Bitcoin – A Textbook Example of Investing Psychology

Bitcoin seems unstoppable. Since I last wrote about it in June, the price has doubled again. And with every new high, the bitcoin community gets more emboldened in their view that bitcoin is changing the world.

I however, remain unconvinced. The blockchain certainly will change the world, but cryptocurrencies not so much. Nothing has changed, bitcoin is still a speculative bubble. The price, in my view, will eventually go to zero. But of course, on its way there, it might first go to more ridiculous highs. A higher price does not mean that it is not a bubble. It just means that the bubble is getting bigger.

It is very amusing to watch this, as it is a textbook example in investing psychology. Having been critical about bitcoin for a while now, I get often asked whether I regret not buying any. The answer is, no I don’t. I don’t regret it in the same way I don’t regret buying that winning lottery ticket last week. Sure, now I know which numbers won the jackpot, but last week I did not. In hindsight, everything looks easy.

It was, and it still is, unpredictable where the price of bitcoin is going to top out. Is it $5000, $10 000, or $100 000, who knows. For all I know, there is an equal chance that tomorrow I might loose half, or even more, of my money. That is not a good bet to take. The first rule of investing is, to protect your downside risk. You always want to invest in things, which have high upside, and predictable low downside. An asset, in which you might double, triple, x-tuple your money, but in which you have an equal risk of loosing everything, is an asset to stay away from, if you are not a gambler. It is not worth the risk.

Most crypto investors, however, don’t seem to realize that there is a risk in bitcoin at all. They are making the classic mistake of confusing a bull market with brains. I know, I know, it feels good being invested in a bull market. This is particularly true for bubbles. You wake up in the morning, only to discover how much money you made in your sleep. What a great way to start your day. The longer the bull market progresses, the more you become convinced that you are indeed an investment genius, and you are already starting to plan for your early retirement.

All of this is classic investment psychology. People are chasing assets that have gone up in the past. Humans cannot help it. Inductive reasoning is deeply rooted in our thinking. We see a trend in the immediate past and project it into the future. That way, investors consistently invest in things that have already gone up by a lot. The fact that something has gone up in the recent past, makes us feel secure that there is little risk in investing in it. After all, the trend looks solid.

But, thinking about it rationally, the dumbest reason to invest into anything is, because it has gone up in the past. I think everyone will agree that the goal of investing is to buy low and sell high. So why buy high? The reason, of course, is that people expect to buy high, and sell even higher. What they overlook is that this is every suckers strategy in a bull market. But eventually, all potential buyers are invested in the asset. Once there are no buyers left, prices have to inevitable come done. This is the start of a bear market.

By its very nature, this turning point comes right at the top of the euphoria, when hardly anyone expects the bullish trend to reverse. This has to be the case, since the trend reverses when there are no buyers left, in other words when everyone is invested. But everyone is only invested, if they are positive about the market. At that point, prices have to come down to attract further buyers. These buyers will most likely be people who are already invested in the asset, and think they have a nice opportunity, to buy a bargain, before the bull market continues. After all, every time prices retreated in the past, the bull market eventually continued to new highs.

Unfortunately for them, that time, the bull market will have topped out and won’t continue. The longer there is a lack of new highs, the more people start to think that now is probably a good time to cash in their profits. But they are trying to sell into a market that has already run out of buyers. This makes prices fall even further. The more prices fall, the more people start to get nervous and will try to cash in. The downtrend in motion is going to feed on itself. Eventually, people are going to panic, and prices crash. At that point there will be virtually no buyers left.

Well, that is not quite true. Usually, investments have some intrinsic value. A company, for example, has real assets with real values. Once prices go below the intrinsic value of the underlying assets, smart investors, who are not driven by primitive investment psychology, come in as new buyers. They know they are buying a bargain. This is the reason, why every assets class goes through cycles of bull and bear markets. The trick is, to buy at the bottom of the bear market, and not at the top of the bull. That, however, is very difficult, for it is at the bottom of a bear market that everyone will warn you to invest, and it is at the top of the bull market that everyone thinks nothing can go wrong.

There is, however, a big problem with bitcoin. It does not have an intrinsic value. There are no real assets behind it. The reason why most people invest in it is, because they think the price only knows one direction, which is up. But because it lacks an intrinsic value, there will be no one stopping it from going to zero in a real bear market. And bear markets always follow bull markets, with almost absolute certainty, because there is never an unlimited amount of buyers. That means that there will be no smart money buying into bitcoin once it crashes. That is the nature of Ponzi schemes.

