Financial Advisor Tim Hayes

Bitcoin the Future of Money or a Novelty?

One bitcoin today is worth roughly $39,286, which demonstrates how out-of-whack this cycle’s pet rock, tulip craze, or dot-com stock (pick your financial bubble) has gotten.
Table of Contents

Proponents hail bitcoin as the world’s first virtual currency, forgetting or unaware that 97% of today’s money is virtual. [1] Transacted without using physical cash, it is instead processed with bank money consisting of computer digits.

Adam Smith’s big mistake

One of capitalism’s founders, Scottish economist and philosopher Adam Smith, got much right. However, one of his great errors, still made today, was the theory that money replaced barter: “The greater part of his occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him, he purchases food. The old clothes which another bestows upon him he exchanges for other old clothes which suit him better, or for lodging, or for food, or for money, with which he can buy either food, clothes, or lodging, as he has occasion.” [2]

However, Dame Caroline Humphrey, Sigrid Rausing Professor of Collaborative Anthropology at Cambridge University, rebutted Smith in a 1985 paper: “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money. All available ethnography suggests that there has never been such a thing.’ [3]

David Graber, in his landmark book, Debt: The First 5000 Years, makes a similar argument regarding the lack of anthropological evidence of money replacing barter: ‘The problem is that history shows that without money, such vast barter systems do not occur. Even when economies “revert to barter,” as Europe was said to do in the Middle Ages, they don’t actually abandon the use of money. They just abandon the use of cash. In the Middle Ages, for instance, everyone continued to assess the value of tools and livestock in the old Roman currency, even if the coins themselves had ceased to circulate.’ [4]

In The Banking Law Journal of May 1913, A. Mitchell Innes pointed out the complete lack of proof of money replacing barter: ‘A moment’s reflection shows that a staple commodity could not be used as money, because, ex hypothesi, the medium of exchange is equally receivable by all members of the community. Thus if the fishers paid for their supplies in cod, the traders would equally have to pay for their cod in cod, an obvious absurdity. In both these instances in which Adam Smith believes that he has discovered a tangible currency, he has, in fact, merely found—credit.’ [5]

Yet the myth of barter remains central to capitalism.20,00

My Professional Designations

Financial advisors who hold the AIF® designation have:

  • Completed the AIF® Designation Training;
  • Passed the AIF® designation exam;
  • Met the designation’s prerequisites and qualification and conduct standards;
  • Accrued a minimum of six hours of continuing professional education, with at least four hours coming from fi360-produced sources;
  • Attested to a code of ethics.

Financial professionals who hold the CRPS® designation have:

  • Completed a course of study encompassing design, installation, maintenance and administration of retirement plans;
  • Passed an end-of-course examination that tests their ability to synthesize complex concepts and to apply theoretical principles to life situations;
  • Pledged adherence to the CRPS® Standards of Professional Conduct, and are subject to a disciplinary process in that regard.

CRPS® designees renew their designation every two years by completing 16 hours of continuing education, reaffirming adherence to the Standards of Professional Conduct, and complying with self-disclosure requirements.

Financial Advisor who hold the AWMA® designation have:

  • Completed a course of study encompassing wealth strategies, equity-based compensation plans, tax-reduction alternatives, and asset-protection alternatives;
  • Passed an end-of-course examination that tests their ability to synthesize complex concepts and apply theoretical concepts to real-life situations;
  • Agreed to adhere to the AWMA® Standards of Professional Conduct, and are subject to a disciplinary process in that regard.

AWMA® designees renew their designation every two years by completing 16 hours of continuing education, reaffirming adherence to the Standards of Professional Conduct, and complying with self-disclosure requirements.

CFS designation is awarded upon passing an examination on mutual funds, ETFs, REIT's, closed-end funds, and similar investments.

Advanced studies on topics include:

  • Fund analysis and selection;
  • Asset Allocation;
  • Portfolio Construction
  • Sophisticated investment strategies for risk management, taxes, and estate planning.

 

 

San Diego, CA, November 13, 2020 – The Institute of Business & Finance (IBF) recently awarded Tim Hayes with the only nationally recognized tax designation, CTS (Certified Tax Specialist). This graduate-level designation is conferred upon candidates who complete an 135+ hour educational program focusing on personal income taxes and methods to reduce tax liability. The combined top state and federal bracket can easily exceed 40%.

San Diego, CA, September 1, 2020 – The Institute of Business & Finance (IBF) recently awarded Tim Hayes with the estate planning designation, CES™ (Certified Estate and Trust Specialist™).

