added.

It’s unlikely that Bitcoin would replace the dollar or other government-controlled currencies. But it could serve as a kind of universal alternative currency that is accepted everywhere around the globe. Concerned about the dollar’s inflation? Just move your cash to bitcoins and use them to pay your bills instead. Tired of hefty credit card fees? Bitcoin allows transactions that bypass banks.

“That’s the holy grail for people who believe in freer markets and currency,” said Adam Gurri, a libertarian economics writer in New York.

There are no middlemen charging fees to move money between users. You can transfer bitcoins — even infinitesimally small fractions of one — directly to others’ digital wallets.

But don’t expect governments and banks to let Bitcoin take over so easily. Financial institutions will lose business if people stop using their payment systems, and central banks like the U.S. Federal Reserve would lose their ability to help slow and speed up economic activity. Paul expects banks to lobby and authorities to crack down.

“Governments absolutely demand a monopoly on money and credit. They’re not going to give it up easily,” Paul warned. “They will come down hard.”

Interesting times…

 

Greenspan Says Bitcoin a Bubble Without Intrinsic Currency Value

Former Federal Reserve Chairman Alan Greenspan said Bitcoin prices are unsustainably high after surging 89-fold in a year and that the virtual money isn’t currency.

“It’s a bubble,” Greenspan, 87, said today in a Bloomberg Television interview from Washington. “It has to have intrinsic value. You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. Maybe somebody else can.”

Bitcoins, which exist as software and aren’t regulated by any country or banking authority, surged to a record $1,124.76 on Nov. 30. The currency has rallied on growing interest from investors, while merchants are starting to accept Bitcoins and U.S. officials have told lawmakers such payments could be a legitimate means of exchange.

“I do not understand where the backing of Bitcoin is coming from,” the former Fed chief said. “There is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it’s a government or an individual.”

There are about 12 million Bitcoins in circulation, according to Bitcoincharts, a website that tracks activity across various exchanges. Bitcoin was introduced in 2008 by a programmer or group of programmers going under the name of Satoshi Nakamoto.

‘Legal Means’

A Justice Department official said Nov. 18 Bitcoins can be “legal means of exchange” at a U.S. Senate committee hearing, boosting prospects for wider acceptance of the virtual currency.

“We all recognize that virtual currencies, in and of themselves, are not illegal,” Mythili Raman, acting assistant attorney general at the department’s criminal division, told the Committee on Homeland Security and Governmental Affairs.

Fed Chairman Ben S. Bernanke told the Senate committee the U.S. central bank has no plans to regulate the currency.

“Although the Federal Reserve generally monitors developments in virtual currencies and other payments system innovations, it does not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the market,” Bernanke wrote to lawmakers.

To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net

 

Ron Paul: Bitcoin could ‘destroy the dollar’

By Jose Pagliery  @Jose_Pagliery December 4, 2013: 12:01 PM ET

NEW YORK (CNNMoney)

Imagine a world in which you can buy anything in secret. No banks. No fees. No worries inflation will make today’s money worth less tomorrow.

The digital currency Bitcoin promises all these things. And while it’s far from achieving any of them — its value is unstable and it’s rarely used — some have high hopes.

“There will be alternatives to the dollar, and this might be one of them,” said former U.S. congressman Ron Paul. If people start using bitcoins en masse, “it’ll go down in history as the destroyer of the dollar,” Paul added.

It’s unlikely that Bitcoin would replace the dollar or other government-controlled currencies. But it could serve as a kind of universal alternative currency that is accepted everywhere around the globe. Concerned about the dollar’s inflation? Just move your cash to bitcoins and use them to pay your bills instead. Tired of hefty credit card fees? Bitcoin allows transactions that bypass banks.

Even economists who embrace the power of central banks, like University of Michigan professor Miles Kimball, recognize the currency’s potential.

“Bitcoin really shows governments are behind the curve,” Kimball said. “It demonstrates there’s a demand for an electronic equivalent of cash.”