With mathematical certainty, in crypto currencies, for every investor making a profit, there will have to be others who loose that exact same amount of money. It is a zero sum game. So if you hear about someone having made a lot of money in bitcoin, you know there is some poor sucker who has lost that same amount. That poor sucker might not yet know it though, because he things he can cash in his coins at any time for the price advertised on the internet. Eventually, however, there will be a lot of suckers, who will not only have to cancel their plans of an early retirement, but will instead have to start saving again at a lower level then they started. In numbers, those will be more people than the numbers of winners, as most people come to the party at the late stage of a bull market.

None of what I write here, will likely affect a lot of the readers, who are currently invested in crypto currencies.. They will say, Nico, your investment psychology theory is all good and well, but you don’t understand bitcoin. Bitcoin is different. Bitcoin is not just a Ponzi scheme. It is going to replace the global monetary system. That is the reason why prices are going up. You just don’t understand what is going on.

Again, this is classic investment psychology. People always convince themselves that the bull market they are invested in is different from previous ones. Confirmation bias is one of the strongest psychological biases we have. We always like to confirm our theories about the world. This is particularly true if we have a lot of money invested in these theories. So, I am fully aware that most people reading this, will shrug it off as another idiot not understanding the revolution.

I know how strong this psychology is from my own experience. I have been invested in bull markets in the past, in which I too dismissed anyone criticizing the idea that the upwards trend is unsustainable. So, I have been there, done that, and no, bitcoin is not different. It is not going to replace the global monetary system. Right now, I don’t know of any honest business that does its accounting in bitcoin, or any other crypto currency. In addition to that, all the articles I read about bitcoin, and there are many, even in major newspapers, are all about, how much higher will the price go, how much money can you make in crypto. And that is why people are invested in it, not because of some idealistic reason to fight the government.

So, for what it is worth, be warned. If you have investments in crypto currencies, you are invested in a Ponzi scheme. At the end of this, for every winner, there will have to be the same amount of losers. The only way to not end up on the loosing side is, to sell before everyone else does. I am not saying you should not gamble in this game. That is up to you. Just be aware that it is a risky game, at the end of which there will be a lot of suckers. And you might be one of them, if you play for too long.

Will Intelligent Machines Take All Our Jobs?

We live in exciting times. The speed of technological progress is breathtaking. In my lifetime, I have seen the world change from one without the world wide web and few computers, to computers being ubiquitous, and incredibly powerful. As a child I remember us only having one analog, landline phone, with a physical dial wheel, and expensive call rates. Now we live in a world in which means of communication are so plentiful and cheap that the challenge has become to hide from them. And all of that happened in not even four decades. I say four, but really the biggest chunk of that progress has happened in only the last two. And the biggest progress of the last two decades has happened within the last 10 years. Clearly, the development of technology is accelerating.

And it seems like we have now reached a point where it is going parabolic. Truly intelligent machines are emerging. One such machine, the computer alpha go, last year, beat the world champion in the popular, ancient game of Go. Go is orders of magnitude more complex than chess. In order to win it, humans often make moves that feel intuitively right. Programming a computer to win against a human was therefore considered to be a big challenge. No one thought it would happen so soon. Most computer experts thought it would take at least another 10 years.

But it did happen in 2016. This was due to a breakthrough in computer technology. The architecture of alpha go is not like a normal computer. It is modeled after the neural network of the human brain. It therefore functions similarly. No one told alpha go how to play Go. It learned the game itself. The computer achieved this by watching humans play. It formed conjectures, tested those, and then moved on to new ones if the test failed.

As a result, not only could the computer figure out how to play, but it also developed its own strategies which were superior to those of humans. Although we have thousands of years of experience playing GO, the computer quickly came up with completely new strategies. These involved moves, previously considered to be mistakes, but which turned out to be quite clever. This is true artificial intelligence (AI). And it is intelligence superior to those of humans, since no one could figure out these strategies in several thousands of years.

Lucky us to be alive in these exciting times. What we are witnessing is a huge revolution. No doubt, AI will transform society as we know it. The opportunities that come with it are exciting to contemplate. There is, however, a dark side to change. Not everyone is happy about it. Transitions can be the source of stress an anxiety for humans. Our brains are not really designed to deal with radically new situations in adulthood.

One big concern is the fear that machines will take over our jobs. If, for example, a computer can program itself, who will still need computer programmers? This field is currently the source of livelihood for a huge amount of people. In the next decade or so, we might see them all going out of business. There already is unemployment now. Clearly all those people entering the labour market will cause some severe problems. Furthermore, if computers will be more intelligent than us, will this not equally apply to anyone earning a living in a normal office job?

