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The Bitcoin Bubble
… It might seem that Bitcoin is just like a fiat currency issued by governments. Writing in the Wall Street Journal, Jack Hough says precisely that it’s a purely online currency with no intrinsic value; its worth is based solely on the willingness of holders and merchants to accept it in trade. In that respect, it’s not so different from fiat currencies like the dollar or Euro, but whereas governments back such money, Bitcoins lack central control. But this is a misunderstanding of what money does and where it came from. The “fiat” (meaning “let there be”) in “fiat money” reflects the power of governments to command and tax. Because of their power to tax, governments can make money by fiat, simply by declaring their willingness to accept that money in repayment of tax debts.
Historically, money arose from, and in conjunction with, this power. (This point has been made repeatedly over the years, most recently in David Graeber’s controversial Debt: The First 5000 Years, a surprise publishing hit for an anthropologist. )
By contrast, Bitcoin looks more like the “just so” story, commonly told in economics textbooks, in which money arises to simplify what would otherwise be complex and cumbersome barter transactions.
That would be fine if Bitcoin were simply a unit of account, used to keep track of transactions. But all the interest in Bitcoin is in the idea that it is a store of value, one that may be expected to show steady appreciation rather than depreciation. So Bitcoin needs to be evaluated as a financial asset.
Viewed in this way, Bitcoin is perhaps the finest example of a pure bubble. It beats the classic historical example, produced during the 18th century South Sea Bubble of “a company for carrying out an undertaking of great advantage, but nobody to know what it is.” After all, the promoter of this enterprise might, in principle, have had a genuine secret plan. Bitcoin also outmatches Ponzi schemes, which rely on the claim that the issuer is undertaking some kind of financial arbitrage (the original Ponzi scheme was supposed to involve postal orders). The closest parallel is the fictitious dotcom company imagined in Garry Trudeau’s Doonesbury, whose only product was its own stock.
As with any kind of asset used as currency, from gold to tobacco to U.S. dollars, Bitcoin is valuable as long as people are willing to accept it. But in all of these examples, willingness to hold the asset depends on the fact that it has value independent of that willingness. Tobacco can be smoked or chewed, gold can be used to fill teeth or make jewellery, and U.S. dollars can be used to meet obligations to the U.S. government.
This independent value is not fixed and stable. If people give up smoking, or wearing gold jewellery, or if the United States experiences inflation, the external value of these currencies will decline.
But in the case of Bitcoin, there is no source of value whatsoever. The computing power used to mine the Bitcoin is gone once the run has finished and cannot be reused for a more productive purpose. If Bitcoins cease to be accepted in payment for goods and services, their value will be precisely zero.
According to the efficient-markets hypothesis (EMH), which still dominates the analysis of financial markets, this should be impossible. The EMH states that the market value of an asset is equal to the best available estimate of the value of the services or income flows it will generate. In the case of a company stock, this is the discounted value of future earnings. Since Bitcoins do not generate any actual earnings, they must appreciate in value to ensure that people are willing to hold them. But an endless appreciation, with no flow of earnings or liquidation value, is precisely the kind of bubble the EMH says can’t happen […]
Comment by mrajanov, on April 17, 2013 — 5:13am:
This thing called Bitcoins is a non-entity in most practical senses. It is poorly designed and, in any case, even if it were designed soundly it would face serious threats from systemic actors with whom it competes.
Having said that, there are a few inaccuracies and technical errors here—
But in the case of Bitcoin, there is no source of value whatsoever. The computing power used to mine the Bitcoin is gone once the run has finished and cannot be reused for a more productive purpose. If Bitcoins cease to be accepted in payment for goods and services, their value will be precisely zero.
It can be shown that these sentiments are incorrect in that they are expressed in absolute terms. The value of Bitcoins could be zero in the scenario above, but this is not necessarily so. This is because it is a matter of market and social practice rather than economic theory.
