Comments on: Ponzi Argumentation: Gary North’s Rhetorical Mania Property - Prosperity - Peace Sat, 09 May 2015 08:06:55 +0000 hourly 1 By: Ladislav Wed, 12 Feb 2014 00:58:32 +0000 Mr. Mather, you wrote: ‘condescendingly calls me … a “space cadet” (I will let readers judge)’
Well, being asked to judge, I am looking at a photograph of a skinny, silver-haired, bespectacled, good-looking smiling man. I feel quite amused reading the text next to the photograph, however, I would call the “space cadet” characterization close but no cigar.

By: Ladislav Tue, 11 Feb 2014 15:15:45 +0000 That is a $1e6 question. Thanks, Mr. Mather, I enjoyed your writing. What a pity you are not an economist, but, in that case, having a Nobel prize would be a handicap, I think 😉

By: Jörg Janssen Thu, 12 Dec 2013 08:07:43 +0000 Hello Mr Ellis, you wrote:

I do want to ask what I think is a valid question (…). That is the question of a personal attack. In your critique you mentioned the following quote from Mr Mathers:

“Gary North is no stranger to predictions. Perhaps his most famous one is his widely publicized prediction that Y2K would end civilization as we know it”

So pointing out that Gary North made a predictions that the tech infrastructure of the entire world would go down as of 12:01 am, 2000 AD is somehow making it personal? The prediction turned out to be wrong. That is a fact.

IIRC a personal attack is an attack on the person making an argument rather than on the merits of the argument itself. To illustrate: If one million Keynesians randomly hacked away on typewriters for an infinite amount of time, one of them would eventually come up with the complete works of Mises and another with Mr North’s article. The fact that they are Keynesians would not invalidate the arguments made neither in the complete works nor in the article.

Mather’s attack on North IMHO is particularly disingenuous: Mather asks us to disregard North’s point because thirteen years ago, North had been wrong. Do I need to spell out the problem with that attack?

However, for the sake of the argument I shall assume that you are correct and Mather did indeed attack North argument rather than his person. The topic under discussion is bitcoin’s future. In Mather’s own words, North’s argument goes as follows:

Because it’s been volatile, (North) reasons, it’s not being used for market exchange, and therefore can never be currency. And because it can never be currency, he concludes, it is worthless and destined to collapse.

Could you help me understand how pointing out Mr North having been wrong in the past adresses the point that bitcoin’s volatility precludes its general acceptance as currency?

By: Michael Ellis Wed, 11 Dec 2013 19:28:13 +0000 I will not do a point by point critique of this rather long and pointless defense of Gary North. However, I do want to ask what I think is a valid question and one that has been mentioned quite a few time by both Gary and his defenders. That is the question of a personal attack. In your critique you mentioned the following quote from Mr Mathers:

“Gary North is no stranger to predictions. Perhaps his most famous one is his widely publicized prediction that Y2K would end civilization as we know it”

And rather then point out HOW this is “getting personal” you just use the same kind of rhetorical tactics the Mr North uses. You in fact just ask “What do you think you did here if not get personal?”
So pointing out that Gary North made a predictions that the tech infrastructure of the entire world would go down as of 12:01 am, 2000 AD is somehow making it personal? The prediction turned out to be wrong. That is a fact. Furthermore, Mr. Mathers doesn’t make any judgments about the prediction itself, he merely mentions it because it was a prediction that Mr. North spread far and wide in the media and it is possibly the prediction that he is most associated with. Similarly, Mr. Norths predictions about Bitcoin are based on assumptions and arguments that are based more on his philosophical outlook than by the actual facts of what bitcoin is or isn’t.
So how about you explain your first critique. How is mentioning that Gary North made a such a prediction somehow making it personal or a Mr. North characterized it “A personal attack”? Mr Norths entire article about the imminent failure of bitcoin as a currency is also a prediction, so I would assume that it would be appropriate to at least mention one of his most famous predictions that turned out to to be unfounded?

The rest of your defense of Mr. North and your criticisms of Mr. Mathers rebuttal are equally rhetorical and lack the specificity necessary for a valid logical critique.