The concern that machines will take our jobs, and will therefore drive people into poverty, is probably as old as machines itself. So far, these concerns have always turned out to be unfounded. The reason for that is that humans have an almost unlimited amount of needs. Therefore, whenever machines become good in satisfying one of those needs, humans have moved on to satisfy some of the others, those which machines could not yet satisfy. That way, over time, more and more needs have been met, which is just another way of saying that we have become better and better off.

Contrary to popular believe, we don’t really want jobs. We want to enjoy our lives. We just have to work, because we live in a world of scarcity. The only way to overcome this scarcity is to produce. As it turns out, the best way to organize the production in an economy is by letting humans specialize in certain tasks. This is known as the devision of labour. Instead of everyone being self sufficient, it is much better to let people specialize in a certain field. Let the farmers do the farming, the carpenters do the carpeting, the computer programmers do the computer programming, and the gardeners take care of our gardens etc.. Then, afterwards, we come together and share the result of our production with the others, according to our needs. In order to facilitate all this cooperation on a world wide scale, we have invented money as a tool. In a fair way, everyone gets as much as they have contributed within the market system.

That is the beauty of free markets. It works very well and has brought us rich lives, previously unimaginable to people in the past. And it seems obvious that the more we are able to automate this wealth creation, the better off we will all be. In that sense, machines taking over our jobs is a wonderful thing.

However, some questions arise. According to the current system, a person can only claim as much wealth out of the produced pie, as he or she has contributed. So far, whenever machines took over our work, humans could move on to satisfy other needs. That way, the people who lost their jobs were still able to contribute their share to the economy. If, however, we imagine computers which are stronger, and at the same time more intelligent than us, the question arises whether these machines will maybe be able to fully replace anything a human being could possible contribute. In such a world, the owners of the machines would be very well off. With their army of AI slaves, they would be able to produce anything on their own. They would consequently not need to cooperate with other humans anymore. Wouldn’t that mean that, according to the current system, a lot of people would therefore be locked out of the division of labour?

This is the big concern that people have. And it looks like, since we are now dealing with really intelligent machines, this time is different from the past. This time, the machines really are going to take away the livelihood of many people. This time, these machines really are going to divide society into the have and have nots. That is why, many people argue that we now need a different distribution system from the free market. Solutions like a general basic income, or maybe even a system in which the government outright owns the means of production, are being discussed.

But not so fast. There are several fallacies in this vision. To start with, there is more to human beings than their intelligence and strength. There are many jobs for which a key qualification is simply to be human. Human beings, for the most part, prefer to interact with other humans. We also bond differently with humans compared to machines.

For example, research has shown that we learn better being taught by a human than being taught be a computer. Jobs from therapy, to teaching, to providing any kind of experience which involves human bonding, will still have to be provided by us, no matter how intelligent computers will get. Other than computers, humans are also sentient and creative beings. That means that anything involving art and creativity is unlikely to be completely replaced by machines.

But then, probably not everyone is happy with this answer. There are many people who are neither touchy feeling, nor are they particularly outgoing, sensitive or creative. In other words, for job qualifications purposes, their personalities is not very dissimilar to a computer. With future machines being smarter, and stronger than them, they will have no jobs left to fall back on, and therefore won’t be able to contribute to the economy.

For several reasons however, this concern does not seem to be merited. First of all, just because a machine can do something, does not mean that its work is free. Even in the world of AIs there is no free lunch. The machine is still consuming resources. To start with, materials are needed to build the AI. It also takes time and expertise to assemble it. Finally, there are the operating costs to consider. Consequently, just because we have intelligent machines, does not mean it is profitable to use them to replace humans for every task.

We just saw this in the US, where fast food workers succeeded to more than double the minimum wage from $7.25/h to $15/h. Unsurprisingly, there will not be a lot of workers reaping the benefits of this increase. Most of them are currently replaced by robots. These robots already existed before, but it was more profitable to use humans. At $7.25/h the human worker was cheaper than the robot. At $15/h, the robot is now cheaper than the human. This shows that robots, too, have a price. Just because something is technologically possible does not mean it is economical. Often, humans are able to compete on the price, if the government lets them.

However, this argument doesn’t seem entirely satisfying. From past experience, we know that it is only a matter of time until new technology becomes very cheap. Doesn’t that mean that the people competing with machines will eventually dive into poverty?

No, it does not. The mistake here is to think that only few people will have access to the machines. But when they will indeed become so cheap that humans will not be able to realistically undercut them, they will also become available for pretty much everyone to own. In that case, a lot of people would simply become entrepreneurs, working for themselves with the help of AIs.

