How Many Divisions Does the Algorithm Have?

My second post on bitcoin.  First, a reminder from the first:

My view in a nutshell: I support a free market in money, credit, currency and banking.  If you think I write something counter to that in this post, you are mistaken; re-read the first sentence.

I took some time to consider the various issues raised by bitcoin before I wrote the first post.  It has been almost two weeks since then.  It seems about time to write a second. 

You will likely recognize the title of this post.  It is a slight modification of a line Stalin used regarding the power of the Catholic Church and the Pope.

I find fault in many of the defenses of bitcoin – for example the idea that it can succeed as an alternative currency and still ensure complete privacy.  I have read people who brag that they can buy anything on the internet with bitcoins.  Maybe so…but where do they have the package delivered?  Or that they can even buy airplane tickets with bitcoin.  In whose name was the ticket issued?

How are users of bitcoin dealing with the tax ramifications?  Sure, one might take comfort in the anonymity of the whole thing.  But those data storage centers in Utah aren’t for nothing.  Is it certain that, from the date of your last use of bitcoins, the statute of limitations on tax fraud will expire before the government figures out the code?

But all of this is peripheral.  I guess this is the bottom line for me about bitcoin: if the state wants to crush it, it will crush it.

Does this mean I hold no hope for a more decentralized world?  Certainly not – I think decentralization is quite likely, if not inevitable.  I have often pointed out concrete examples – the former USSR, Yugoslavia, and Czechoslovakia, each one broken into several pieces.  The struggle to hold the EU together is another bit of evidence as to the difficulty the elite are having in further centralization.

The internet is a big part of the reason that I believe the decentralization will continue.  But if this is true, why not bitcoin – a child of the internet if ever there was one?

The control over money and credit is the single most important tool that the elite have in order to maintain control (although I can make an argument for education, also).  By elite, I don’t mean politicians or bankers.  I mean the people that the politicians and bankers work for – knowingly or not.

The elite will give up on much (take a step back, as the Daily Bell sometimes suggests) before they give up on control over money and credit.  I have written that it seems likely to me that they will even allow for sovereign defaults – real, no kidding defaults – if this allows the faith in regulatory democracy to continue for a longer time.  They will even allow some forms of political decentralization if this allows them to maintain overall control.

And control is the end.  Not wealth.  They have untold wealth – it is the control that allows this.

But if market money wins?  What do they have? Is it only coincidence that the century of virtually world-wide central banking coincides with the century of regulatory democracy and continuous war resulting in the closest thing to world government that has been achieved in recorded history?

The state, as tool for the elite, will crush bitcoin if this is so desired – and the only reason I see that it won’t be crushed is if the elite want to co-opt bitcoin.

Does this mean I believe the state is omnipotent?  Omniscient?  Omnipresent?  No, certainly not.  But it does not have to be these things.  A few very public hangings will suffice.

How did the state crush Swiss private banking?  The US government made very public examples of a handful of individuals and institutions - and guess what?  An entire industry came to heel.

Does the state have to be total in its destruction to achieve its ends?  Does a herd of elephants?  If I hear a herd of elephants charging my way, do I stay put in the comfort and certainty that not 100% of living things in the path of this devastation will die?  Do I not seek the storm cellar on approach of a tornado, even though not all in its path will be thrown into oblivion?

Does this mean that, through force the state will always come out on top?  No.  But the state is on top for now, and will be for the foreseeable future.  Too many people still have faith in the system.  Eventually enough will lose faith, and this will lead to a loss of power.  All states require this faith by the people in the state, else the state cannot survive – why do you think they spend so much effort on propaganda?

The state is delivering the goods, so the masses continue to support the state.  Eventually, too few independent will not be able to support the too many dependent via coercive state transfers.  That is likely when the faith will crumble.

Control over money and credit is the key tool of the elite.  They have demonstrated that they are not shy about using every possible means to maintain control.  There are not enough people ready to withdraw their consent from being controlled. 

But the numbers increase daily.  It just doesn’t strike me that today is the day.

This is my most fundamental criticism about bitcoin.