Gresham’s Law and Bitcoin

Gresham’s law holds that “bad money drives out good money,” meaning that given a choice of currencies (broadly speaking, “money” that serves as a store of value and a means of exchange), people use depreciating “bad” money to buy goods and services and hoard “good” money that is appreciating or holding its value.

As this dynamic plays out, eventually there is little “good money” in circulation and the economy suffers accordingly.

Correspondent AK recently submitted an insightful discussion of Gresham’s law and bitcoin:

1: Discussions surrounding Bitcoin and Gresham’s law immediately devolve into a debate about historical formulation or wording of Gresham’s law. Gresham’s law includes the notion that one or several currencies must be accepted at a defined value under legal tender law. However, the wider economic phenomenon that “powers” Gresham’s law is a universal phenomenon that is independent of any particular legal or cultural context.

To wit, in economic exchange where the seller will accept two different commodities as payment, the buyer will tend to pay with the commodity that in his own eyes is of inferior or lesser value. When this phenomenon is replicated in a large number of economic exchanges, and in reference to the same two commodities, this results in the “bad” currency driving from circulation the “good” currency, as buyers in the marketplace pay with the inferior or lesser-valued commodity (as viewed from their own point of view), when the seller will accept two different commodities as payment.

2: This phenomenon, which we could refer to as Gresham Effects, is independent of the legal framework operating at any given time. If you will accept as payment milk with an expiration date two days from now or milk with an expiration date ten days from now, I will tend to pay you with the milk with an expiration date two days from now. If many similar exchanges occur in the marketplace, this will result in the “bad milk” driving driving the “good milk” from circulation as market participants routinely offer only the milk expiring in two days in their exchanges.

3: Therefore, if in the marketplace sellers are willing to accept either Bitcoin or fiat currency as payment, the phenomenon Gresham Effects tells us that buyers will offer the commodity they view as inferior or of lesser value in these economic exchanges. If market participants generally view fiat currency units as inferior or as lesser in value than Bitcoin currency units, and if this value judgment is repeated in many economic exchanges, this can be expected to result in the “bad” money (fiat) driving the “good” money (Bitcoin) from circulation.

Since Bitcoin was not in wide circulation to begin with, Gresham Effects in this case has the effect of preventing or suppressing the wide-scale use of Bitcoin as an exchange currency. This situation can be expected to last for as long as sellers are willing to accept either fiat currency or Bitcoin as payment and buyers view Bitcoin currency units as superior or of greater value than fiat currency units. In short, due to Gresham Effects Bitcoin will not become a widely circulating medium of exchange while these conditions persist.

Interpretation: To me, this indicates or implies that Bitcoin’s use case is more as a ‘reserve currency/store of value’ and less as a currency for use in daily transactions. In general, I will not relinquish my Bitcoins in exchange for t-shirts or Snickers bars if the seller will accept either Bitcoin or fiat currency. I will prefer to pay for t-shirts and Snickers bars using fiat currency.

On the other hand, when I want to purchase something and I do not have enough fiat currency to pay for it, in this case I may use my “reserve” currency, Bitcoin. For example, if I want to purchase a house and I only have enough fiat currency for 20% of the price, in this case I may use my reserve currency to pay the other 80%. This example assumes that paying the full price by fiat currency is not an option. If I had enough fiat currency to pay the entire price I would pay by fiat currency.

The significance here is that those who are envisioning a future in which Bitcoin becomes a widely circulating medium of exchange may be envisioning something that is at odds with the laws of economics. Both economic law and empirical evidence seem to indicate that due to Bitcoin’s strictly limited supply, market participants may refrain from offering Bitcoin as payment in daily transactions. Bitcoin may have very important use cases, but its most most important use case may not be a widely circulating medium of exchange.

Thank you, AK. As anyone who follows cryptocurrencies knows, the objections to cryptocurrencies and bitcoin specifically are legion: it’s not stable, it can’t be trusted, it isn’t “real money,” etc.