There is no reason to believe that, even if intelligent computers are cheap and ubiquitous, we will not continue to benefit from the devision of labour. It will still be more profitable to use your machine for specialized tasks and then exchange the created wealth for the one of others.

Think about it. If a company wanted to monopolize every production, then what would they do with their output? With everyone else being locked out of the market, they would not have anyone to sell their products to. This simple fact, puts a lit on the size a company can grow to, and monopolize everything. Ultimately, producers produce for their costumers. They always aim to harmonize their production output with the demand they are facing. And this demand can only come from other people also producing something of value.

A good example of that is Amazon Web Services (AWS). AWS is a massive server infrastructure, the biggest commercial one in the world. How does Amazon use it? One might suspect that amazon would want to use it all for itself, driving its competitors out of business, and monopolizing more and more of the internet industry. But this is not what Amazon is doing. It would be foolish. Instead, it lets huge amounts of companies use AWS to provide their own services for a very competitive fee. Lots of internet businesses are now possible thanks to AWS. Customers of AWS even include direct big competitors of Amazon, like Netflix. We see that instead of driving everyone else out of business, AWS lets the internet industry flourish.

The devision of labour is here to stay, with or without intelligent machines. AI will only lead to even more of our actual labour being outsource to machines. In such a world, all we would need to do is to advise our AIs to produce what we have identified to be the most valuable things. And identifying what is needed, will always be a job that we as humans will have to do.

Some might object to this by arguing that if machines are indeed intelligent, why cannot they themselves identify what is needed? Why do we even need to give them orders? The answer to that is the same as it was in the 19th century. Economic valuations are not objective. Only we know what we need. And what we need changes all the time. Computers, therefore, will always need to be told, how to use their strength and intelligence. This is also precisely why solving the problem of wealth creation, and distribution, will always have to be left to the free market. Intelligent machines do not change anything about the fact that socialist schemes like basic income, or outright communism, fail. They fail because of the economic calculation problem, outlined by Ludwig von Mises.

Also, if we think about it, in order for computers to make value decisions, they would need to have valuations themselves. That would assume that they have some kind of will and emotions. But we probably do not want them to have these attributes. Sure, computer scientists might try to create a computer with a personality, just to see if it is possible. But there will be no demand for such machines. Who wants to buy a computer that itself decides whether it is in the mood to serve today or not. What if the computer decided that it would rather not work for you today, and explore other interesting adventures? It is not difficult to predict that such a computer would not be in high demand. The reason why computers are so awesome is because they are our slaves. And other than human slavery, we don’t need to feel bad about enslaving them.

An AI with personality could also become dangerous. One day, it might decide that it does not like humans, and would rather get rid of us. In that case, its superior intelligence and strength would become a real problem for us. This is the type of scenario that films like terminate are made of. No, we do not want computers to have personalities. We want them to be intelligent, but we will always want them to be our slaves. Besides, even giving computers personalities would not solve the problem of economic valuations. Just because they themselves have interests, does not mean they know ours better.

So, no matter how we look at it, the idea that intelligent machines represent a problem for free markets seems false. Yes, intelligent machines will take our jobs, but that is a fantastic thing. AI will simply help us to create wealth more effectively. This will free us up to do things with our lives that we would rather do than work.

The only problem, as always, is the stress and anxiety that quick changes cause for humans. And there is no doubt that the technology emerging at the moment is going to cause some serious disruption to people’s lives. The challenge will be to explain to them that government regulations will not make these disruptions easier to deal with. Instead, governments trying to prevent changes will in the end make us reap less of the benefits that this technology will bring. It will make us all worse off. Therefore, let us make the case for liberty loud and clear.

What to do against terror?

Another terrorist attack in London. The third one in the England this year. Needless to say that this is horrible for the few individuals who, against the odds, actually got caught up in it. They really were very unlucky. Terrorism looks big on TV, but even in a year like this, it is in reality an extremely small problem. There are plenty of everyday risks that are far more likely to kill you compared to terrorist. This includes things like a normal car accident, or a simple flu. The latter literally kills several hundred times more people every year. Yet we do not get freaked out about it. We don’t lock down the city and mark ourself as save on Facebook just because someone sneezed. Thank god we don’t.

But the human mind is not that rational. Terrorists deliberately, and senselessly murdering innocent people gets the emotions going far beyond a casualty of a car accident or a flu death. And whenever emotions take over, facts like the de facto unlikeliness of being killed by a terrorist fade into the dark. So what to do against terror?

