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Bitcoin Currency Replacing Real Currencies?

Bitcoin Currency Replacing Real Currencies?

As recently as March, MBF Blogs wrote about ticketless transport and the increasing moves toward a cashless society.

What We Said Then

Some businesses and certainly HMRC will welcome electronic payments as easier to monitor and process than grubby cash transactions. Other people will mourn the passing of paper money and coins which have been integral in the evolution of our entire economic system.

We asked what happens when there is a breakdown/failure of the system?

We cited some doom-mongers alarmed about the advent of the cashless society. Patrick Henningsen wrote on Global Research (November 2012) a cogent argument about why it rings alarm bells.

It’s worth rehearsing that discussion:

‘A world without cash is ruled by technocrats overseeing plastic and RFID chips working smoothly. It is a sterile world for Henningsen. It’s a dystopic impersonal future like that depicted in the 1970s sci-fi classic, Logan’s Run.

He said that people expected it to be slow creep as the sheer volume of cashless transactions grew and they make cash redemption more expensive. Why do you think supermarkets offer customers ‘cash-back’? So they have less actual cash to count and bank.

He is among conspiracy theorists who reckon the 2008 economic crisis and subsequent events are part of an engineered plan to introduce a range of parallel currencies as forerunners of what he called ‘a new global electronic currency.’

If there is a collapse of the Euro or a return to some of their old currencies within Europeans states, then they will all be in electronic versions, not paper and metals. If the US dollar ceased to be the reserve currency of the world, it would be reintroduced electronically.

Henningsen picks up the view that such crashes will be deliberately brought about as ‘the perfect storm for the introduction of a major global digital currencies, and this will do nothing but fast-track our entry into the new cashless society.’

The whole argument is that it is more sinister than it sounds, this cashless society thing. The electronic future will be controlled by a faceless handful of clever people with their fingers on the buttons.’

What Now Then?

A recent new development is that of the economic meltdown of the Cypriot banking system and the interest of the Russians. The gas and oil reserves that Cyprus lays claim to have always explained the interest of Russia in wanting to ‘help for a price’ the small island.

Oh, and Russian businesses are believed to have over €19bn stashed away in Cypriot banks, lured by their previous high interest rates!

Internet searches show that the Russians, followed by Estonia, the USA and Finland are the most assiduous in looking for items about virtual currency. Pundits believe it signals a fundamental shift in people’s trust of paper and coin currencies.

This particular one is called the Bitcoin.

Bitcoin, Get Used to It

It is an online, virtual currency, designed to facilitate trading. It has no government or central bank to underpin it, nor gold reserves to back it up. Some observers regard it a sort of international ‘online cooperative.’

To prevent more Bitcoins being ‘created’ to cause devaluation (no quantitive easing here), there is an upper limit of just 21 million. No more Bitcoins can exist than that.

The rules were apparently set out by a figure called ‘Satoshi Nakamoto’ in 2009. Very little data is available on that person or group of people. But, nonetheless, the creation is taking off. Scarcity drives up the value and price, just like gold. Users refer to ‘mining’ Bitcoins to liken it to gold.

If a hacker found a way of making more, the world would still know exactly who owns and where are the 21 million. They are tracked online. However, for the individual owner or speculator, if they were stolen, there is no Government-backed safety net scheme, such as the £85,000 protection limit covering approved British banking institutions.

When the idea really takes off, and the world is soon awash with a range of digital currencies, then Governments will have only themselves to blame for deliberately debasing the old ‘real’ currencies. That and the inevitability, alas, of cashless societies.

Image: CASASCIUS