For example, even putting aside that gold can be used in fillings, computers, wedding rings… et cetera, it has a conceptually distinct value relating to the special status that the market and society have given it in acting as a store of value, an instument of psychological comfort if you will. There is an implicit guarantee (a poor, but effective, term in this instance) that gold can be sold to someone else at some price in recognition of the uncertanties of a complex economic world and the psychological comfort that is consequently sought. There is no explicit guarantee. Whatsoever. It is simply that society (the “market” in some sense) has given it this role, accepted it, to the point where it will endure for the foreseeable future. It is not efficient — but it is reality. The below sentiments are spot on in that sense (especially in relation to gold once the distractions of tooth fillings and such are removed)—
they represent the sharpest ever refutation of the efficient-markets hypothesis.
If society, the market, were to consider Bitcoins as a better tool for the role (say it’s more compact, transportable, exchangeable, reliable, secure, non-perishable.. whatever attributes may be considered relevant at that time), then it is possible that Bitcoins could take on the role that society has currently bestowed on gold.
Because of Bitcoins’s technical and structural defects this is not likely but it is conceptually possible and therefore the absolutist statements above are inaccurate.
There is no economic reality outside our own thoughts and behaviour. There is no economic system outside the one we create.
At this stage of our evolutionary process, anyway.
Young Mr. Marx
As a student of law in his father’s footsteps, first in Bonn and then in Berlin, the bohemian young Marx was something of a brawler and boozer. He was, however, just about socially respectable enough to marry Jenny von Westphalen, daughter of a distinguished, aristocratic Prussian family. The pairing looked incongruous to some of their friends, with Marx, a hairy, swarthy commoner of suspiciously Semitic provenance, playing the Beast to Jenny’s Teutonic Beauty. He was always rather foolishly proud of his wife’s high-class origins, though Sperber suspects that the Westphalens’ nobility was somewhat specious. That Jenny was four years older was another scandalous feature of the marriage. As Sperber comments, the union “violated accepted norms of masculinity and of relations between the sexes.” Being younger than your wife was thought at the time to be shamefully emasculating, rather like being less educated than your valet. Judging from an enigmatic letter sent by Jenny to Karl, the couple also seem to have engaged in premarital sex, which was common enough then among the rural and urban masses but “virtually inconceivable behavior for the very proper daughter of a high Prussian state official from a straitlaced provincial city.” Nonconformism clearly began at home, as it did with Marx’s later collaborator Friedrich Engels, who took a working-class woman as his mistress. (The fact that she was of Irish origin suggests a marvelously convenient combination of class sympathies and anticolonialist ones.)
The young Marx began his career by securing a post at a radical newspaper in Germany. Journalism was to provide him for the rest of his days with a suitable alternative to academia on the one hand and street-fighting militancy on the other. Still, it took some time for this Young Hegelian to become a fully paid-up Marxist. Five years before he wrote the Communist Manifesto, he could be found “advocating the use of the army to suppress a communist workers’ uprising.” Communist ideas, he wrote, were genuinely dangerous and could “defeat our intelligence, conquer our sentiments.” It is as though Darwin had voiced his belief in Adam and Eve on the very brink of publishing On the Origin of Species. Having become a Marxist, Marx then famously denied that he was one.
For most of Marx’s life, much of his and Jenny’s time was devoted to keeping irate creditors from the door. He once commented that nobody had ever written so much about money while possessing so little. His poverty, to be sure, was of a suitably genteel kind. As Sperber notes, “except on one disastrous occasion, he never proposed that Jenny keep house for him.” Besides, there was always a slatternly servant or two to be hired. The couple could even rustle up the odd governess for their growing brood. But Marx’s knowledge of material scarcity was a good deal more than theoretical. It was a matter of when the butcher was to be paid, not just of the contradictions of capitalism. Three of his children died at birth or in infancy, in tiny apartments and slum neighborhoods. When his daughter Franziska joined this grim company, we are told he “had to spend the day of [her] funeral running around, seeking money to pay the undertaker.” It was capitalism that finally rode to his financial rescue in the shape of Engels, philandering son of a Manchester factory owner, who in the days before registered letters existed would cut banknotes in half and send them to his needy colleague in separate envelopes. During his time in England, Marx was also kept afloat by his articles for the New York Tribune, then the leading newspaper in the United States.