I’d like to illustrate “real money” with a chart of the bolivar, the national currency of Venezuela. Note that until relatively recently the bolivar traded (at least at the official rate) at around 10 bolivars to one U.S. dollar (USD) and around 25 to the USD on the black market (i.e. free market). These exchange rates slowly moved higher, but few expected the bolivar to depreciate to an appalling free-market rate of 100 to one USD.

Rather suddenly, the state issued fiat currency bolivar lost the majority of its purchasing power. This loss of purchasing power, also known as inflation, gathered momentum and is now at hyper-inflationary rates: a few months ago it only took 237,000 bolivars to buy one USD, and now in June it takes 2,800,000 bolivars to buy one USD.

Not to put too fine a point on it, but the Venezuelan citizen who converted all the family’s bolivars to bitcoin two years ago (June 2016) would have preserved the purchasing power of their “money.” So while the Bank of International Settlements (BIS, which is owned by 60 central banks) is pleased to declare bitcoin untrustworthy and in effect, not “real money,” unlike the stable, secure, trustworthy fiat currencies issued by central banks, it pays to reconsider Gresham’s law before concluding bitcoin isn’t “real money.”

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Onward to Stock Market Nirvana… Or Not

At long last, we have reached the Nirvana of consensus: the stock market is heading to new all-time highs. Even the perma-Bear camp seems to have accepted the inevitability of new all-time highs ahead: The FANG stocks are hitting new highs, the Russell 2000 Small-Cap Index is hitting new highs, and the laggard S&P 500 is sure to catch up to its peers, as it climbs the ladder of higher lows. Once again we’ve reached the Nirvana of ever-higher stock valuations.

Or not. That troublesome kid watching the naked Emperor ride past in his imaginary finery keeps muttering about rising wedges. Consider the Russell Small-Cap Index (RUT):

The Raging Bull of the FANG stocks, Netflix:

The S&P 500:

And the so-called “fear index,” the VIX, reduced to the Nirvana of complacency and supreme confidence:

The Nirvana of January–super-low VIX and an ever-rising stock market– was disrupted by an unwelcome eruption of reality.

The beaten down VIX traced out a couple of blue wedges before the eruption, but let’s ignore them. What matters is order was restored to the Universe by the triumph of complacency and confidence as the VIX was ground down to sub-12 levels again.

Rising wedges tend to lead to declines, so ignore them. Never mind their ubiquity– Nirvana blasts right through resistance and rising wedges.

The faithless few might be troubled by the similarities of late January to the present, but the faithful have supreme confidence in the Fed, the tremendous bite of the FANGs and the all-powerful forces of greed and complacency–a marriage made in heaven!

Here’s a look at the real Nirvana: the income and wealth gains of the top .1%.

Debt-serfs “own” nothing but debt, the Technocrat class shouldering student loans and mortgages keeps the machine running by working themselves to exhaustion, and the speculative class skims virtually all the gains.

Stock market Nirvana feeds wealth/income inequality Nirvana.


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Murder Incorporated

Murder Incorporated is a three-book series by Mumia Abu Jamal and Stephen Vittoria, which I can highly recommend based on the first book. The other two are not out yet.

Book One, “Dreaming of Empire,” is a critique of U.S. imperialism, a debunking of U.S. nationalist myths, a corrective or alternative history of the U.S. nation. Politically, a book like this would never be permitted in U.S. schools, and it’s clearly not aimed at clearing that hurdle. It uses curse words, which would provide a handy excuse for keeping it out. It’s also not straight history. It’s part chronological, part theme-based. It mixes historical accounts with pop-culture, with quotations from scholars, historical sources, and analysts interviewed by the authors.