By: Paul Edwards Wed, 11 Dec 2013 02:07:45 +0000 Jörg+Janssen:

Well done. Your defense of North and his take on bitcoin won’t be popular, but nevertheless, your comments strike me as accurate and well reasoned, and based in a solid understanding of the Menger/Mises understanding of money.


By: Jörg+Janssen Tue, 10 Dec 2013 16:29:05 +0000 Mr mather, you wrote:

To summarize, North frames my article as a personal attack on him rather than a critique of his Bitcoin arguments.

I quote from your previous article:

Gary North is no stranger to predictions. Perhaps his most famous one is his widely publicized prediction that Y2K would end civilization as we know it. (…) North’s article is riddled with false premises and faulty logic demonstrating that he does not understand Bitcoin. (…) North is widely recognized as an expert on Austrian economics, and I make no claim to the contrary. North purports to base his critique of Bitcoin on Austrian economic theory. However, his arguments are so weak that he makes Austrian economics look bad (…) North was spectacularly wrong about his technological prediction that Y2K would be the downfall of civilization. Nobody knows if his prediction that Bitcoin is destined for worthlessness will come to pass. But if it does, the cause of Bitcoin’s downfall won’t be because of the empty arguments North has made against it.

What do you think you did there, if not getting personal? You continue:

To North’s credit, he starts off by making a large concession to my critique. He drops the Ponzi scheme claim and titles his response, “Digital Tulips: The Bitcoin Mania.”

This is incorrect. As Mr North pointed out in his reply, he had defined his use of the term “Ponzi” in his original article: The creators and early adopters promise future gains and siphon off the incoming money. The promise however will not be fulfilled. You referred to the Wikipedia definition instead and by trying to show how Bitcoin doesn’t conform to it – as opposed to show that it didn’t conform to Mr North’s – completely missed the point. Mr North did not drop his claim that Bitcoin is a Ponzi scheme by his definition, but accommodated your insistance on semantics. Nor is this a large concession and you are not winning ‘debate bitcoins’ by pointing it out.

He devotes the introduction to reframing the debate by giving historical context about tulip mania.

That is not reframing the debate. You may have missed it, but he used your insistence on semantics to choose a well-known historical analogy and illustrate his previous claim – and making you look none the better for it. You carry on:

North from the outset attempts to frame this debate about Bitcoin as a personal attack on him. (…) I issued no personal attacks against North, and I have no need to do so.

I think this is something we can judge for ourselves, can’t we? You continue:

North continues: “He dismisses me as if I am an economic ignoramus.” If I thought North an economic ignoramus, I would not have written the critique in the first place.

Then why did you originally write the following:

This article attempts to rectify this unfortunate situation by calling out the faults in North’s arguments and showing how his arguments diverge from Austrian economics. (…) Nothing is valuable for its own sake. All value is assigned. This is Subjective Theory of Value 101. North doubtless knows this, but it appears he’s attempting to imply gold and silver possess some sort of intrinsic value.

Then you decide to pronounce the following:

Anyone who wishes to show that a good is a Ponzi scheme must demonstrate how it differs from a market network effect good. As the Austrian economist Karl Menger argued, money itself replaced non-money as a market network effect good.

Carl Menger did nothing of the sort, as had been pointed out to you. I shall skip over the next paragraphs, as they just contain bitter complaints about Mr north not taking you as seriously as you deem yourself worth. The first of his points you address is the following:

North says the heart of his article is that “fiat money is ‘spoken’ into existence. It is not money developed over centuries in market transactions.” He then equates Bitcoin to fiat money (…) This is blurry language that results in blurry thinking. Fiat money’s key distinguishing characteristic is that it is mandated for use by fiat. By state decree it must be accepted as money. Bitcoin is not issued by fiat, and it is not used by fiat.

Again Mr North defines his term, in this case ‘fiat'; and again you redefine it and attack his choice of words while utterly missing the point. And having accused him of ‘blurry language’ you go on and equate ‘fiat’ with ‘state decree’. Next you claim:

Further, some fiat money in the past has been commodity backed and fully redeemable.

