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OPINION: Bill Walton, Two Bits

I’ll trade you three shares in my gold mine for two Bitcoins
20171209 gold walton

It used to be the weight of pennies in my pocket that kept me off-balance but now it is quarters. The dimes and nickels go into my piggybank, as I hardly ever need one of them in the financial transactions of daily life. Parking meters, when you can find a live one, still accept the two-bit coin. You can use a pile of them for a small tip at the eatery and my barber will accept a handful as a thank you after a trim. I now rattle and clink quarters in my pocket, much to the annoyance of persons unnamed.

You do remember that old saying of a shave and a haircut for two bits. It seems a little fantastic now, but I do recall paying only a quarter for a haircut when I was a lad. Moreover, Mr Fawcett did not expect a tip, just conversation. Talk about inflation: going from a quarter to $16 for a haircut in one short lifetime. And the other day my barber put down her scissors to answer her cell phone. So much for my conversation.

The term, two bits, apparently came from the old Spanish Peso in days of yore that was worth about 12 cents American. The Americans, used to the old English term for a small coin as being a ‘bit’, joined the two coins and made the value of two Spanish bits into a quarter of an American dollar. Eventually we issued coins in that denomination, Canada putting a British monarch on one side, a caribou on the obverse, while the Americans favored their first President. Lately we have both been decorating our two-bit pieces with critters, scenery, and other people.

The thing is that now if you have (actually they are imaginary) some of those bitcoins you are in luck. Some years ago an acquaintance told me to buy some bitcoin but I was certain it was a Ponzi scheme and hesitated. Some still think it is a just that, others say it is a bubble (and about to burst) while people who are mining bitcoin say it is as good as gold. It’s funny that they would use that comparison because while they might like the analogy, it is anything but like gold.

Back again to the days of yore, it was the de facto requirement that countries had to hold a reserve of gold (or other precious stones or metals) to substantiate the value of their currency. The theory was that if push came to shove, you could always exchange printed or minted government currency for gold and thus retain your wealth. We gave that up in favour of tying value to the US dollar, then the world’s trading medium. That was working reasonably well, especially for the Americans, until some people started to invent or create these new ‘crypto-currencies’ to avoid the fluctuations of the American dollar (and get rich in the effort).

The bitcoin, as far as I can figure it, is created by an algorithm and all you need is a bank of very powerful computers to work on this magical program of finding new values for the algorithm. They call it mining but any hard-rock miner will tell that is a load of crap. There is a limit on the number of bitcoins and they get very difficult to find as they approach that 21 million number. I expect the whole scheme will collapse before they reach that number. It would be like running out of gold. Or ink to print paper money or a little silver to put into our quarters.

Don’t let me discourage you from using your Bitcoins, any more than you would stop buying penny shares on the stock market. Nor should you stop using your credit cards when you know darn well that you don’t have the money in your account to cover the amount. There is always next month’s pay cheque or pension payment to cover some of the cost. Of course the value of money is rather subjective – not like the value of a chicken or rabbit for the dinner pot. I’ll give you a small bag of turnips for that chicken . . .

Shucks, even the City plays with imaginary money, borrowing from itself, shuffling debt onto future taxpayers. I still haven’t figured out how making one of your companies borrow money to pay you a lump sum beats getting a regular payment without incurring the borrowing costs. Budget expediency, I guess. Maybe there is some algorithm that the City is mining to pay for new arenas, police building, and a Library.

I am now considering smelting, not mining, my quarters. You see, prior to 1968, our two-bit pieces actually contained some silver. Mind you, silver is not the trading chip that gold is, but it still might be worth more than some cryptocurrency that has only an imaginary value. Who knows, a person, might even be able to trade a few ounces of sliver for a pair of chickens – or a haircut.