Dreaming of Empire also does not try to leave the past in the past. Instead it proposes to explain current wars, the weaponization of outer space, and the rhetoric of contemporary U.S. politics through a myth-busting hard look at the past. And there’s little the U.S. public needs more. Indeed the authors seem to have concentrated on topics around which damaging myths have been constructed, including the glories and goodness of the Founding Fathers.

Reading here in Charlottesville, I’m struck by the extent to which local boys, Jefferson and Monroe (and the latter’s “Doctrine”), dominate this story. I wonder how many people realize that when a participant in a fascist rally here last summer drove his car into a woman and killed her, he was in that moment driving past the location of James Monroe’s first house here. I’m sure it’s more people than realize that Charlottesville is not a hotbed for fascists (they mostly come from elsewhere) but is a town that was founded by and which still prominently honors fascists avant la lettre.

The authors of Dreaming of Empire are smart enough not to call sacred founding fathers fascists as an idiot like myself might do. Instead they allow such fascists to convict themselves in their own words. Here we read John Winthrop thanking God for bringing deadly epidemics to native peoples, Benjamin Franklin crediting God with a plan to “extirpate” the “savages,” Jefferson advocating that tribes be “exterminated,” Jefferson likening African Americans to orangutans, and an Iroquois telling Washington to his face that women and children shudder at his name as that of a mass murderer, etc.

I think the focus on the founders of the fatherland as the creators of the Manifest Destiny demand for Lebensraum is entirely appropriate, even as the authors rightly trace the seeds of U.S. imperialism back to the British treatment of the Irish and the Spanish treatment of Jews and Muslims. I think, however, that a critique of World War II myths is even more necessary, and I hope one makes it into book 2 or 3. This book does, to its credit note the post-WWII globalization of the Monroe Doctrine. And I remain grateful to Mumia Abu-Jamal for his supportive review of my book War Is A Lie.

While the wars come fast and furious, there are at the moment many that are much better understood in the context of the history and the ideology illuminated in this book. The members of the so-called Democratic Party currently opposing diplomacy with North Korea or Russia and even trying to legislate a permanent occupation of South Korea cannot be fully understood solely through the lens of partisanship. Neither can the majority of U.S. senators who have openly voted for genocide in Yemen. The resistance to U.S. bases in Okinawa, the coups and attempted coups in Honduras and Nicaragua and Venezuela, the endless imperial outrages in Afghanistan and Iraq and Syria, the U.S. military expansion throughout Africa, the aggression toward Iran, the resistance to even nuclear disarmament, the attacks on international law — all of this, to be understood or stopped, has to be seen through the history of empire that long predates the current hegemonizing dotard in chief.

If I have any concern with this first book in its series, it is the same concern I have with many other books. Namely, this is a critique of violence that never gets around to explicitly advocating for the more powerful tools of nonviolence. The accounts of activism by the poor before, during, and after the American Revolution focus on violence. The Saint Patrick’s Brigade gets more attention than Henry David Thoreau. The Cuban Revolution gets extensive and familiar attention, while uses of nonviolence in El Salvador 1944 or dozens of other cases goes unmentioned. This bias is partially corrected by the book’s closing with details new to me about a peace activist, Malcolm Boyd.

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How Fancy Bear Destroyed Eliot Higgins Bellingcat Credibility

If you’re just catching up, Fancy Bear was outed this past week and those Ukrainian hackers are going to cause a lot of legal problems for their supporters in the US if journalists remember their job is to protect the public as a 4th estate. If they don’t, we’ll get there without them.

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Against David Irving’s View of Hitler

Eric Zuesse, as posted originally at The Unz Review

In response to Ron Unz’s “The Remarkable Historiography of David Irving”, this note will pick up on and elucidate the reader-comment to that from James N. Kennett, which stated: “It seemed to me that the problem with his work was not the possible inaccuracy of the details that he included – but the things he had left out. Anyone can tell a good story by leaving out the evidence that does not fit. Irving also coined the phrase ‘the Auschwitz Survivors, Survivors of the Holocaust, and Other Liars—A.S.S.H.O.L.E.S.’ You don’t have to be a supporter of the Holocaust Industry to realise that this is crass insensitivity, and an ahistorical insult to those who did survive. Far from indicating a historian of unique genius, it is the product of a perverted mind.” (I have added the link there in Kennett’s comment — it wasn’t provided by him — a link to an apt comment that had been posted at “Good Reads” about David Irving’s statement there against those survivors.)

