YOUR MONEY

China warns the world of bitcoin

The government of China has put a new twist on the old Chinese parable of the Emperor Who Has No Clothes.

It has become the only ‘honest man’ who tells the world the truth, and hopefully has burst the illusion and con that is bitcoin -- a ‘virtual’ currency first introduced in 2009 to carry on real world transactions - unlike Sim City's Simoleons.

China has prohibited its banks from accepting bitcoin 'money'.

The idea of a single currency that can be used internationally sounds great, and if banks and currency exchange companies with their high fees can be eliminated or reduced, all the better.

That is bitcoin’s appeal.  It’s low, fixed transaction fees – allowing lump sum of millions to be transferred for just fixed penny charges  – is a great lure, and anonymity and quick world wide transfers has made it especially appealing to illegal traffickers and money launderers, evading government eyes and detection.

But bitcoin has, as the Chinese government announced, no ‘guarantor  of last resort’ and no intrinsic value unlike gold or silver.

And to quote Wikipedia, “bitcoin”,

Many have mentioned speculative bubbles in connection with Bitcoin.^[61][62][63] Professor John Quiggin of the University of Queensland has noted that since Bitcoin by design has no intrinsic value, it is "perhaps the finest example of a pure bubble" currently known and "represent[s] the sharpest ever refutation of the efficient-markets hypothesis", but cautions that we have no way to predict when the value of bitcoins will return to zero.^[64]

 

Currently, there are at least 2 ETF funds speculating in bitcoin according to the Financial Post/Reuters as of December 13, 2013 (see http://business.financialpost.com/2013/12/13/bitcoin-fund-raises-65m-after-two-months/)

According to the Globe and Mail (Dec 12, 2013, B11)  a bitcoin was worth just $13 US in January, peaked at $1,200 US in late November and has lost almost 40% since China's December 12, 2013 announcement.

Anyone for Monopoly money?