The Difference Between Gold and Bitcoin is Time

Bitcoin is crashing today, along with all cryptocurrencies. I’m not “happy” because I like bitcoin. It’s crashing today because of Asian legal worries. Eventually, all cryptocurrencies will be outlawed entirely. All of them, except government cryptocurrencies. Those will be inflated continuously and purchases using them will be tracked entirely.

Gold cannot be outlawed because it has too much support as a thing that exists in reality over time. Cryptocurrencies can be outlawed entirely because they are new, and have little support outside of core grassroots cryptoenthusiasts. If you’re playing for collapse, which I am, the play is gold, not bitcoin. All cryptocurrencies will eventually go to zero as global government bankruptcy gets closer. Only hard assets with an intrinsic market value based on use value will be worth anything. Cryptos will be firewalled and pushed into black markets at best. Those who trade them will be termed monetary terrorists and the biggest of them will be those who use cryptocurrencies for contract killing, taken to court in public trials and portrayed as if everyone who owns any amount of bitcoin makes their living killing people.

Obviously, the vast majority if digitial currency owners are innocent people who do nothing wrong whatsoever. But they will not be portrayed that way. Be very careful.

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Shortage vs High Prices in Chazal

Mdirash Rabba Breishit, Toldot 64:2 – Chazal seem to recognize the difference between high prices and a bona fide shortage. A shortage happens only when buying and/or selling at the market price is forbidden by government. If prices are mandated by government to be lower than the market price, a shortage will develop when more buyers than sellers are willing to exchange. Some buyers will not find what they want. At the market price, the amount of buyers and sellers equal out.

The Midrash here is discussing the famine that Yitzchak tried to escape from. God told him to stay in Israel and not to go down to Egypt like his father:

Is it not taught that one may not leave the land [of Israel] unless two se’ahs of wheat are being sold for a selah? Rebbi Shimon says when does this apply? When there is no wheat to by. But if there is wheat available, even one se’ah for a selah (meaning twice the price as above) one may not leave the land. Since Elimelech left the land he was punished, in that he and his sons died.

If food is very expensive in Israel, it isn’t sufficient reason to leave. But if there is a shortage and you can’t buy what you’re looking for, then you can leave. Nafka mina bewteen high cost of living and real shortage of goods due to economic intervention. Without government, there are no shortages because price always finds market level.

 

One Cheer for Kahlon, and A Word on Protectionism

Moshe Kahlon, chairman of some party called “All of Us” and as the Finance Minister for some reason has the power to get rid of certain taxes singlehandedly, will be getting rid of all import taxes on products that are not produced in Israel. I’m pretty sure this means products where a tariff on them does not protect any industry in Israel.

The tagline of the article is this though, and it’s pretty stupid:

היום הוכרז המהלך שיביא להורדת יוקר המחיה על ידי הוזלת מאות מוצרי צריכה שאינם מיוצרים בארץ. שורת המוצרים עליהם בוטל המכס כלל לא מיוצרים בארץ – ולכן אין שום סיבה שהמדינה תטיל עליהם מכס

Today it was announced that a process will begin that will bring down the cost of living by cheapening consumer products that are not produced in Israel. The products that will no longer have tariffs are not produced in Israel at all – therefore there is no reason for the State to place tariffs on them.

The fact that tariffs on these products will be taken down is great, but the reasoning is idiotic. Tariffs are just a cash grab that uses protectionism as an excuse. They are not there to “protect Israeli industry”. They are there to take money away from you and put it in the hands of the government.

First of all, if the government wanted to protect domestic industry, it would just forbid imports from other countries of products that compete with Israeli industry. But it doesn’t do that. It just takes a cut from you if you buy the competition, because what the government really wants is not protected industry, but money, however it can get it and from whoever it can get it, with any excuse it can use to do so.

Second, the whole idea of protectionism is asinine. It’s easy to see if you take the extreme case. Let’s say an Israeli company can only produce widget X at a cost of a billion shekels a widget because the company produces widget X by hand and does not have the know-how to produce it via capital equipment like machines.

