Mr. G.B. shared this with me, and when he did, I found myself shaking my head in disbelief, for it confirmed my suspicions about bitcoin. Indeed, many people over the past year have asked me what I thought of it, and would I please write about the subject.
My answer to them has always been that I do not know enough about it, but that I had an intuition - nothing more, nothing less - that something was amiss. Some even urged that I make the website subscriptions available on bitcoin, and again, that nagging intuition kept me from it, and I'm glad I did. Here's why, and it comes courtesy of "Tyler Durden" at Zero Hedge once again:
Now this is breathtaking folks, and "Durden" gets to the heart of the matter here:
"...the latest news comes from the birthplace of the modern central bank, the UK, where we learn that none other than the UK Royal Mint has been working on plans since this summer to issue physical Bitcoins in collaboration with the Channel Island of Alderney.
"But where the story gets downright surreal is that as the FT reports, the same symbolic Bitcoin token issued by the Royal Mint "would have a gold content – a figure of £500-worth has been proposed – so that holders could conceivably melt and sell the metal if the exchange value of the currency were to collapse." In brief: a perfect, and utterly incomprehensible, fusion of (opposing) hard, soft and digital currencies all rolled into one..."(emphasis in the original)
"Wait, what: gold-backed Bitcoins? If so, that would be truly revolutionary because for the first time a Treasury (and by implication, a central bank) is effectively hinting that not only are they willing to fiat-ize Bitcoin, but also have the symbolic BTC token (after all Bitcoin is a digital currency by definition) serve as a commodity trap. Because once enough gold-backed physical Bitcoins are locked up in some basement in the UK, who has the master key? That's a rhetorical question by the way."
This, as "Durden" quips with a healthy dollop of dry humor, is confusing, to say the least, because it combines "the minting process of a physical gold-backed token representing a digital currency, with the backing of an entity that does the bidding of an issuer that only believes in fiat currencies." Once all this is achieved, then
"All we can do at this point is sit back in wonder and amusement as we hit the pinnacle of monetary confusion, whereby the UK Royal Mint, willing to take full advantage of retail confusion, will mix hard, soft and digital currency, and produce a product... that is locked away on an island that belongs to the UK.
"And all we can say is "brilliant", because if there is a better plan to meld the sentiment of both hard and digital-currency (and hence, anti-fiat) advocates, and to redirect it in a "fiat" pathway, we have yet to hear it."
So what is really going on here?
It's simple, if you read between the lines a bit: what is being done is simple that virtual currency is being added to the gold-rehypothecation scheme, for what is happening is bitcoin is being "backed" by gold, which you can redeem if the currency value falls below the bullion content of the coin. Except, of course, the coins will be held in reserve on an island, and you can't redeem your virtual bitcoins for the real bitcoins, and, on that basis, the coins can be "leased" and rehypothecated over and over again... only this time, by the same computers used in high speed trading.
Frankly, we should call it what it is: High Frequency Fraud.