1.0 out of 5 stars
I know nothing about crypto currencies!!!
Reviewed in the United States on 22 October 2019
Cryptocurrencies like Bitcoin were invented to solve a problem with the world's currencies, and Blockchain was developed to solve a problem with Cryptocurrencies ~ Get it?
*****
Obviously, people think that there is a problem with the world's money and so they are trying to make a new and better type of money. But somewhere along the way these inventers of this new money realized that their new money had some major problems of its own. To date, the inventors of this new money are still trying to fix the problems with their new money that they invented to fix the problems with the old money. They have high hopes that putting everything on-line will solve all the problems. Considering all the worldwide online hacking, I worry that putting this new money on-line will only make things worse.
The following quotes from BLOCKCHAIN TECHNOLOGY EXPLAINED are meant to reassure the reader.
"The challenge is, the mixing requires some type of honest coordinator who will mix the pot fairly and redistribute everyone's coins properly." To make this work we need an honest coordinator and honest verifiers – are you kidding me? If we could count on people being honest, 99% of all such problems would instantly disappear. "In order to slow down attackers and guarantee Blockchain security, there needs to be more honest verifiers on the network than dishonest attackers." Who would have thought? "Bitcoin uses crytography to make it statistically very difficult to create false transactions." Doesn't it need to be more than very difficult to create false transactions with your money?
"Instead of having a bank keep one official copy of the ledger, we'll have everyone keep their own ledger and then we'll verify transactions by consensus." Would you be satisfied if your bank balance was verified by the consensus opinion of people you and your bank will never know?
I found the author's reassurance of this process unnerving to the point of scary: Let's take a look at the current system before jumping into something new and untested. Before there was any money, people used the barter system to exchange goods and services "I'll fix your wagon if you give me fifty apples from your tree". A major problem with the barter system was finding a repair man who wanted fifty apples, or someone with fifty apples who had a wagon that needed fixing. In the ancient world it could take weeks, months or years for two such people to find one another.
Someone finally thought of the idea of money, a totally new type of thing that could be used to trade for anything at any time with any one. But this new thing would have to meet several very strict requirements. Everyone would have to know instantly that it was valuable and that people could not just make more of the stuff. As well, it would have to be so scarce that people could not just pick it up off the ground. Humankind finally settled on Gold & Silver because it met all of the requirements – no one could make it, it was very rare and immediately recognizable.
As people began making coins from gold and silver, others began mining for these minerals in hopes of becoming rich, but gold and silver was so hard to find and in such small amounts that it was almost always far more trouble than it was worth. People could look all their lives and never find any, and this is what made it workable as a currency.
Today we can go to work and get paid money and hand this money to someone else to purchase something totally different from what we ourselves have produced. This has worked pretty well for thousands of years. Sure, there were criminals who made fake gold and silver coins, but experts could tell if the material they were made of was not really gold or silver, and when caught these counterfeiters were severely punished.
To stop anyone and everyone from making money – it was finally decided that only governments would be allowed to make money, and the governments could only make as much money as they had gold and silver to justify its creation. If a government had a million ounces of gold and announced that each of their coins or bank notes was worth one ounce, people could inspect to see that they had enough ounces of gold to justify the amount of coins and bank notes the government had made.
This worked extremely well unless a government got in trouble and needed more money than it had gold and silver to back it up. In desperation, some nations began making money that did not represent goods that had been produced and services that had been provided. Which meant their money increasingly represented nothing. After their money lost all of its value, their powerful nations simply disappeared as their enemies descended upon them. Virtually every powerful nation in history has gone through this process as it became desperate to continue living beyond its means.
In the 1970s, the United States finally went completely off of the gold standard. This was done because our government had simply printed too much money. This became glaringly obvious to me when in 2005, I took a vacation and visited my hometown – driving through the old neighborhood where I grew up. Half a block from my childhood home I saw a place with an open house sign in the front yard. I just couldn't resist and went in to have a look. The place was so tiny that it seemed almost like a doll house.
My parents had paid $10,500 for the three bedroom one bath tract home. I picked up a flyer on my way out the door and was shocked to see a $521,000 price tag with a comment that the buyer could tear it down and build on the same footprint. In other words, the buyer would be paying over half a million for the lot with utilities and would in addition, have to pay several hundred thousand more to build a new house on the lot. Apparently, real estate professionals knew that no one would pay half a million dollars to live in such a tiny house.
After this eye-opening experience I decided to do a little math. My parents bought our home in 1955 and by 2005 – fifty years later, the population of the city had doubled. This made the calculation relatively easy because the geographic area of the city remained the same. If the population doubles and the supply of land remains the same – of course, the increased demand must cause the price to double. But in this real world case the price did not double from $10,500 to $21,000 – it went to $521,000, so what happened?
The supply of land stayed the same and the population – the demand, doubled. So the only variable that does not work is our money! And the only calculation that makes any sense is that our money has decreased in value. The 1955 dollar had to go from being worth one hundred pennies to being worth two cents. So it took fifty times as many dollars to buy the same thing. We see home prices going up and mistakenly think that the home value has increased, when what is actually happening is our money is declining in value.
In other words, our government had printed fifty times as much money as there was gold. This of course is the reason they took us off the gold standard, so that no one could check to see what they had done. In 1955 the minimum wage was about one dollar and hour. By 2005, with respect to housing, the minimum wage would have had to be $50 dollars an hour to maintain the same standard of living as existed in 1955.
Remember, money represents goods that have been produced and services that have been provided. When the government prints money that does not represent goods and services – our money increasingly represents nothing! Fighting endless wars and paying more and more people money to do nothing – this is what is bankrupting our nation. When we look in the newspaper or watch the news on television and hear that home values are rising, we are being lied to. Home values are not rising – the value of the dollar is falling, so it takes fifty times more 2-penny dollars to by that same house. The math shown here is from 2002. Since it is now 2019 the dollar could be worth far less than 2 cents.
Contrary to what we are hearing and reading in news reports – housing values are not suddenly increasing. Instead the value of our money is rapidly decreasing. But rather than inventing an endless number of Cryptocurrencies and an absurdly convoluted and questionable "Blockchain" to safeguard it from counterfeiters, all we really need to do to stop this death spiral is to go back to the gold standard and let the chips fall where they may. Once we know how bad things have truly become, can we finally plan to deal openly and honestly with this issue and finally start digging ourselves out of Dante's Economic Inferno!!!
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