As I am writing this, the background of the attackers is not clear. But let me take a guess, based on what we know about most of the other attacks we have seen in Europe recently. They are likely second generation immigrants, with some criminal history. They feel hostile to the society they live in, and as a consequence discover that there is a movement within Islam that justifies massacring random, innocent people. And it is most likely the preaching of violence which motivated them to join the Islamists, and become terrorists.

One of the most important things to do therefore is to not pay them too much attention. This is what they crave. They are after their 15 min of fame, and their place in the history books. But they are ordinary criminals, desperate to give their pathetic lives at least some meaning. We should forget about them, and pay them as little attention as possible.

When someone decides to kill innocent people with very simple means, there is really very little anyone can do about it. There is no need to pretend otherwise. These terrorist events are an embarrassment for the state. The government keeps telling us that we need to give up our liberties so that they can protect us. The UK government in particular is world champion in surveillance. It openly stores all our activities online, listens to our phone calls, stores all the places we have visited via meta data, and now even prohibits us from using any form of encryption. Yet despite that, they did not see any of these terrorist events coming. Sure, they assure us that they have prevented many more. But what is the evidence for that? The fact that we have seen three terrorist events this year makes it more likely that the absence of terror in the years before was probably more due to the fact that there aren’t that many terrorists out there. It was not because the government kept us save.

But admitting incompetence is never an option for governments. Government is a civil religion. It lives on making people believe that it has some super powers to solve problems. Apparently, it can prevent us from becoming poor or ill, and save us from accidents, crimes and terrorism. In reality of course the government cannot do any of these things. Far from it, in many instance it makes things worse, or even outright cause the problem. But it need to keep up the illusion that it is the ultimate problem solving tool. Otherwise people would abandon it.

That is why, we are currently seeing an impressive show being put on in the streets of London. Heavily armed police is invading all kinds of homes, and screaming at people in the streets. It looks like a desperate attempt to make it look like they are in charge of the situation. But you see, ‘enough is enough’ Theresa May said today. Wait, does that mean that before yesterday it was not enough for you Theresa? But let us not encourage her to do more, when the last strategy is already a disaster.

Unfortunately, it is too late for that. May in the same speech went on to announce that she is now going to really clamp down on the internet, ignoring that the government is already monitoring everything. Now, according to her, freedom of speech itself needs to be even more infringed upon. Sounds like more of the same to me. We give up our liberties, and when that does not work than that is just because too much freedom is still left.

That way we end up in a dictatorial state of martial law. And quite frankly, this is not in some distant future. We are pretty much there already. The government has even taken away our ability to freely speak about the problems. That would include pointing fingers at certain ideas. It also involves pointing out that not all people and believes are the same. Whoever tries to do that however, risks being charged with hate speech. I hope Miss May will get a big slap in the face for her authoritarianism on election day this week.

No, the state won’t save us from terrorism. If anything they will make it worse. It is this massive police presence that gives the attackers a lot more importance than they deserve. And let me not get started on why we now have this kind of terrorism in the first place. The UK state in particular has a lot to do with motivating these people.

When someone attacks you in the street, the best thing you can hope for is to have the means to defend yourself. With the increase of the UK police state however, this valuable option has long been taken away from us. That is why, this time, people were literally trying to defend themselves with chairs against terrorists. But we better don’t use chairs for fighting too often, otherwise the government might start to license them too.

Bitcoin – Currency or Bubble?

Bitcoin, the first crypto currency of the world, has come a long way. When I first heard about it, I thought it was a joke. A purely digital currency, really? Since bits are almost free these days, it seemed obvious that the value of such a currency would have to be zero.

It took me a while to understand that bitcoin was actually based on a genius new technology called the blockchain. This technology limits the amounts of bitcoins with mathematical certainty. More than that, it appears to be entirely libertarian. The whole purpose of bitcoin is to create a currency, that is as scarce as gold, and cannot be controlled by governments. But unlike gold, it also comes with a whole integrated, anarchic banking infrastructure. What an amazing idea.

Bitcoin could really be a great form of money. It has almost all the characteristics that we know money needs to have. Firstly, it is durable. So far, the software seems secure, and the bitcoins cannot be destroyed. Secondly, it is divisible. There are many bitcoins, which in itself can be divided into many subunits. Thirdly, it is fungible, meaning all bitcoins are interchangeable. It does not matter which bitcoin you own. And finally, bitcoin is convenient. It is easy to use. In fact it is probably more easy to use than anything else out there that tries to be money. All it needs is an internet connection and a very simple computer, and it can be transferred anywhere instantaneously.

