The Once Great Peter Schiff Doubles Down On Ignorance 😏

So in the past Peter has been very bearish or pessimistic or whatnot about Bitcoin.

He's said some weird things, like this beauty starting @4:52 where he claims there's not a fixed supply of bitcoins because you can break them into smaller pieces.

He says it with a straight face.

I was eating some vegetable Lo Mein and flipping through the yootoobs the other night, and I decided to search "Peter Schiff Bitcoin" to see where he's at these days.

And it turns out our own Dan Dicks @pressfortruth got this little interview with him:

It threw me into a little bit of a nerd spasm and I felt like I had to blog about it.

@3:25 fiat currency

Bitcoin is not fiat currency.

http://www.dictionary.com/browse/fiat

If something is 'fiat' it means it was ordered from authority. 'Fiat' doesn't mean "not a physical object".

When we hear "fiat" it sort of automatically comes loaded with bad connotations. If he instead had said "it's not a physical object that you can see and touch", then it begs the question of "ok, and that matters why exactly?"

But by describing it as fiat, it's like a cheap shortcut to seeming like he raised a meaningful concern without actually saying anything.

So I'm not sure Peter harmlessly misuses a word here or if there's some sophistry involved.

Fun fact: If you had to pick one or the other, gold is actually way more fiat than Bitcoin.

Gold has commonly been ordered by rule of law to be currency throughout history, whereas of course Bitcoin never has. So bearing in mind what 'fiat' actually means, gold has a heritage of being fiat, and arguably some of its value could be a residual effect of this.

@3:54 you can keep creating more cryptocurrencies tho

He doesn't understand the network effect, and it really isn't even interesting to bring up other than to be thorough about all the bad arguments he makes in only a few minutes.

If it worked as Peter describes, then everybody who has the skills to clone Bitcoin should be doing it constantly and you'll keep biting off a piece of its value every time.

But of course the reality is that a blockchain doesn't have any value without a network of people using it, and so it doesn't matter how many clones of the same thing are out there because people will still consolidate to the one network.

Peter probably doesn't recognize that the hundreds of cryptocurrencies that seem to be popping up out of nowhere are all attempting to serve niche purposes. They don't magically gain value just because someone says "hey, here's another blockchain". They work in different ways, and the amount that will ever exist is limited by whatever needs are out there that a blockchain can fulfill (or that we speculate it can fulfill).

@4:33 "I don't think these cryptocurrencies are ever gonna deliver on their promise of functioning as real money in the world"

This is basically a red herring. They don't have to "function as real money in the world", whatever exactly that means, in order to have real purpose and real value.

That said, I just bought a Whole Foods gift card using Bitcoin. I've paid for lots of things using Bitcoin (it would be entirely doable to live off of bitcoins these days and never spend cash), but I've never paid for anything with gold and I doubt there's a decent list of vendors or a practical way to do it.

So relative to gold anyways, Bitcoin already is "real money in the world". (And that's despite being born in 2008 when gold has been here forever.)

Whether or not it will ever be the world's commonly used form of money, crypto people at least recognize that this is a seachange away. We don't talk about the "promise" of this happening as tho it's a practical thing that starting tomorrow we expect everyone to shift over to it and pass laws that it will be the nation's money. Which is how gold people talk about gold.

So again Peter is projecting his own side's issue here.

@6:15 "I mean I think there could be a difference between the blockchain itself and the implications that it has vs. the value of these tokens, these cryptocurrencies that can utilize the blockchain. Of course, a lot of other things can utilize the blockchain."

This is kind of like saying a spider's web is good, but you're not so sure about the individual strands of web.

A blockchain is the tokens of that particular blockchain. The tokens are how you use it.

Sure, they can be speculated on and bid up to something too high. But that doesn't seem to be what Peter's saying. He's saying that "the blockchain" may be meaningful but that the tokens aren't.

@7:25 "they should be going back to real money, they should be going back to gold, not something people say is as good as gold. It's not, it's not even close."

Nobody really says that. It's apples and oranges.

Gold is a metallic object. Cryptocurrencies are internet protocols. They're an evolution in how we communicate information back and forth.

It's more just gold people saying crypto isn't as good as gold when crypto people weren't trying to compare them.

Peter seems to look at cryptocurrencies only from the narrow prism of how gold works, as though there's nothing to them besides that.

Incidentally crypto probably will shatter gold in terms of which proved to be the better store of value over any long-term time horizon. So it probably is better than gold even at just being gold. But it's also much more than that and nobody really thinks about gold as the comparison or the rival to it.

@7:42 "Goldmoney is the way to go, because Goldmoney does everything that a cryptocurrency does as far as your ability to spend it online and use it in commerce, except it goes much further in that it's a reliable store of value, it's not something that could blow up any day"

Quite the opposite. Having somebody else hold your money is exactly what could blow up any day.

He does mention that the gold is stored with Brinks who has never lost an ounce. But that's moot, because they've also never been trusted with the amount of wealth that you'd need to back global commerce.

Cryptocurrencies can scale to hold a limitless amount of value (everybody on Earth can own and use them) and there's still no trust issue, whereas centralized holders could only be trusted with so much before the incentive to grow corrupt outweighs their business model.

So there's no way for something like Goldmoney to scale to be a type of money that actually is commonly accepted by vendors everywhere, because at that point there would be a trust issue even if there isn't one right now.

So you can't have your cake and eat it too. It might be completely safe for someone to store your gold. But you have to give up on it being useful in commerce. You can't have both here.

Not to mention, worst case scenarios of runaway inflation seem risky for centralized gold storage even if the company itself is trustworthy.

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A lot of what Peter says regarding it being a bubble is non-falsifiable, meaning that years down the road he can just say it's a bigger and bigger bubble, as he's been doing since 2011. He even lays some groundwork by saying it might get bigger and maybe even be the biggest bubble ever.

Usually when Peter talks about bubbles, he identifies what the government did to create the bubble.

In fact I think that's essentially how Austrian theory works: That bubbles are quick and tiny if not for government interference that either exaggerates or prolongs them.

So I find it peculiar that the biggest bubble ever, in Peter's mind, would be caused by free-market activity (if anything, hampered by governments), and that this actually sits well and feels right to him.

Maybe, instead, it's a really wonderful paradigm shift and you just haven't gotten it yet Peter?

Love,