You know, there are certain people, otherwise known as economists, who would find the terms ‘fiat’ and ‘commodity backed and fully redeemable’ mutually exclusive. But next comes an argument that is to the point:

The fact that Bitcoin hasn’t “developed over centuries in market transactions” is simply not the crux of what determines whether or not it is a currency. People’s demand to use it as a currency is the crux of whether or not it’s a currency.

And as Mr North and before him Carl Menger had argued, the first (developed over centuries in market transactions) is a strong point for the second (people’s demand to use it as a currency). Bitcoin fails on the first point. That some transactions have been completed using Bitcoin is little proof that it will be widely regarded as useful.

It’s bizarre that North readily says that the US dollar is money, as if the fact that it used to have a commodity backing is the reason it is valued now. Most people today don’t know any monetary history at all, and they give no thought whatsoever about whether dollars (or any other fiat money) is commodity backed or not.

You misrepresent Mr North’s point. He points out that the Dollar is being used as money because it was successfully used so in the past, not because everyone remembers that at one time it had a commodity backing. Bitcoin is very little being used as money; given its volatility, which I see you do not dispute, this is unlikely to change.

North raises no objections to the other fiat currencies I mentioned as being money either, some of which have short histories and no commodity roots.

Of course he doesn’t, because it would be completely beside the point: Bitcoin was rising in price, thus attracting buyers. But it rose without any fundamentals explaining its value. In fact, its volatility precludes its usefulness as a stable store of value and thus a useful medium of exchange. But being useful medium of exchange is exactly the promise that Bitcoin makes; thus, in the long the value of Bitcoin can only go in one direction.

North does not refute my point that Bitcoin is not made “out of nothing.”

And why should he enter a semantic argument? It would do nothing to further his point.

North makes the surprising claim that fiat currencies are stable: “My point is this: the volatility of Bitcoins’ price is an indication of why they will not replace central bank fiat currencies, which are easily used in trade, and which are — so far — stable in purchasing power.”

Again you are missing the point: Even if the dollar is slowly losing value, it is still less volatile than Bitcoin and thus better suited as currency.

North categorically ignores the numerous fiat currencies around the world which have imploded in his lifetime.

Just because many government-mandated fiat currencies imploded, a free-market fiat currency does not necessarily have to be stable. In fact, Bitcoin isn’t. However, when you concede this, you again miss the point:

Bitcoin has been more volatile than US dollars, as I’ve noted, but it doesn’t mean that fiat currencies are stable. It also doesn’t mean Bitcoin has to be more stable than the US dollar to serve as a currency.

As long as Bitcoin isn’t more stable than the US dollar, most people would find it less useful as a currency instead of the US dollar.

North is also not giving a fair account about ease of use in trade compared to Bitcoin.

And why should he? His argument is not from ease of use, but from stability of value.

North continues, “The market has determined that the dollar is money. It has not determined that Bitcoins are money.” Governments determine what is money by fiat, and the dollar is no exception. (…) North wants to make it seem like the choice is between the US dollar or Bitcoin, period. North ignores the fact that Bitcoin is international, and its use is not by fiat.

Coming from someone who banks internationally, I find this statement surprising. Billions of people perform transactions in dollars outside the domain of the US government. There are whole countries where people avoid their national currency in favour of the dollar and there are whole global markets that use the dollar for their transactions. This is what Bitcoin must compete against. To do that, it must win the confidence of Billions. A value development that looks like an asset in a bubble does not inspire confidence.

(North) wrote in his original article, “Something that was valuable for its own sake, most likely gold or silver….” This statement implies gold and silver have intrinsic value, but he takes offense that I call him on it. He may have written a dozen books in the past on the subjective theory of value, but that is irrelevant to what he wrote in his article.

No. You choose to interpret the statement that way. It was clear from the context what he meant: Assets like gold and silver have other uses than a medium of exchange, but Bitcoin hasn’t.