Bitcoin is hardly the first attempt at a digital currency that operates outside of state boundaries. Ebay’s (EBAY, Fortune 500) PayPal plans to launch a digital interplanetary payment system. There’s also growing support for a concept called seasteading, floating cities on international waters where business and innovation aren’t held back by laws.

Millions of Africans, particularly in Kenya, make payments simply by texting one another. The widely used M-PESA system allows people to bypass banks and electronically transfer cash. Some even use mobile minutes as a form of currency.

Digital payments make buying items internationally a smoother process, because exchange rates are gone and there are no cumbersome bank regulations or fees. It also enables people to make payments in areas without bank access or where carrying cash can be dangerous.

How I make money mining bitcoins

However, Bitcoin has advantages other digital payment systems don’t. Transactions don’t require names — just digital wallet IDs — which makes them more private than credit cards.

More importantly, the system was designed to produce a slow and steady supply of bitcoins, making it less susceptible to losing value via inflation.

“That’s the holy grail for people who believe in freer markets and currency,” said Adam Gurri, a libertarian economics writer in New York.

There are no middlemen charging fees to move money between users. You can transfer bitcoins — even infinitesimally small fractions of one — directly to others’ digital wallets.

But don’t expect governments and banks to let Bitcoin take over so easily. Financial institutions will lose business if people stop using their payment systems, and central banks like the U.S. Federal Reserve would lose their ability to help slow and speed up economic activity. Paul expects banks to lobby and authorities to crack down.

“Governments absolutely demand a monopoly on money and credit. They’re not going to give it up easily,” Paul warned. “They will come down hard.”

Kimball hopes politicians will take a less combative approach, choosing instead to compete.

“I suppose they could just try to crush Bitcoin, but that’s the wrong way to do it,” Kimball said. “Governments should be creating their own version of Bitcoin. They should be ashamed they haven’t.”

But everyone agrees that restraining Bitcoin’s development would negate any of its promises to entrepreneurs.

“We have to make improvements in our payment system. The progress of humanity depends upon it,” said Mark Thornton, a senior fellow at the Ludwig von Mises Institute, a libertarian economic organization in Alabama.

Bitcoin Boom Spreads to IPhones With Mobile-Payment Apps: Tech

Matt Tuzzolo, who used to split restaurant bills by sending money via PayPal, now wields his iPhone to pay his fellow diners — in Bitcoins.

“It’s more convenient than PayPal,” said Tuzzolo, a software developer in Portland, Oregon, who uses the Gliph mobile application to transfer digital money on the go. “It’s as easy as sending a text.”

Gliph Inc., which has more than 25,000 users, has raised more than $350,000 from venture capitalists including Tim Draper, who has backed such companies as Skype and Tesla Motors Inc. It’s one of hundreds of Bitcoin-related programs available from Google Inc. and Apple Inc. app stores.

The mini-boom in Bitcoin software for smartphones is making it easier for consumers to use the virtual currency in place of cash for quick transactions, such as paying for food or splitting a bill. The widening appeal of the digital money is also fueling a rally that has lifted Bitcoins to record levels, surpassing $1,000 apiece last week.

“Bitcoin’s success hinges on how well it’s adopted and configured for mobile,” said Richard Crone, chief executive officer of payment-researcher Crone Consulting LLC. “They are very dependent on mobile actually scaling.”

Since Bitcoins exist as software, apps on wireless devices are an efficient way to transfer money. While physical coins representing Bitcoins are in circulation, they either store software or are used as a proxy for a digital transaction.

Mobile Wallet

The emerging category of mobile Bitcoin apps is aimed at making it easier for people to employ the programs for everyday tasks, such as storing digital money in virtual wallets, paying other people and stores for goods and services, and exchanging Bitcoins for dollars and other currencies.

“It has to be there, in person, when you have to spend it,” Rob Banagale, Gliph’s CEO, said in an interview.

• QUICKTAKE: The Rise of Bitcoin

While mobile apps are fostering wider use of Bitcoins, other challenges include security, regulation and app-store approvals.

Virtual currencies and mobile payments are two areas regulators will scrutinize for potential legal violations. The Consumer Financial Protection Bureau is monitoring the growing mobile-payments industry as part of its brief to police retail financial markets.

