And so the FOMO/FUD/then-they-cry phase begins. [Hashtag flamey rant incoming]
James Baxter-Derrington, some no-name commentariat across the pond, had enough of the bitcoin price rally. He wrote an angry piece to show all those pesky Bitcoiners who's boss! It's filled with all manner of level-0 Bitcoin FUD: a ranty, stupid take from a precoiner with Bitcoin Derangement Syndrome—Ugh, apan, what else is new?
The Telegraph: "Whine all you want, bitcoin is still worthless"
I would highly recommend not reading it; if you’ve ever come across some stupid objections to bitcoin—outdated, debunked, flat-out incorrect, pathetically wrong etc—you already know what this one says. Plop this piece into legacy media at any point in the last 15 years and it would have “worked.” Here's the recap:
- You can’t pay debts with bitcoin (no?)
- its volatility is bad; it has no value (says who?)
- it has no infrastructure (wait, what?)
- You must have governments to enforce contracts and protect private property, says all the Experts(TM).
Let's quote another few hot-shot credentialed idiots who say that Bitcoin processes fewer transactions than VISA, thus worthless—yup, you got me. Oh, and if everyone uses bitcoin it would require the entire world GDP to process (?!). Also, the BlackRocks and pension funds coming in means nothing to Mr. Baxter-Derrington:
“I could point you to PPI or Enron or Wirecard to suggest that sometimes these institutions get it wrong.”
OK, now that I have you on the ropes with some fewer braincells, on with the juicy stuff.
“Everything changes all the time… Pets.com and Beanie Babies, typewriters and fax machines, tally-sticks and wooden houses in the City of London, the list goes on. I do not doubt that you can make some money on Bitcoin this year. You can probably make a pretty penny for five, maybe 10 years still. I wouldn’t even be surprised if there was money to be made longer than that.”
Bro, freakin' tallies?! Dude comes into my house...
Clean-up:
In the dot-com bubble of the '90s, Pets.com was part-owned by Amazon, currently the fourth-most valuable company in the world, because nobody knows the future and it wasn’t obvious in, like December 1998, that selling books on internet was a good, valuable, world-revolutionary idea while selling pet food on the internet was a bad, bubble, disastrous idea. Also died very fast, like "bubbles" and other such stuff does. 1
Beanie babies I can’t explain, but like other weird and short-term phenomena in financial markets—akin perhaps most recently to GameStop craze or Bed, Bath & Beyond stock drama, etc.—strange things do happen in financial markets. Sometimes for inexplicable reasons.
Looking at his examples it becomes obvious that dude just name-dropped any odd scam or Ponzi his Google search could produce. (Madoff, Enron etc)
Most ironic of all is that tally sticks, which, far from being worthless speculative manias, were clever ways to advance government spending—i.e., sovereign debt.
Now, if dude's out here rallying against governments taking on too much debt, I guess he's more based than I assumed. YES, sir, government borrowing like there’s no tomorrow (esp for frivolous shit) = bad. More likely, he has no idea what he's talking about and hopes his ignorant audience won't call him out on this estupidez either.
...but this is a MONEY column by a financial historian(-ish; credentialism can go fuck itself) so let's dive into that portion of the post.
Tallies Solved a Liquidity Problem for Premodern Governments
Christine Desan, Making Money (2014)
Here are some tally sticks:
Tallies were physical sticks, cleaved down the middle to produce two unique copies of a financial contract. Predigital non-fakeable proof-of-work, if you will.
Far from being an ephemeral, bubble-mania type asset that died three months later, they existed for centuries; versions of them have been found in Ancient Greek and as far away as Uganda.
They’re mostly familiar as a financing mechanism for the English Crown, roughly ~12th C to 18th C.
“In these sticks, which are only stocks, notches show the amount deposited, the name of the lender, the county, the time of year when the money can be repaid, and the year. The stick’s other half contained the same information. When the debt was paid, matching the two halves showed that they ‘tallied, the wood’s unique features and split ensuring high security against forgeries.” (the Science Museum, London 2)
Presumably, why they came up in retard-journo Baxter-Derrington’s google search is their moneyness. Because Exchequer tallies, like modern fiat money, were debt claims on the sovereign and widely recognized as such, they could circulate as payment, be a stand-in for the missing hard currency:
“As tally sticks were a form of contract for an amount of money between a creditor and a debtor, they were also used as a form of money, the same way as coins, to pay wages and buy and sell items circulated between people.” 3
Added bonus in a low-trust, pre-modern society:
"the Exchequer's aim was to ensure the accountability of officials, its own and those in other branches of government, by allocating financial responsibility to individuals rather than institutions." (Richard Cassidy, The Financial History Review (2021)4
You can think of tallies as physical instantiations of a credit card from an age well before any such sophistication was possible: You get paid in bulk at the end of the month (year, really), but have to pay for meat and eggs and, like, firewood every day. It’s a way to align spending and revenue that don’t come in together. That’s pretty convenient in a poor, pre-financial economy, with divisibility and information problems.
Now, sovereigns of the past—not unlike our modern schmucks—obviously went overboard with this; the English crown issued more tallies than it had revenue streams backing them. So the payback line got longer, and longer and longer... If you're issuing a non-interest-bearing, debt that can't/won't be repaid, and that circulate as payment in the economy—tah-daaah, you've made money.
THEY QE'D THE 15TH-CENTURY ECONOMY WITH FUCKING DEBT STICKS.
Yeah, Mr. Baxter-Derrington. Bitcoin has been around for sixteen goddamn years. It's bigger and better than ever. Precoiners with BDS rallying against bitcoin impresse nobody.
And leave my tally sticks the fuck alone.
Hat tip to Andrew Bailey who took apart this sad dude's ramblings (https://twitter.com/resistancemoney/status/1856850827895591288)
That's today's not-so-little money lesson.
Peace,
J