My 2000 book WHY the Holocaust Happened (the publisher subsequently went out of business, and so it’s no longer available) discusses both the history and the historiography of the Holocaust; and, while the writings of David Irving are not mentioned there (but more ‘respectable’ proponents of his ‘weak dictator’ interpretation of Hitler were), it presented, regarding Mr. Irving, lots of (as Kennett has put it), “the things he had left out,” and that I think invalidate Irving’s works, because the motivation behind those omissions is clear and is not considered acceptable by most historians. Here are some of those omissions — things left out altogether, or else unjustifiably denigrated, by Irving — (with page-references to where the given excerpts appear in my book):

Pages 229-230:

Despite the transparent frauds of the Holocaust-deniers inside and outside academia, there is no serious question that the Holocaust existed and that it constituted a crime of unimaginably vast scope. Equally without doubt — again notwithstanding hoaxers both inside and outside the universities — is the fact that Adolf Hitler held the motive for the crime, and that the Nazi Party and the other perpetrators “on the ground” were his instruments in carrying it out. According to Adolf Eichmann, Chief of the Bureau for Jewish Affairs at the Reich Security Headquarters, in his 1983 Eichmann Interrogated (p. 75), it was in August or September 1941 that his boss “Heydrich sent for me. I reported. … He began with a little speech, then said, ‘The Führer has ordered physical extermination.’ These were his words. … The Führer had ordered the physical extermination of the Jews.” And (xxii, 92) Eichmann also acknowledged that by no later than 21 September 1939, Heydrich had made known to him the “basic conception” of “the physical extermination of the Jews” as “the ultimate aim” that was “promulgated by Hitler.” Eichmann’s recollection was exact to the day: Heydrich’s official order, referring to “the final goal (which will require a lengthy period),” was dated 21 September 1939. On 31 July 1941 Göring instructed Heydrich to draw up detailed plans for “the desired final solution of the Jewish question” (document 710-PS in Trial of the Major War Criminals). Hitler’s signature even appears on the document (630-PS) dated 1 September 1939 authorizing the “euthanasia” of the disabled and other “incurables.” The physicians had wanted that in writing, and got it. And in his Secret Conversations (Table Talk) of 21 October 1941, Hitler concluded his long tirade against Jews: “By exterminating this pest, we shall do humanity a service of which our soldiers can have no idea.” Himmler publicly stated in a speech on 24 February 1943 that this was necessary in order to have “exterminated a bacterium because we do not want in the end to be infected by the bacterium and die of it.” Hitler’s guilt in the Holocaust is beyond any reasonable doubt, regardless of what neo-Nazis say.

page 218:

