On August 18, 2008, the name “Bitcoin” was registered. When I wrote about it last, there were over 1,000 ‘crypto’ (meaning fake) coins of all names and promises being produced, probably in many garages or basements, by those who would attempt to become rich by producing crypto coins costing a few cents each to make, having no value, other than being bought by chance takers who thought, and still think, that value can be created at no cost. Bitcoin, created with, and backed by nothing, seems to outlived the rest.
Is a postage stamp created out nothing, worthless? No, because it is represented by the entire postal service of the federal government, which as usual, has no concept of running anything, and which loses $8 billion a year. Stamps are useful, since you can mail letters and packages with them. (It occurred to me many years ago, that by eliminating Saturday delivery, the deficit could be reduced, but of course the U.S. ‘snail’ is run by the swamp in D.C., so it will continue to lose billions). How about a picture, either an original or print? They’re useful to decorate your home or office. There is cost of both. The artist may have spent many hours painting it, and a print maker may have to pay the artist a royalty to use his or her work, and a famous painter of 200 years ago, certainly has a tremendous antique value, as do antiques of anything. Coffee and tea have unbelievable costs to grow, harvest, roast and distribute. They’re useful to quench a thirst. Can you imagine what coffee and tea would cost if they were controlled by the government? As I wrote many years ago, if the federal government was sole maker and seller refrigerators, they would be expensive, use huge amounts of electricity, would break a lot, have a short life, and probably wouldn’t get very cold. Maybe Bitcoins should be turned over to the federal government: Then they would probably cost $100,000.
Probably the first uses of the new Bitcoin, was, when 10,000 of them bought two Papa John’s pizzas. Five years later, Bitcoin had a ‘value’ of $13.30, and the last time I checked, they were $57,400! There are several factories producing Bitcoins by the thousands every week or maybe day, as figures seems to be impossible to clarify their output. One Bitcoin the same price as a new deluxe pickup? The Bitcoin, can obviously be duplicated by an artist, who can make a blank, a die, and turn them out in a home workshop. At $57,400 each, has that become a great home industry? What must it cost to make a Bitcoin, since they have no gold or silver in them? A quarter? A dime? Since 10,000 of them initially bought two Papa John’s pizzas, they must be pretty cheap to make.
Supposedly, there is a limit of 21 million to be produced, but there are no serial numbers, so who does the counting? Since Bitcoins have no dollar or EU price on them, how can they be useful in either domestic or overseas trading? The U.S. government is now keeping track of all Bitcoin trades, so anonymity is not possible, as opposed to gold and silver, which like thousands of items at Walmart or yard sales, can be bought and sold without any red tape or reporting, unless it is in an IRA, which I have already pointed out, should be avoided if possible.
The world is full of people making business or personal economic mistakes, such as a Henry Ford son making the Edsel. Locally, in my town of 19,000, I see new businesses start every year, and I know some will fail, because there is no need for them, they are poorly named, located, or even conceived. I am always correct in my prediction of a failure. The Dow Theory inventor, Richard Russell (1924-2015), in a column, wrote that a good stock has a P/E ratio (price-earnings) of 10 to 12. As I write this on Friday, March 12, 2021, the P/E ratio of the Dow 30 stocks is 40.6. Is a stock crash inevitable? Will the Bitcoin crash, since it has nothing to back it up, but is the same coin which 10,000 bought 2 Papa John’s pizzas in 2008?
I am not predicting, but it seems damned absurd, at least to me, that people keep buying stocks when the P/E ratio is 40.6, and the Bitcoin is priced at $54,700. This ridiculous phenomenon may go on for many years, with both stocks and Bitcoins. They may go to the sky, or crash I don’t know what will happen ten minutes from now, and if I did, I would take action and become filthy rich. No one knows what will happen in an hour, tomorrow, or next year. I may have a heart attack and drop dead at my desk. A huge earthquake may hit California, or more rain in Hawaii. Anything can happen in the future, and even ten minutes into the future, but I feel very safe in having gold, silver, guns, live in a small town, and know the sheriff. It doesn’t get much better than that.
-Don Stott
don@coloradogold.com