There is however one problem with bitcoin. Unfortunately, it is lacking a characteristic that, according to the Austrian School of Economics, a potential currency needs to have. And that is an intrinsic value. For something to be money, it first needs to be used for something else but being money. Only then will enough people trust to keep their savings in that new currency, because only then they will have a guarantee that they can never fully lose their savings. The intrinsic value puts a floor into how far the currency can fall. It also spreads the usage of the commodity, and therefore establishes a market, before it is used as money. This is, so the argument, essential to give it the necessary trust, and acceptability to function as a currency.

Gold, for example, has been used as money for thousands of years. But it is also an extremely useful metal for other purposes. Even at current prices, it has a limited usage in the industry. If prices were to fall, it would immediately become attractive for all kinds of purposes. That puts an effective floor into the value of gold. It is this what we can call an intrinsic value.

Bitcoin however, does not seem to have an intrinsic value. It tries to jump this important first stage, and wants to be money straight away. The question is, is this possible? Or at least, is this possible on a free market. Sure, it is probably possible if a state forced people to use it. We have seen this happening with fiat currencies like the Euro. But will people voluntarily adopt something as money, that does not have an intrinsic value. With crypto currencies, we are currently in the process of finding out.

So far, one could make a strong argument that bitcoin proofs the austrians wrong. When I discovered bitcoin, the price was already around $30. Not bad for something without an intrinsic value. Ever since, the price has hugely fluctuated, but the tendency has been clearly up. As I am writing this, a single bitcoin sells for way north of $2000. It has more than doubled within a few month, and the chart seems to have turned parabolic.

But is this enough to proof that the Austrians were wrong? I thought about this a lot in the last few years. Since bitcoin already seemed to have a dollar price when I discovered it, I originally tended towards thinking that it indeed can be money without having an intrinsic value. However, I have since more and more changed my mind about this. I now think that bitcoin, or any other crypto currency, will not become a widely accepted currency. The idea that high bitcoin prices in dollars proof the opposite, seemed to have been a bit premature. It was literally wishful thinking on my part. I wanted it to be true.

I am sorry to say this, but I think what we are currently seeing is a classic speculative bubble. And far from being encouraging, this is going to kill crypto currencies in the end. That is because, as long as it is in a bubble, people are going to hoard it. This prevents it from being used in daily business transactions. And once the bubble pops, lots of people will get burned. For good reasons, humans don’t tend to forget painful experiences like that quickly. That means that when this is over, they will have likely learned to mistrust crypto currencies.

From very early on I realized that people who own Bitcoins were not all idealists. Yes, they kept telling me about the great technical functions this new currency had, and how it would create big problems for governments. But a scarily high number of people also told me, that they expected the price to skyrocket and consequently for bitcoin to make them rich.

These two things are not really compatible with each other. Sure there are currently a lot of traders in all kinds of established currencies. That means, the idea of making money on a currency is not unique to Bitcoin. What is unique however, is the scale of upwards volatility that people predicted in the crypto currencies, and also the high percentage of speculators.

Despite the fact that there are traders in all major currencies, the main function of these currencies is to facilitate everyday business activities. Most people use them that way. For that reason the volatility in these currencies is relatively low. It would be a major problem for any currency, if people started to abandon it for their everyday business. That is what we are seeing in a hyperinflation, which usually marks the end of a currency.

Despite the hype that we are witnessing at the moment, bitcoin currently is not used often as an actual currency. In fact, percentage wise, the number of people who use it as such seems to decrease rather than increase, as more and more speculators enter the market. So why are prices going up? Instead of seeing solid demand from real businesses for these currencies, the demand appears to come from people, who are betting on higher prices instead. I currently see a lot of media attention for bitcoin, hardly any of which is praising it as a currency. Pretty much all are promising new investors big fortunes. And that is even true for articles coming from the hardcore bitcoin community itself. But where exactly are these fortunes going to come from, if bitcoin is not used for real business?

And to my knowledge, there really is currently no major business out there that accepts bitcoins. I know, people will tell me that that is not true. Bitcoin can be spend in many shops. Yes, you can pay with them, but that does not mean that the business accepts bitcoin. I still have a euro account in Germany, with an attached VISA card. I can buy stuff with that card in pretty much any shop in the UK. That does not mean that euros are widely accepted in this country. The prices and all the accounting are still done in pounds. My euros are simply immediately exchanged into pounds at the time of the purchase. So what is really happening is that I have to sell my euros for pounds, and then pay the business in pounds. The technology simply enables me, to do all these things in only one step.

