by Jeff Berwick, The Dollar Vigilante:
I’m officially calling this International Bitcoin Week. Because it seems almost everyone has come out with their opinion on it.
In 2014, when asked about bitcoin, legendary investor Warren Buffett said, “Stay away from it. It’s a mirage, basically.”
Back then he said,
“It’s a method of transmitting money. It’s a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money? Are money orders? You can transmit money by money orders. People do it. I hope bitcoin becomes a better way of doing it, but you can replicate it a bunch of different ways and it will be. The idea that it has some huge intrinsic value is just a joke in my view.”
No, Warren, “checks” aren’t worth a whole lot of money. Banks are though.
Poor, senile old man.
Now, in 2017, the bitcoin “mirage” apparently isn’t a mirage anymore after it has topped the billionaires net-worth. According to Warren Buffett, it’s a bubble and “You can’t value bitcoin because it’s not a value-producing asset.”
This is the same criticism that “value investors” like Buffett or supporters of the fractional reserve banking model like JP Morgan’s David Kelly often levy against gold. It has no intrinsic value (nothing does), and “does not provide any cash flow, a right to future earnings,” and so on.
Which, when it comes to traditional equity or debt, claims against assets and capital help value investors estimate present values using the discounted cashflow model or PE multiple.
It could be noted that this is not really an intrinsic value as such, and TDV’s Senior Analyst, Ed Bugos, has written an extensive critique of the value investing approach in his book “Defensive Investing: A Beginner’s Guide and Primer To Investing Within the Context Of Business Cycles and Sectors” (which is available for free to TDV subscribers), and deals with the effects of the Fed on investing post-1929.
Buffett ends a few weeks where Jamie Demon, Ajay Banga and the Prince of Saudi Arabia have attacked bitcoin.
Notice what they all have in common? They are beholden to the fasco-communist crony rigged market system, and like to echo the establishment’s narratives, often without thinking. They don’t understand money, or economics, the causes of the business cycle, or even the source of innovation itself.
And, yes, Warren Buffett may be one of the best value investors of all-time, but he is completely ignorant on money.
Interestingly, his father did. But Warren was a spoiled rich kid who didn’t even take notice when he had one of the smartest men in the world when it came to understanding capitalism and money, Murray Rothbard, at the dinner table as a child.
Warren hated economics, unlike his gold loving and much smarter father. Warren’s hate for gold likely stemmed from a hatred of his father.
But now this hate has broadened to bitcoin, calling it a bubble.
As a TDV reader, you know bubbles are a monetary phenomenon. They are caused by the creation of money (unbacked fiat) out of thin air, manufactured by the fractional reserve banking system, supported by government and central banking legislation, and legal tender laws forcing merchants to accept a currency they wouldn’t accept otherwise if they were not forced after gold was outlawed as money in the USSA in the 1930s.
This entire apparatus is necessary to support the banking system because the model is bankrupt and fraudulent. This is the system that Buffett and Demon support. And the reason that Buffett hasn’t had a great track record in calling tops and other bubbles is because he doesn’t get the difference between the thing called an “asset” and the thing called “money.”
If he listened at the dinner table more often he might have realized that money is an entirely different kind of economic good. It is not an asset. The problem of valuing gold or bitcoin cannot come down to measuring future earnings power or extrapolating yields because they are not equity or debt. They are commodity-assets of a particular kind: monetary.
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