By January 1939, Hitler’s official policy was for the expulsion of all Jews. By June 1940, it was for their expulsion specifically to Madagascar — a goal even less practicable than expulsion itself, since the “Madagascar Plan” required as prerequisites the defeat of both France and England, and could thus realistically not even be considered as a short-term measure which is what it was presented as being. Hitler knew better. And along the way, he skillfully set up numerous highly visible public displays of the unwillingness of foreign nations to accept the flood of dispossessed Jews that he was offering as refugees. (As Rudolph Binion noted in his 1976 Hitler Among the Germans, pp. 29-30, Hitler had even fired Reichsbank chief Hjalmar Schacht early in 1939 because Schacht had been too effective in promoting the expulsion of Jews; and both Binion, and Richard Breitman’s 1991 The Architect of Genocide, pp. 50-1, documented that even Hitler had acknowledged that expulsion of Jews was really intended as nothing more than “exporting anti-Semitism.”) Hitler gleefully observed the embarrassment of other countries that proclaimed their opposition to anti-Semitism but that turned a cold shoulder to these desperate refugees. Hitler was trying expulsion; other nations just refused to receive what he was offering them. The United States, for example, not only did not increase its immigration-quota for Jews; it failed even to admit as many Jews as the official quota permitted. David S. Wyman’s 1984 The Abandonment of the Jews documents (pp. 100, 365, 410) the repeated refusal of President Franklin D. Roosevelt to meet with Jewish leaders to deal with the problem, and also establishes the President’s own personal knowledge of the Nazis’ anti-Semitic exterminations. For Hitler, such international response was itself part of the “sleepwalking” toward genocide. By the time of the Wannsee Conference on 20 January 1942 to coordinate the actions of all state agencies involved with the “final solution,” all participants were reading their respective roles from a playbook written by none other than the Führer himself. And by that time, they were all prepared for those roles — knew them by heart, actually. When three days later, on 23 January, Hitler in his Secret Conversations (Table-Talk) addressed Himmler sarcastically about the matter, Himmler understood very well what he meant by saying of his policy toward the Jews, “I’m extraordinarily humane. … But if they refuse to leave voluntarily, I see no other solution than extermination.”

Page 15:

Obviously, the Holocaust occurred within the context of a World War; yet it actually drained the attention of Hitler and of his fighting forces away from the war-effort, needlessly hardened the worldwide opposition to Germany, and transformed into outright enemies talented people who might otherwise have been neutral or even supportive as “patriotic Germans.” Judged purely as a military tactic, the Holocaust was at best dubious, and at worst counter-productive. Horst von Maltitz perceptively observed in this regard in his 1973 The Evolution of Hitler’s Germany (p. 171), that “railroad transport trains carrying Jews from the West to extermination camps in Poland were given priority over trains for urgently needed troops and war supplies. Moreover, skilled Jewish laborers, desperately needed in the munitions plants in occupied Poland, were carted off to extermination centers, in spite of strong objections by plant managers.” And according to the Polish Ambassador, Jan Ciechanowski, in his 1947 Defeat in Victory (p. 179), he had personally handed U.S. President Roosevelt in the White House on 28 July 1943 a memo that, “The unprecedented destruction of the entire Jewish population is not motivated by Germany’s military requirements. Hitler and his subordinates aim at the total destruction of the Jews before the war ends and regardless of its outcome.” The basic question thus is posed: what was the relationship between Germany’s war effort and the Holocaust? Which served which; what was Hitler’s ultimate objective?

The Führer’s words right before his suicide — his final, supreme, statement of his war-aims — urged his people to continue the war, until victory, against what he held to be the sole real enemy: “the poisoner of all nations, international Jewry.” The enemy for him was Jews in all nations; this also sheds light on why over 96% of the Jews slaughtered in the Holocaust did not come from Germany. We shall indeed show that, for Hitler, defeat of the enemy entailed nothing less than the extermination of all Jews.

In other words, for Hitler, the Holocaust — the “final solution” — was not a military device, it was a military goal; in fact, it was the central military goal, which took precedence over even the expansion of Lebensraum. In order to understand why the Holocaust happened, it therefore is necessary to understand why Hitler hated Jews so fanatically and so obsessively that nothing less than their total extermination would satisfy him.


Those are the key excerpts regarding the viewpoint that David Irving presents.

