Just in the past few weeks Bitcoin has gone from just being considered a fad to being discussed as a serious “thing” by most professional people. If you look at the media, “concerns” over Bitcoin’s reputation for money laundering, tax evasion, and potential crashes and busts have been greatly exaggerated. There are however some really scary, extremely short term as well as long term risks to “using” Bitcoins.
The most serious risk of Bitcoin is that it is the very definition of a “virtual” currency and we know how unstable the currency markets are. Just the other day the price of a Bitcoin went from half of a dollar to a dollar and a half in a matter of minutes. If something like that happened in real world currency markets it would be immediately denounced by the media as “an illegal take” and our economy would be crippled for months, possibly years. And we don’t want to know what that would do to the stock market or the stock options markets.
So, why are there so many people doing this and why do they seem to be getting away with it so easily? Well, I think it is because they think the media will never get around to calling them out for it.
In late ’90s to early 2000s the most popular currency to use was the US dollar. This is because the US government was spending less and more people had more disposable income. And the fact that the currency was backed by a national government made it really easy to invest in.
The problem with this system of currency that we had was that it had many flaws. If the Federal Reserve was ever to printing too much money then our national government would not be able to stay in the black. The other problem was that as dollars were printed the value of the dollar would plummet in value and in time the dollar would be worthless. Also as the demand for dollars was going down the prices of gold would rise and this would cause some serious problems to our economy.
In a way, all of these problems were caused by our mistake of printing too much money. The result was an increase in the value of the dollar and falling prices of things like houses and cars. Then you had a currency crash, which caused inflation to rise to some serious levels. This then caused people to have trouble paying their bills and that caused more problems.
The problem that we are in right now is that we have a new system called the world currency with none of the flaws that came with the dollar. And our problem is that we are in the middle of inflation. It is already getting a little extreme. This has led to several moves on the part of central banks around the world, which could lead to much bigger problems in the future.