Former Federal Reserve Chairman Alan Greenspan said yesterday that Bitcoin prices were unsustainably high. “It’s a bubble,” Greenspan said in a Bloomberg Television interview. “You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is.”

Banagale and other Bitcoin enthusiasts will be discussing such issues at a conference in Las Vegas next week.

Secure Money

To provide some security, Asedik Inc., a San Francisco-based Bitcoin payment service, limits customers to three transactions a month.

“We want to make sure mobile-phone users are protected,” Asedik CEO Matthew Martin said in an interview. “We never want to get into a scenario where someone stole your phone and made purchases.” Asedik’s user base is growing at 40 percent every month, he said, declining to disclose total user numbers.

Bitcoin’s shift to mobile is happening even though Apple has rejected many Bitcoin payment apps, especially those that exchange Bitcoins for dollars and other currencies, developers said. Rejected developers are instead flocking to Android-based devices, according to Pavel Nikitenko, developer of an app called BitcoinViewer that lets users track how many Bitcoins they have left in their wallet.

Apple and Google prohibit apps involved in any illegal activities, according to their software-developer policies. Natalie Kerris, a spokeswoman for Apple, didn’t respond to a request for comment. Christopher Katsaros, a spokesman for Google, declined to comment.

Wider Acceptance

There are about 250 applications in the Google Play store offering services ranging from Bitcoin money transfers to exchange tracking. On Apple’s iTunes, there are almost 100 apps offering everything from mining monitoring — a way to see how fast your computers are generating Bitcoins — to virtual mobile courses on Bitcoin.

Bitcoins emerged in 2008, designed by a programmer or group of programmers going under the name of Satoshi Nakamoto, whose real identity remains unknown. The currency isn’t regulated by any government or central bank. New Bitcoins can only be created by solving complex problems embedded in the currency, keeping total growth limited.

While Bitcoins could be used for nefarious purposes, they can also be a “legal means of exchange,” and policies need to be crafted to regulate their use, the U.S. Justice Department said at a U.S. Senate committee hearing last month.

Mobile Money

The growth in mobile Bitcoin apps is also being driven by the spreading ubiquity of mobile devices. Global shipments of mobile phones and tablets will exceed personal-computer shipments this year by more than six times, according to researcher Gartner Inc.

“That’s going to be the big game, on mobile,” Nicolas Cary, CEO of mobile Bitcoin app provider Blockchain.info, said in an interview.

The market for mobile payments is projected to be $235.4 billion in total transaction value in 2013, up 44 percent from the prior year, according to Gartner. Because Bitcoins can lower or eliminate money-transfer and other banking fees, the digital currency could potentially compete with EBay Inc.’s PayPal, Visa Inc., Google and others offering mobile payments.

Jennifer Hakes, a spokeswoman for PayPal, didn’t respond to a request for comment.

Bitcoin Economy

About a third of people who own Bitcoins are initiating transactions from a mobile device, according to Crone. “In three years, it could easily double,” he said.

Makers of mobile apps report rapid growth. Bitcoin Wallet, used to store and pay Bitcoins, is adding more than 5,000 users a day, up from about 500 at the beginning of the year, according to its developer, Andreas Schildbach.

“We are definitely seeing an uptick, we doubled our volume of transactions from August to October, and it looks like we could double it again before Christmas,” BitPay Inc. CEO Tony Gallippi said in an interview. BitPay lets some 2,000 brick-and-mortar merchants complete Bitcoin transactions in stores via mobile devices.

“As the Bitcoin economy grows, I believe we will need an easy way to spend them,” Draper said in an e-mail.

An increasing number of physical merchants accepting Bitcoins are also driving mobile-app adoption. Thousands of physical and online stores worldwide accept Bitcoins. Madison’s Grill, a restaurant in Portland, began accepting Bitcoins six months ago.

“When we first started, there might have been 20 transactions in the first month, and now we are getting two-three a day,” Steve Brown, owner of Madison’s, said in an interview. “It’s opened our particular restaurant up to a new market. It’s helped me increase my business.”

To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net