Luigi Ghirri's 'Kodachrome'
Luigi Ghirri, Versailles, 1977, vintage cibachrome, 11 × 8 3/8”.
Luigi Ghirri was fascinated by the implications of the photograph’s two-dimensionality—its capacity for narrowness and opacity. None of the twenty-five vintage photographs shown here (all part of Ghirri’s self-published Kodachrome, 1978) contain much that could be called reportage, or even a “decisive moment.” Flatness is the focus. In Ile Rousse, 1976, a coastline dotted with sailboats is bisected by a wooden column streaked with shadows captive from another color space. This formal arrangement causes perspective to seem ambiguous, creating two foreign senses of a place—mundane and faintly surreal—that float over each other. Ghirri had a special ability to collapse the hierarchal distinction between subjects: As spatial relation dissolves, so does its perceived importance. Objects, people, and figures of light coexist in a space that lacks foreground or background, gently unseating the viewer’s sense that the photographs depict some actual space. The frequent appearance of pictures within his pictures—cardboard figures, painted logos, bits of postcards—deflates the distance between real and fake.
The press release describes Ghirri’s photos as “deadpan,” and “reflecting a dry wit”—but this can be misleading. It’s true that they are often wry, such as Egmond Am Zee, 1977 (from the complete series, not on view here), which shows a blue sky upstaged by a flag bearing the logo of Coca-Cola. But more often than not, his works are coolly disorienting—in Riva di Tures, 1977, a jet streak forms the top border of a pyramid defined by the two mountain peaks below it, with the enclosed sky’s outline implying another peak. But the show does end with a self-aware one-liner: Chartres, 1977, is divided between a window with a half-unspooled bamboo shade and a wall on which there is painted a 35-mm canister partly pulled out, which reads FILM.
'Paperwork' at Andrew Roth
William S. Burroughs and Brion Gysin, Untitled (scrapbook A), 1964–70,
mixed media, 12 1/4 × 7 3/4”.
Art historian Alex Kitnick muses that scrapbooks, like sketchbooks, act as “research and development” for artists: Their pages show a variety of approaches to dealing with a framing device and each demonstrate a range of modes and energies. These thoughts are part of his essay in Paperwork, the catalogue accompanying this exhibition—cocurated by Kitnick and Andrew Roth—which features a breadth of journals and scrapbooks made by an impressive collection of artists, including Brigid Berlin, Richard Prince, and Monika Baer among twenty-some others. Here, twelve tidy vitrines house an unruly array of overlapping binders, notebooks, and otherwise ragtag accumulations of printed matter. Some works take on a diary role, creating an internal framework for self-examination and reconfiguration, like Isa Genzken’s I Love New York, Crazy City, 1996-97, which marries diary to ledger with photos, faxes, clippings, and correspondence. In the work of Ray Johnson and Brian Buczak, this internal life made physical becomes a currency between artists: Twenty pages of Johnson’ s Untitled, 1941, for example, are transformed by Buczak some thirty years later, creating a collection of campy in-jokes and ironic juxtapositions.
See also the untitled books compiled by William S. Burroughs and Brion Gysin from 1964 to 1977, which are chaotic and masterful, like a mixed media Ulysses: a cacophony of voices, references, and appropriations that huddle together in imperfect comfort. Others, such as Gerhard Richter’s open-ended “Atlas” project and Geoffrey Hendricks’s untitled book finished in 2012, record their graphic fascinations into iterations rather than seeking a synthesis defined by the boundaries of the page. In Richter’s case, samples of landscape or group portrait photography are gridded together as if prototyping their relative effects. And, if books intrinsically rebel at their display in a gallery, frozen under glass, a four hour video, Scarphagia, 2013, by Karin Schneider and Louise Ward defies this: Projected on a wall, a pair of hands anonymously toil through each and every volume on display, providing an alternative, if not liberating, viewing experience.
