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Mike Shedlock

Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. He operates the blog MISH'S Global Economic Trend Analysis and believes in the Austrian School of economics.

Bitcoin vs Gold: Peter Schiff vs Max Keiser – Who is Right? Bitcoins the New Beaver Pelts?

9 days ago

A major debate topic came up between Max Keiser and Peter Schiff at the Freedom Fest conference on July 19-22 in Las Vegas.: Bitcoin vs Gold.

Max Keiser is a huge proponent of Bitcoin. Peter Schiff says “These digital currencies might make fiat currencies look good. That’s how bad they are.”

The video was well produced, thanks to Stacy Hebert. It’s well worth a play in entirety.

Bitcoins the New Beaver Pelts

As noted in my clip, I think Schiff is on the right side of the debate. This is my take:

  1. Bitcoins are the new beaver pelts of monetary transactions. For thousands of years, when available by free choice, gold has always been the currency of demand. Things like salt, cigarettes, beaver pelts, and recently Bitcoin, come and go.
  2. The scarcity of gold is real. The scarcity of Bitcoin is artificial. It depends on trust that a human-based promise to mine more coins will be limited.
  3. In a currency crisis, liquidity crunch, or stock market collapse, where would you rather be? If you choose Bitcoin over gold, you are not thinking clearly. You are dreaming.
  4. Blockchain does not scale. Imagine the entire history of every transaction of any size, any place in the world, recorded on a distributed network.
  5. Despite the hype, no one would use Bitcoin to buy a candy bar. or even a meal at McDonald’s. One might easily do that with Bitgold. Transaction costs are the difference.
  6. Absurd proclamations and theories about the value of Bitcoin are now commonplace. This is typical of any bubble.

Transaction Fees

In regards to point number 5, Morgan Stanley says ‘Bitcoin acceptance is virtually zero and shrinking’

According to the bank, last year Bitcoin was accepted at five of the top 500 online merchants. Today, only three of the top 500 merchants accept bitcoin as a form of payment.

“The disparity between virtually no merchant acceptance and Bitcoin’s rapid appreciation is striking,” the analysts wrote.

In contrast, Bitgold is accepted at any place that accepts a debit card.

Average Bitcoin Transaction Fee 

Please note the Average Bitcoin transaction fee is now above five dollars. 80% of the world population lives on less than $10 a day. So much for “banking the unbanked.”

Bitcoin to $1,000,000!

On June 8, I commented Jim Cramer Goes Batty “Bitcoin May Hit $1,000,000”: Act Now Before It’s Too Late!

Cramer’s rationale was rather amusing.

“European banks are frantically trying to buy them so they can pay off ransomware. It’s a short-term way to be able to deal with cybersecurity. It is the way to pay off the bad guys,” Cramer said on “Squawk on the Street.”

“When you get hit and you’re not sure how to do bitcoin, these cyberattackers have customer service desks,” Cramer said.

I replied:

Frantically “Trying” to Buy Bitcoins?!

The idea that banks need to “try” to buy Bitcoins is absurd.

Do. Or do not. There is no try. [Yoda]

New Absurd Theories

Also in regard to point number 6, we are now told Bitcoin & Ethereum Can Never Be In A Bubble (No, really: digital bubbles are impossible)

The author’s rationale is based on his own observations of a theory proposed by George Soros.

This reminds me of the dot-com “Gorilla Game” theory that stated “gorillas” like Cisco (CSCO) could never be overpriced. No price was too high for a “gorilla”.

It also reminds me of absurd click rate measures used to justify stocks whose value eventually went to zero.

Rating the Debate

Schiff went a bit off track at times in the debate, primarily in regards to US dollar bashing.

The Eurozone banking system is insolvent. Both the Euro and the Yen are worse currencies than the dollar. Schiff has to know that, but he just cannot stop dollar bashing.

While it’s possible the dollar breaks the previous low, at least Schiff was not preaching hyperinflation.

That said, I believe Shiff has the dollar direction right for now. I don’t hold grudges or let past differences sway my current take.

This puts me in agreement or at least near agreement with the key points made by Schiff in his interview with Max Keiser.


Both Schiff and I have an economic interest in Bitgold. I expect his interest is many times the magnitude of my ongoing advertising relationship.

Mike “Mish” Shedlock