A Japanese company, or whatever country, can produce the same widget X for one shekel a widget, because they have a machine that can do it really quickly and cheaply. The problem with “protecting” the Israeli widget X industry by slapping a tariff of 999,999,999 shekels per Japanese widget X becomes obvious.

If any Israeli company can only produce X expensively versus a Japanese company that can produce X cheaply, it means that the Israeli company is bad at doing what it does and it should stop doing it and go out of business, and the people who worked for that bad company should do something else with their time that is more efficient, something that they are better at than the rest of the world.

To protect an Israeli producer by taking money from consumers means harming Israeli consumers.

But yeah, good for Kahlon. Even though he’s not the sharpest butter knife in the drawer, he’s doing something good here.

The Catastrophic Consequences of Banning Cash

I’m about to give you some very good and very sound investment advice, so take this down.

My good friend at the Esser Agoroth blog sent me this post on the new editions of cash bills to be printed by the Bank of Israel. He links to Ynet, which makes a big deal about the nice little pictures of dead people that will be on the new bills, and because they are women we are all supposed to clap about how amazing and equal the world has become.

For the record, I don’t want any person created in the image of God on any government bill. Make it dots, or stick figures, or whatever. In fact, I consider it a dishonor to have one’s face on a government cash bill. Someone who really cares about the status of women should insist that no women appear on any cash bill. To delve into this specific narrow issue for only a single sentence, since that is all I can bear of this nonsense of who is on a bill, they plan to have Leah Goldberg and Rachel the Poetess on the 20 and 100 shekel bills. These are both Jewish women and good writers who I admire, who wrote beautiful poems.

Because I admire them, the last thing I wish for them is to have their likenesses printed on inflationary government money.

Anyway, the point of my friend’s repost of the Ynet news blurb was to emphasize the last paragraph of the sneaky monstrosity and journalistic serpentine trickery. Here’s the last paragraph:

Economic officials have estimated this would be the last series of paper bills issued in Israel, as paper money is only changed once every few decades, as has been the case in this instance, and in 10-20 years payments are more likely to be made using smart phones, computers and credit cards, all but nullifying the need for cash.

This way, the article is set up to focus the attention of the masses on women being featured on government paper as the important item. The very last paragraph of the article mentions a seemingly bedieved (after the fact) consequence that most people do not read at all, that is structured to make it sound like there is no consequence to it, namely that this “happens to be” the last cash that the bank of Israel will ever print.

Well, here are the consequences of a cashless economy. Before you read my extrapolations for Israel, here’s what happened in India when only high-denomination bills were banned there. Cash is still legal, just not the highest denomination bill there. The results for people’s lives were still catastrophic.

The first thing that has to be understood about a cashless economy is that banks now control 100% of the money supply, and all of it is within the banking system at all times. The banking system is built on fractional reserve, meaning only about 10% (depending on the specific insistence of your local central bank) of your bank deposits are available in the form of physical tangible cash at any given time. The only thing that keeps banks from continually loaning out 90% of your money, from bank to bank, is the fact that theoretically, you can legally withdraw your money in the form of physical paper at any time from any ATM in the country.

The fear that any and all of your deposits theoretically can be withdrawn out of the banking system in the form of physical cash is the only thing that keeps banks from inflating the money supply continuously through infinite loans to other banks and making profits off the interest and enslaving you even further. If every single transaction is electronic, then everything remains in the centralized banking system at all times, with loan volume exploding. The money supply goes sky high and price inflation gets out of control. In the absence of real, physical cash, prices skyrocket. Real assets like gold, oil, food, real estate, skyrocket.

That’s the main, theoretical point. But let’s get down to things that are more specific and concrete.

Think about cash transactions that happen in the economy. Normal, legitimate ones, not drug deals, which these mainstream media government shills are obsessed with you focusing on. Say your kid does some babysitting for cash. Your wife does a private lesson and is paid in cash. The guys at the shuk in Machaneh Yehuda in Jerusalem sell fish or fruit or whatever for cash.