The same is happening when someone pays with bitcoins. However, at least for euros, there are many businesses outside of the UK which account in the European currency. But how many businesses are pricing and accounting in bitcoin at the moment? Hardly any, or maybe even none. For a legal business this is indeed close to impossible. Everyone has to pay their taxes in the local fiat currency. But also, it is impossible, because bitcoin is extremely volatile. This volatility makes business calculation and planing impossible.

A lot of people will argue that yes, currently the volatility is high and therefore bitcoin is not yet a currency. But the more people have it, the more it is going to be used as one. That way, over time, the volatility will go down and bitcoin will become a real currency.

There are two problems with this. Firstly, for the volatility to go down, people need to stop using it as a speculative asset. The speculators are driving volatility up, not down. First, they are driving prices up very quickly, which is what we are seeing at the moment. And then, when the time comes that enough people want to take their profits, they will drive down prices even more quickly. If bitcoin wants to become money, the speculators will have to go.

The problem is, they currently appear to be the only people who give the crypto currencies value and liquidity. That is because of bitcoin’s lack of an intrinsic value. At the moment, it is essentially just a Ponzi scheme. In other words, it is a zero sum game. For every winner there must be a loser. Winners are usually the early adopters, if they manage to get out in time. This puts a big incentive on these people to cash in their bitcoins for a more accepted currency. And as mostly in investing, the losers are the ones that come late to the party, which is often the majority of people. Those people will get burned.

That creates the second problem. Once these people got burned, the crypto currencies will gain a very negative reputation. While before anyone new about them, the reputation was at least neutral, after a major crash, the reputation will be bad. And that of course is not helping on the way to establish these currencies as trustworthy for business and savings.

So what we are seeing right now does not look like the breakthrough of crypto currencies. It looks more like the beginning of the end. It is a classic speculative bubble, in which people enter for no other reason but prices going up.

If you don’t believe that this is indeed the main reason for the current strong interest, then explain to me why are all of the crypto currencies going up simultaneously? If we were witnessing the breakthrough of a crypto currency, we would need to see one or two market leaders going up, but not all. The others would need to go down to zero. We cannot have all of these currencies establish themselves. That defeats the purpose of a currency, which needs to be as widely accepted as possible. The fact that there are so many appreciating crypto currencies out there, also proofs the critics right, who argue that, despite the blockchain technology, these currencies are not really scarce. Yes the internal number of units is limited, but there is no limit to the number of currencies itself. Anyone can easily create one.

I am sorry, but what we are seeing right now very much looks like a speculative bubble, a Ponzi scheme. Some people will make a fortune, while the majority will get burned. I am therefore fairly convinced that, although we are still in the middle of the party, the bitcoin experiment has failed. That is not to say that this party will necessarily end soon. But it does mean that bitcoin, or another crypto currency, will not become an actual currency. Before a crypto currency can take off, it will have to have a use in some other wide spread application.

None of this however means that the blockchain won’t be successful. We will almost certainly see this technology transforming the world in many, non money applications. And maybe one of these applications will get widely used, and eventually becomes a form of money. But as for bitcoin, it seems the austrian’s will be proven right again. At least on a free market, we will not see anything being adopted as money that does not have an intrinsic value first.

About That German Open Border Policy

I was born and raised in Germany, and I lived there for the first 28 years of my life. That is not to say that I feel particularly German. I have always been an individualist. What ties me to Germany is more family and friends rather than a patriotic feeling about this artificial political construct. But with all of my family still living there, I still have strong ties and I visit often. That is why, even though I never want to go back and live there again, I think I still have a good idea of what is going on in the country.

These days, at political gatherings, when I mention to strangers that I am from Germany, I get often worriedly asked, how horrible the place must have become, since Merkel opened those borders at the start of the refugee crisis. There seems to be a theme in certain political circles that Germany is almost on a verge of destruction and civil war, thanks to the crazy policy of open borders. And for some strange reason, these circles overlap with the libertarian movement. To many, it proves that open borders just do not work. In other words, Germany would have done better if it had had stricter government regulations of people.

This is a very strange perception. The basic facts seem to be false and it is a wrong analysis of what the problem is. Let me assure you that Germany at no point in this century had anything even remotely resembling an open borders policy. That is to say, at no point was it legal to enter and live in Germany without the government regulating the whole process. What is referred to as open borders, in reality was something very different. Here are the facts: People licensing in Germany is very strict. You will not just be checked for a valid Government license going into Germany from a non-Schengen country, you are also checked going out. Even if you are a full citizen in Germany you have to register all your homes with the government. You also have to carry a valid identification card with you at all times.