The predilections of twins
The verdict that genes matter, but so does environment, seems obvious. That might, as Segal argues, be because of our increasing acceptance of genetic explanations of behaviour – brought about in no small part by Mistra itself – or it might be the effect of attempting to weigh the contributions of two already overdetermined quantities, genetics and environment, to another overdetermined quantity, general behaviour. Indeed, one comes away from Born Together – Reared Apart with the impression that the flexibility of genes as go-to causal mechanisms for almost any particular individual behaviour impeaches rather than reinforces their explanatory power. With a little creativity, a just-so story can link seemingly any behaviour to genes, provided one doesn’t have to specify the genes in question, or think too closely about the behaviour. For instance, Segal presents the case of two identical twins, both ‘extremely talented in mathematics’. One of them, raised in China with little education, found work as a cashier; the other, raised in the US, ‘obtained an advanced science degree’. Segal treats this as evidence of identical genes expressing themselves in the face of different environmental circumstances, but the explanation raises more questions than it answers. Does one use the same ‘quantitative skills’ as a cashier and as a scientist? What, precisely, are the cognitive processes involved in ‘mathematics’? For that matter, what conditions (meritocratic, bureaucratic, personal etc) affect job selection in China as against the US, and how is the expression of genes for mathematical ability affected by them? From this and other examples of ostensibly genetically driven twin behaviour, one is left with the impression that we wouldn’t be much worse off assigning personal differences in behaviour to the levels of cheerfulness factor in germ plasm.
There is further cause for concern. Mistra’s inventories encoded a surprising array of complex, highly individuated behaviours by means of standardised, uni-dimensional measures. For instance, fascinating as it is to learn that a vague, complicated and subjective trait such as ‘conservatism’ is genetic in origin, it’s even more interesting to learn that there’s a psychological metric – the ‘Wilson Patterson Conservatism Scale’ – that Mistra researchers used to measure it. But what, precisely, is it that the conservatism scale measures, and why should we take Wilson and Patterson’s version of conservatism as the official definition? The psychologist Barrie Stacey wrote in 1978 that the W-P conservatism scale appears to have ‘three major components – blimpish religiosity, racialism and a rather prurient sexuality’. These, in his view, ‘add up to a greatly constricted view of conservatism’. Whose conservatism is the one reflected in our genes: Wilson and Patterson’s? Stacey’s? Both? Neither? Segal’s circular explanation, that the conservatism scale captured a subject’s conservatism, does little to clarify the matter. The same can be said of numerous other Mistra measures, including religiosity, creativity, leisure time activity, intelligence and mathematical skill: these are not natural kinds, but social kinds – social values which we identify by names (like ‘conservatism’) for convenience in colloquial conversation. Segal dismisses such concerns with a terse note that the ‘intelligence tests, personality inventories and most of the interest questionnaires that were administered had been used widely in prior research. The reliability and validity of these instruments had been well established.’ Perhaps, but when what’s at stake is the cause of human behaviour, and therefore the extent of biological influence on such social issues as education reform, economic inequality, unemployment, crime and sexuality, one could wish for closer scrutiny of the means used to demonstrate that genes ‘explain’ behaviour.
Vauxhall & We
Private pleasure gardens attached to noble houses and royal courts have a long history, but Vauxhall Gardens, which opened on the South Bank of the Thames in 1661, might well have been the first commercial pleasure garden in Europe. The business flourished for two centuries, finally closing in 1859. Vauxhall’s special status, Alan Borg and David Coke argue in this hefty antiquarian tome, lies in its originality as a commercial venture, the changes it triggered in the social and cultural life of London, the extreme heterogeneity of the mingling crowds, the mass audience the gardens gave to modern music and popular song, and the revolution it triggered in mass catering and outdoor lighting. In the architecture of the garden buildings, the design of the interiors and the painting and sculpture it showcased, Vauxhall was, they claim, ‘the first true public gallery of modern British art’. It was also the site of patriotic pageants and jubilees, offering damp, chilly Albion its version of the carnivalesque: ‘anarchic, tumultuous, youthful, thrilling, kaleidoscopic and, for most people, totally foreign to their day to day lives’. Venice-on-Thames.