This graduate-level designation is conferred upon candidates who complete a 135+ hour educational program focusing on trusts, wills, probate, retirement benefits, caring for children, and what should be done after the death of a loved one. Over $50 trillion is expected to pass from one generation to another during the next half-century.

The Accredited Portfolio Management AdvisorSM, or APMA® program, is a designation program for financial professionals. The program educates advisors on the finer points of portfolio creation, augmentation, and maintenance. Students will gain hands-on practice in analyzing investment policy statements, building portfolios, and making asset allocation decisions.

San Diego, CA, May 12, 2020 – The Institute of Business & Finance (IBF) recently awarded Timothy Hayes with the only nationally recognized annuity designation, CAS® (Certified Annuity Specialist®).

This graduate-level designation is conferred upon candidates who complete a 135+ hour educational program focusing on fixed-rate and variable annuities. Several trillion dollars are invested in annuities; it is estimated that at least one-third of all annuity contracts are not titled correctly.

Where, then, did money originate?

Money evolved from debt, not barter. Money is transferable debt. Moreover, it is capitalism’s ability to transfer debt, together with the capacity of private banks to create almost unlimited amounts of money, that helped create its enormous power.

Not all debt is money, though—only those debts that can be used to pay your tax bill. For example, if you borrow money from a friend and provide a written IOU, that document is not money. If you negotiate a home equity loan for $25,000, you can pay your taxes with that debt.

Read More: The U.S. Deficit and National Debt

Modern Monetary Theory (MMT)

The coronavirus-induced economic collapse has reinvigorated modern monetary theory or MMT. The idea is that a country like the United States that has its own currency has no limits to the amount of government spending because its central bank, in this case, the Federal Reserve, can create whatever money it needs to buy it.

The Committee for a Responsible Federal Budget (CRFB), a Washington-based watchdog group, projected the U.S. government’s deficit to reach \$3.8 trillion in 2020, much of it financed by the Federal Reserve through quantitative easing.

You might ask, ‘Why go through the process of selling the debt if the central bank is going to buy it? Just have the Federal Reserve provide the government with a three-trillion-dollar overdraft.’

Proponents of MMT do not worry about debt. If printing all this money causes inflation, then you control it by raising taxes instead of interest rates.

Believers in bitcoin think that governments’ printing all this money makes a case for private currencies.

The free market myth

Economists cling to the myth of barter in part because if money did not evolve from barter, their other theory that markets do best with little involvement from government becomes suspect. Furthermore, without the myth of barter, a powerful state is required to fuel growth in capitalist economies. A strong state is needed to guarantee the bank-produced money and enforce debt contracts.

Problems arising today from those myths

Bitcoin evolved from this flawed theory. The euro also comes to mind. If money replaced barter and accelerated the transactions that could have happened through barter, creating a currency, the euro, that was not backed by a country might make sense. If, however, money evolved from debt, and it needs the support of a sovereign state to function, what country would do that for the euro? Which state would back another country’s bank-created money?

Deregulation of lending

Because they believe it just replaced bartering, most economists think money is not that important; thus, regulating its production makes little sense to them. Over the past thirty years, this theory gave the banks the space they needed to go on a massive money-producing binge through their loan-making processes. All that debt, though, now weighs on the world’s economies, leading to low-interest rates and low-growth rates.

Read More: The U.S. Is In a Precarious Situation

Bitcoin the Future of Money or a Novelty?
Bitcoin the Future of Money or a Novelty?

If bitcoin is not currency, then what is it?

Bitcoin is a novelty. Its value comes from a misplaced view of where the money comes from, together with its scarcity. (Bitcoin’s founder, Satoshi Nakamoto, limited the number of bitcoins to be mined.)

If the demand for bitcoin remains high, with a fixed supply, the bitcoin’s price could stay high. But if demand shrinks as investors move on to the next novelty, the bitcoin’s value could suffer a fate like that of many Internet stocks after the dot-com bubble burst.

These are the opinions of Financial Advisor Tim Hayes and not necessarily those of Cambridge Investment Research. They are for informational purposes only, and should not be construed or acted upon as individualized investment advice.

Securities Licenses

Passing the exam qualifies candidates as both securities agent and investment advisor representative.

Individuals who pass the Series 7 examination are eligible to trade all securities products: corporate securities, municipal fund securities, options, direct participation programs, investment company products, variable annuities contracts, etc.

The exam measures the degree to which each candidate possesses the knowledge needed to offer the products of investment and insurance companies, including the sales of mutual funds and variable annuities.

The exam qualifies candidates as securities agent within a state. Nearly all states require people to pass the Series 63 for state registration.

I am also licensed to offer life, health, accident, disability and long-term care insurance products, as well as fixed annuities.

Scroll to Top