It would have been constructive to simply say his choice of words is not what he meant and move on. Yet he says my criticism of him saying gold and silver are valuable for their own sake is an “attack on him” and “rhetoric” with “no supporting logic.”

And he is right: By twisting his words and painting him as ignorant on economic theory you ARE attacking him – as opposed to attacking his arguments. And there IS no logic being used but merely words are being played rather than a valid point being made. The very same goes on your insistence of using the term “network effects”; to your insistence on the Wikipedia definition of a Ponzi scheme: It does nothing to address Mr North’s point.

I maintain that Bitcoin is being used in market exchanges. He disagrees: “Bitcoins are not being used in market exchanges.” I of course can point to numerous market providers of products and services which accept Bitcoin. North could do his Christmas shopping on this site alone.

Bitcoin transactions are at 80 000 per day. Can you guess what fraction this is of daily dollar transactions? For all practical purposes, Bitcoins are nonexistant in the market and exceptions just prove the rule.

North completely ignores my criticism of his statement that a good has to be consumed in order to serve the customer. Neither Bitcoin nor gold are consumed.

And rightly he does ignore it, since you confused the economic term of “consumption” with “physical consumption”.

However and finally, you come to Mr North’s point:

I wrote, “During the adoption phase of any good as money, the purchasing power rapidly increases from its initial value as a non-monetary good as more and more people adopt it.” Notice how North swaps in the word “fiat” for “good”: “He is making this up. There are no records of any such private fiat money in history. All fiat monies have been extensions of previous government money systems or a previous commodity standard.”

I find the exchange to be very clear: You attempt to explain Bitcoin’s rise in price by more and more people adopting it as currency, thus increasing its demand. North correctly points out that there are no records on which you could point as example for your claim as opposed to a Tulip Mania effect. You then explain:

If a person in a given economy believes that a good will be adopted as money, he may act on that speculation by purchasing the good in advance of it becoming money.

So far, you are presenting speculation as an explanation of the demand for bitcoins. So far, all agree. Then you go on to assert:

If he is correct in his prediction, he will see that good rapidly increase in purchasing power as it becomes money. Why? Because that good is in the process of becoming the most widely demanded good in the economy, which is the definition of money.

What you are saying here is that if Bitcoin is being demanded more and more, it will eventually be used as a medium for exchange. That is what is known as a non sequitur: Bitcoins current price increase does not mean it will continue to rise. It may be a bubble. Simply asserting it isn’t one does not make it so.

Bitcoin’s adoption as a borderless medium of exchange by more and more people around the world would cause its purchasing power to rapidly increase.

But that is not the only explanation for Bitcoin’s price increase. Bitcoin’s adoption as a speculative asset by more and more people around the world would also cause its purchasing power to rapidly increase – and then to fluctuate and rapidly fall. Mr North has argued that use as a speculative asset as well as strong price fluctuations preclude Bitcoin’s use as a medium of exchange: An asset that is expected to apperciate will be hoarded, not sold. You then come to his point:

Because it’s been volatile, (North) reasons, it’s not being used for market exchange, and therefore can never be currency. And because it can never be currency, he concludes, it is worthless and destined to collapse.

That is his point. And here is your refutation:

Gary North may claim the fate of Bitcoin is already sealed, but his arguments are not compelling.

I leave it to the reader to judge whether you thus convincingly addressed Mr North’s point.

By: Caleb Sat, 07 Dec 2013 16:50:36 +0000 This needs to end, Gary North is embarrassing himself

By: Menger Sat, 07 Dec 2013 14:21:37 +0000 Gary North has posted his “interview” with an imaginary Bitcoin advocate:

That’s right. Now he ignores John Mather, makes up his own “adversary”, and “destroys” him. Talk about losing a debate!

Perhaps Mather will address the remaining fallacies in this “interview” and in this recent post:

By: irdial Wed, 04 Dec 2013 22:55:19 +0000 A tour de force of absolute, comprehensive, damning, devastating, eye watering, first class pwnage. Who is John Mather?!

By: Menger Wed, 04 Dec 2013 19:52:12 +0000 Massive pwnage.