Now, all that cash is gone. All transactions are now digital and therefore recorded. That means they are all recorded by government. And government taxes every single one of those transactions. What does that mean?

It means that every transaction that used to be finalized in physical cash and which may or may not be taxed because the sellers can hide some of the cash, will now be taxed fully at the legal limit set by idiotic politicians in the knesset who can dictate how much money from each transaction they feel like taking for themselves. Let’s assume, reasonably and conservatively I think, that 30% of the cash earned by the simple Jews at the shuk is not delcared as income. That means in a cashless world, taxes rise on shuk food purchases by 30%, because now it would all be taxed. Profits fall by 30%, marginal producers are forced out, supply gets lower, demand stays equal, prices go up.

But worse than that. I’d be willing to bet that 90% of babysitting services in the entire country are undeclared. It’s 90% under the table, because it’s done mostly by kids. With no cash, it’s all taxed. Profits for babysitting plummet. Which means, by supply and demand, that the cost of babysitting services skyrocket by around the same price as the tax. More for food, more for babysitting. At least.

Further, the private tutoring economy will be destroyed. Very little of that cash is declared. It will all be taxed. Private tutors make less money for their services, marginal players exit the market, supply of private tutors shrink, prices for them go up, and the middle class will be less able to hire private tutors for their kids. Only the rich will be able to afford it. Contributing to that dreaded “inequality” that the left fears so much.

Private tutors, babysitters etc. though are just the tip of the iceberg. I only mention these examples because I am personally familiar with them. Can you think of any other legitimate services that are mostly cash transactions that will be destroyed by the lack of cash? Ah, I can, here’s another, and this has to do with a situation that Moshe Feiglin has spoken out about as the child of divorced parents. (This is public information.)

I have a friend in Katzrin in the Golan where I live who is a divorced father. Through some stupid mishap the government still thinks that he needs to pay alimony, when his own ex-wife has agreed that he owes her nothing. But since there is a computer error somewhere, his bank account is frozen. He can only eat and live if paid in physical cash.

Without cash, he would starve. Literally. He gets his salary through some convoluted path ending in cash. Without it, he’d be screwed. He would rely entirely on tzedaka to stay alive. The government controls the banks, and therefore all the bank accounts. If there’s an error, it’s your problem, not the government’s. That’s the reality.

Now think of anything in your personal lives finalized in cash that will now be taxed because it will all be recorded. All of those prices will go up because marginal providers are forced out of those markets, constricting supply and raising the price.

This will cause severe disruptions in the economy and will make those people’s lives who are just making end’s meet in Israel absolutely miserable, even more so than they are now, and add on top of this the exploding price inflation by the fact that there will be no check on factional reserve bank loans. It will be a disaster. People’s lives will be ruined.

But at least tax evasion will be a thing of the past in Israel.

הודו לה’ כי טוב, כי לעולום חסדו.

The investment advice I have? This will happen. Zehut cannot stop it. We will only stop it when Moshe Feiglin is Prime Minister. Before that happens, load up on commodities and physical assets of your choice. Provided they are still needed to make stuff, anything that humans need or want, they will rise in price dramatically when physical cash is no longer available.

The Beautiful Thing About the Bitcoin Split

Bitcoin split into two different currencies today. I don’t really understand why except vaguely something about the software being too overloaded and needing to be either upgraded or split to lighten the transaction burden on the network. Or something like that.

There was something amazing about the bitcoin split that isn’t being reported by anyone. That is, no government was involved in the decision to split the currency into two. There were no squabbles, no politicking, no building coalitions, nobody forcing anything on anybody. The guys who hold up the bitcoin network, they simply came to an amicable decision to split up, and social justice warriors were not even involved.

And what happened to the bitcoin price? Nothing much at all. It was fine. The people who use it are fine. The people who buy it and sell it are fine. Everything is fine.

Whenever I suggest privatizing something – roads, courts, airport security, garbage disposal, the water supply, etc. – I am invariably asked how the private sector could possibly handle X. Well, this is how the private sector would handle a money dispute. Amicably, cleanly, efficiently, and quietly. So we can all live our own lives.