The royal parks, such as St James’s and Hyde Park, began opening to the public in the 17th century, while places like the Bear Gardens south of the river offered food and music, as well as bear-baiting, to more unruly customers. But the observant would have noticed something rather different about the Spring Gardens, as they were originally known, at Vauxhall. John Evelyn, an early visitor, described the site in July 1661 as ‘a pretty contriv’d plantation’. The trees there were said to be a hundred years old in 1661. The gardens offered ‘a universal withdrawing room for the city’, as Borg and Coke put it, the impression of separateness emphasised by the fact that until Westminster Bridge opened in 1750 most visitors got there by boat. The site was carefully chosen: the South Bank had a long history as a site of commercial entertainments; the river was the chief thoroughfare in the city; and Vauxhall was conveniently close to the market gardens of South London and safe from the stink of the city. Pepys mentioned Vauxhall in his diary 23 times between 1662 and 1668. He wrote about the arrival by river, the expensive food, the nightingales singing, the acrobats and fiddlers and the entertainers who made animal sounds, the arbours for romance and the drunken groups of men pestering pretty women.
The sexual opportunities associated with the gardens were well established by the early 18th century. Addison and Steele had their loveable curmudgeon Sir Roger de Coverley harrumph that he would be a better customer if Vauxhall offered more nightingales and fewer strumpets. A Virginian gentleman called William Byrd was matter of fact about the amenities in June 1718:
We went to Spring Gardens where we picked up two women and carried them into the arbour and ate some cold veal and about 10 o’clock we carried them to the bagnio, where we bathed and lay with them all night and I roger’d mine twice and slept pretty well, but neglected my prayers.
The lusts of the regime’s satraps were also a matter of public knowledge. During the disastrous military campaign in Greece in the winter of 1940-41, Mussolini’s son-in-law Galeazzo Ciano installed himself and his entourage in a large hotel in Bari, where twenty or more girls were brought in by government officials every week for orgies in which the participants divided into teams and squirted water from soda-siphons at one another’s genitals while hacking at their clothes with scissors. Just to make sure everyone knew what was going on, the windows were left wide open.
Neutral monism
Thomas Nagel [in Mind and Cosmos] begins with the clearest of materialism’s problems: the great difficulty it has explaining the subjective character of experience, the feel of our mental lives: the feel of seeing colours and tasting wine, the feel of thought itself. Despite all the careful work that has been done in this area over the past fifty years, for Nagel the problem is as recalcitrant as ever. Materialism does indeed struggle to give a good explanation of these features of our minds. However, if materialism were somehow true, it would seem not to be true. The view from inside a conscious physical system would be distinctive in ways that would make it hard to understand from a third-person perspective: having an experience is very different from describing that experience, regardless of what the system having the experience is made of.
This holds back some arguments against materialism, but problems remain. In response to them, Nagel outlines a form of ‘neutral monism’. Neutral monism has for some time been a fringe character in debates about the mind-body problem. It was developed in different forms by eminent figures in early 20th-century philosophy, including Russell and Dewey, but then faded. A neutral monist argues that the mental and the physical are both manifestations of something more basic. It is a mistake, according to this view, to try to explain mind in terms of matter, or vice versa (hence the term ‘neutral’). But it is also a mistake to think there are two fundamental ingredients of the world (as a dualist does), rather than one.
The unpopularity of the view notwithstanding, Nagel is right that neutral monism is the best alternative to materialism. He thinks we have a clear idea of what the mental and physical are, that we can see neither can be reduced to the other, and that the only way to make sense of the situation is to say that all of nature, at bottom, contains a bit of both. A different and to my mind more promising version of the view has a more critical flavour. It holds that standard ways of thinking about the mind-body problem are dependent on crude conceptions of both the mental and the physical. We think we have a clear and definite idea of what a ‘purely physical’ or ‘purely mental’ process is like, but our grasp of both is so poor that we do a bad job of thinking about how they might be related, and see a gulf that isn’t really there. Nature gives rise to what appear to us as ‘physical’ processes and ‘mental’ processes, but both arise from something that fits into neither of these crude categories. Nagel’s neutral monism, however, is more of the ‘glue the two together’ variety than this second, critical strain. He thinks we can see, even in advance of changes that may take place in physics, that ‘something must be added to the physical conception of the natural order.’