Irving states that Hitler didn’t know about whatever extermination of the world’s Jews was intended, if any was intended. However, Irving doesn’t deny that local exterminations were carried out. Irving alleges that Hitler’s subordinates knew about and wanted these local atrocities, but that Hitler wanted only that Jews be expelled from everywhere to be sent to Madagascar. However, such expulsion was actually the intention and expectation of Hitler’s finance-chief, Hjalmar Schacht, and Hitler finally demoted him, perhaps for that very reason. Hitler certainly didn’t want Schacht to know what his plans for the Jews actually were. Hitler just wanted some rich Jews to buy their ways out, since he tried to postpone for as long as possible anyone’s knowledge of what his intended “Final Solution to the Jewish problem” actually was. Furthermore, as my book noted, Hitler wanted to make things as difficult for FDR and for Churchill as he could. He did everything possible to avoid leaks regarding what his intentions were, and especially regarding why he held those intentions. Also, Irving noted, in a footnote, that Eichmann had testified to having been informed by Heydrich that “The Führer has ordered physical extermination,” but Irving simply dismissed that by saying: “There is no primary or secondary documentary support for such a statement. This kind of evidence, of course, would not suffice in an English magistrate’s court to convict a vagabond of bicycle stealing.” He dismisses everything that doesn’t fit with his image of Hitler — “probably the weakest leader Germany has known this century,” as Irving said in the Introduction to the 1977 edition of Hitler’s War. The 1991 edition changed this to “Hitler was a far less omnipotent Führer than had been believed, and his grip on his subordinates had weakened with each passing year.” Of course, that’s saying the closer that events got to the actual perpetration of the Holocaust, the less responsible for whatever it was, Hitler was, in Irving’s view. To Irving, Germans were tragic victims, but many of them overreacted to the abuses that they had received from Britain, Jews, communists, and some others.

While my book doesn’t mention Irving, it does deal extensively with (among others) a writer about the Holocaust who seems to hate Germans as much as Irving seems to hate Jews: Daniel Goldhagen. The problem with both writers is that they are tribal (one a “Jew” and the other an “Aryan” — i.e., pureblooded Christian, or, at least, not “Jew”), though writing from the opposite tribal standpoints. To be a historian, instead of merely some kind of propagandist, requires abandonment of any tribalism at all. Unfortunately, Goldhagen’s tribalism is considered acceptable, whereas Irving’s isn’t. Today’s Palestinians — and many others — are victims of Goldhagen’s particular form of tribalism. But perhaps as the Holocaust recedes from view, with the passage of the decades, tribalism itself is becoming fashionable again, too. In fact, tribalism seems to be coming into vogue again throughout the world. Look, for example, at what the U.S. Government and its Saudi and UAE partners are doing to the Houthis, a Shiite tribe, in Yemen. Even genocide is becoming ‘acceptable’ again (certainly to America’s Government and its allies). The restoration of Irving to ‘acceptability’ is just a part of that broader trend.

PS: In the many reader-comments to this article at The Unz Review, there are few that address the evidence this article presents that Irving’s view of Hitler and of Hitler’s connection to the Holocaust was false. Some of the reader-comments are ad-hominem (and false) against me. But none of them focus on the evidence that’s presented here; and especially I want to repeat here, as I did in responding to one of those reader-comments, these two quotations, as being crucially important evidence:

Having read the reader-comments up to this point (comment #46), I notice that none even so much as mentions the key quotation that I present in this article, which is “in his Secret Conversations (Table Talk) of 21 October 1941, Hitler concluded his long tirade against Jews: ‘By exterminating this pest, we shall do humanity a service …’,” which should settle the matter as to whether Hitler was proud of his “extermination” of Jews, which people he held to be a “pest,” and which “infection” in his other writings he called a “bacterium,” just as did Himmler. So, all these reader-comments evade that admission by Hitler. Furthermore, all till now have been evading: “The Führer’s words right before his suicide — his final, supreme, statement of his war-aims — urged his people to continue the war, until victory, against what he held to be the sole real enemy: ‘the poisoner of all nations, international Jewry.’” I frankly don’t understand how anyone, after seeing those two statements from Hitler himself, at and near his end, can leave any reasonable doubt as to whether David Irving is a liar. This is not the Hitler that he portrays.


Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

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