Beyond all the thing things I want to privatize, first and foremost and my utmost priority, is to privatize money creation. Let the government have the shekel if they want. Manage it however they want. Print it, don’t print it, I don’t care. Just let the private sector produce its own money and allow people to use whatever money to pay their taxes at market value.

Why is this my top priority? Because the Israeli government is the source of 99% of all problems in Israel. From the Temple Mount and the government-funded police who beat and tazer defenseless Jews on Tisha B’Av to skyrocketing real estate prices to the war with the Arabs and Oslo, it’s all their fault. All of it.

Government power needs to hacked away and the single greatest power – the source of all the other powers the Israeli government has is the ability to print money that we are all forced to use. The monetary monopoly is the seat of all of its power. Break the State’s monopoly on money, and you have hit the weak spot at the center of the Death Star. You break the State’s biggest power monopoly by far. Once money is privatized, the State can no longer inflate with impunity because the shekel would deteriorate fast. The government in an environment with monetary competitors, must either shrink fast or go bankrupt even faster.

How do you privatize money? Just allow taxes to be paid in any currency at market value, and allow business to create money. Gold, silver, copper, stocks, bonds, dollars, euros, bitcoin, ethereum, whatever. It’s all up to the market whether to accept a currency or not.

How would the private sector handle money creation and money squabbles? The answer: very simply, as we just saw with bitcoin.

Imagine if there was a political effort to split the dollar or shekel into two currencies. Could you imagine the fighting that would be involved? All the worthless news we’d have to read, all the voodoo econometricians babbling about GDP and XYZ and 123 and using words that make us all feel dumb and unqualified to have an opinion?

But bitcoin split into two in a mutually agreed upon divorce by the developers. No violence, no public bickering, no social justice warriors, nobody blabbing on about how the poor or the rich or the middle class would be hurt by the split or the non split or anything. That’s how the private sector would handle money creation and monetary disputes. With peace and quiet.

With private competition against the shekel, inflation would end. People’s savings would increase in value. Real estate prices would plummet. The war with the Arabs would have to be ended for lack of money to keep it going. If you believe that’s a bad thing, you probably have a PhD in macroeconomics, Rachmana Litzlan. (Yes, many PhD economists actually believe war – AKA the mass destruction of goods and services and people – is actually good for the economy. It isn’t.)

 

The Caveman Minimum Wage Argument

Here’s an original approach to debunking wage minima.

Imagine that in 10,000 BCE, when humanity was just beginning to learn how to farm crops, that the minimum wage was $15 an hour in today’s value numbers.

Would there be a human race today?

The surprising answer is yes, because whatever government that may have existed back then would not have had the resources to enforce a minimum wage.

How much resources does it consume to enforce a minimum wage? How much money is minimum wage enforcement erasing from the incomes of the earners of minimum wage, e.g. those with skills JUST high enough to make it over the employment high-jump?

“Minimum Wage, so stupid, even a caveman wouldn’t do it.”

How Obama Just Exacerbated Income Inequality With His Overtime Meshuga’as

In a fit of absolute genius the likes you wouldn’t see from a highly evolved muskrat, Obama today is forcing buyers of labor to pay more for that labor at any rate over 40 hours per week. He thinks this will mean that more workers will make more money. As in the total number of dollars spent on labor will rise because of this law.

What he doesn’t understand is that less workers will be making more money and the remainder will lose, because laws cannot magically increase the amount of money people are willing to spend on labor. Less people will make more money in order to equal out the total dollar amount spent. The others will either be cut to part time or fired.

What happens is we go from a situation of relative equality, where say:

100 people make $100 overtime, for a total overtime dollar amount of $10,000

To a situation of less equality where:

90 people make $111.11 overtime for a total dollar amount, again, of $10,000, and the other 10 people have zero.

Therefore, overtime legislation creates income inequality. 

Obama doesn’t think. Therefore he isn’t.