Owp!
First published in 1968, Judith Kerr’s The Tiger Who Came to Tea continues to be one of the best selling and best loved children’s books in the UK. It was an instant hit with my son too when we bought it for him at around the age of eighteen months, and seems to be set to continue to be one of his favourites for some time to come. The secret behind having remained a hit over forty years after its publication date, despite more than a couple of dated elements—some of which, such as the reference to ‘Daddy’s beer’, rather amusing to refer to out loud—has to be the charming and surreal matter-of-factness and nonchalance of how the girl and the mother in the story let a tiger in to have tea with them in their kitchen. The sudden appearance of this ‘big, furry, stripey tiger’ in an entirely routine mother-and-daughter scene is portrayed as exciting and fun, but at the same time, as something absolutely natural and fine …
The story
Sophie and her mother are having their afternoon tea in the kitchen when the doorbell rings. They wonder who it might be, but cannot think of who, so go to the door and see. When Sophie opens the door she finds a tiger who politely invites himself in: “Excuse me, but I’m very hungry. Do you think I could have tea with you?”. Sophie’s mother lets him in and offers him a sandwich. The tiger eats all the sandwiches on the plate in one big mouthful. ‘Owp!’, and, still looking hungry, proceeds to do the same with all the buns, all the biscuits, all the cake, washing it down with all the milk in the jug and all the tea in the teapot. He then looks round for more, until he eats every last bit of food and every last bit of liquid in the house, including all the water in the drains. He then, also very politely, says “Thank you for my nice tea. I think I’d better go now”, and leaves. When Sophie’s Daddy gets back, they tell him all about the tiger and what happened and he suggests they go out for a meal. So they go out in the dark, with ‘all the street lamps lit’ and eat in a cafe.
Exclamation marks and colons
From James Thurber’s The Ladies’ and Gentlemen’s Guide to Modern English Usage,
The New Yorker 1931.
It is my contention that a colon could almost always be used in place of an exclamation point. Its use as a symbol of passionate expression is not, I’ll grant you, well known, and yet it lends itself to finer shadings of excitement than the exclamation mark, which after all is a hybrid composed, on most typewriters, by striking, successively, the period, the back-spacer, and the apostrophe. This process of synthesis usually takes from six to eight seconds and is very frequently complicated by accidentally striking the upper-case shift-lock key, thus setting the machine so that it writes solely in capitals. In this way a person, after making his exclamation mark, will sometimes go on to write six or eight sentences in capital letters without realizing he is doing it. He then either has to go back over those sentences and draw a diagonal line across each letter — the proofreader’s sign for “restore to lower case” — or else, if he lets the capitalized words stand, he must enclose a separate note explaining what happened. All this takes time, and diverts a writer’s mind from what he was trying to say. Furthermore, by following his exclamation mark with several lines of capitalized sentences, screaming and bawling across the page, he has made the exclamation mark seem ridiculous and ineffective. The best way to avoid all these complications is to use a pen or pencil. This is, however, the era of the typewriter — even love letters are written on typewriters. Thus it will be helpful to learn that the colon, which is typed by striking only one key, can be employed in place of the exclamation mark in almost any given sentence where the emotion one wishes to express is of an amatory nature.
Take the sentence “You are wonderful!” That’s trite, and it’s made triter by the exclamation point, but if one writes it thus: “You are: wonderful,” it’s certainly not trite and it has a richness that the other hadn’t or hasn’t — “hadn’t” is better, I guess. Nothing so closely resembles the catch in the voice of the lover as that very colon. Instead of shouting the word “wonderful,” as the exclamation point does, it forces a choking pause before that word, thus giving an effect of tense, nervous endearment, which is certainly what the writer is after. Of course whether he should be after that effect, no matter how the sentence is punctuated, is a separate problem.