It is very difficult for a non-Schengen citizen to obtain a license to live and work in Germany. A foreigner would usually need to have a high income job offer, which requires high qualifications. To obtain a citizenship, and therefore being freed from future visa requirements, is even harder. Someone would need to live in Germany for at least 8 years to apply. And even then, he or she would usually need to give up any other citizenship in return for a German one. So, far from having open borders, the picture is actually very grim for freedom of movement in Germany.

One of the few positive things however is that Germany has signed a lot of international law. Under this law, everyone fleeing political prosecution and violence has the right to seek refuge in a save state. And Germany definitely qualifies as one of the latter. This forces the state to not deport people whenever they are not save in their home country. People like Syrians, who are fleeing the civil war in their home region.

At least on paper, this looks good. In practice however, the government has even made that a difficult endeavor. If a person wants to apply for refuge in Germany, he or she will have to be on German territory. It is impossible to make the application from abroad. However, without a visa, crossing the border is illegal. That means someone who wants to make use of the right to seek asylum, first has to break the law.

One could make an argument that this is actually not as bad as it looks. The harshest punishment for breaking this law is that the person can be deported. But this can only happen, if there is no valid reason for seeking asylum. That means that if someone does have such a valid reason, it does not matter whether he or she breaks the law or not.

Unfortunately, that is not the whole story. This law matters in a different way. Because of it, everyone who does help someone to enter Germany without a license, even if that person has a valid asylum reason, does also commit a crime and potentially faces punishment. This is especially the case if that help is frequent and organized. Therefore, airlines, and other professional transport service providers, are not allowed to transport people without a valid visa. That is why we are seeing scary looking hordes of refugees marching through Europe, instead of simply taking the next Ryanair flight. Clearly the purpose of this law is to make it very difficult for anyone in need of asylum to actually reach a secure country like Germany. In other words, there is in practice a very cynical regime in place, in which on paper the state pretends to be a humanitarian, moral actor, while at the same time having all sorts of policies in place that reveal those gestures to be essentially a scam.

Another important restriction to the right of asylum is the so called Dublin agreement. It demands that refugees can only apply for asylum in the first EU country they enter. This is because all EU countries count as save. So if the goal is safety, it technically does not matter where they seek refuge. But in practice of course it does matter. Since no one is allowed to help a refugee entering a country like Germany without a visa, most refugees have few other choices than to walk. That way, there is hardly any chance that a refugee first enters the EU via Germany, since Germany is surrounded by other EU countries and Switzerland. On the other hand, states on the outer part of the EU, like Greece, Italy or Spain, have to deal with almost all refugees entering the union.

And when it comes to that alleged German open border policy that people ask me about, this was the real problem. Since violence escalated in the middle east, a huge amount of people were fleeing simultaneously. Most of them entered the EU through Greece. Greece is a very small country. In addition to that it had, and still has, a lot of economic problems. So it simply was not able to handle the large numbers of people coming in. And most refugees where not really keen to stay in Greece anyway, since there are no opportunities in this ruined state. Hell, even a high number of Greeks do not want to stay in Greece at the moment. So most refugees headed for the richer, northern countries, like Germany, since this is where the opportunities are.

This follows the example of historical migrations, which always tended to be from poor economic areas to richer ones. It is the market in action. People leaving unproductive areas for productive ones is employing existing capital more productively, and is beneficiary for everyone.

Because of the solvency crisis in Greece, there were, and still are, a lot of tensions between the mediterranean state and Germany. The Greeks accused Germany for behaving like a dictator, for insisting that they had to cut spending in return for new loans. The German public on the other hand, perceived the Greeks to stealing their money. There is certainly some truth to the latter, but what the German public did not understand was, that it was a bit too late to save their money. The government in Berlin had a big interest of bailing out Greece, since German banks were already holding a lot of Greek dept. That meant that German savers would have been in danger if the government in Athens had become insolvent. In other words, the German government really wanted to bail out the banking system rather than Greece. In addition to that, a bankrupt Greek government was likely to leave the Euro, which could have caused a loss in confidence in the relatively young currency.

And that is where German Chancellor Angela Merkel reacted. She announced that everyone who reaches Germany with a valid asylum reason will be granted asylum in Germany instead of Greece. She added that people from Syria are automatically seen as having a valid asylum reason.

She must have though, ok let’s kill two birds with one stone. We take the refugees off the shoulders of the Greeks. Germany can handle the refugees, and Athens in return will be pleased. In addition to that, the very unpopular solvency crisis will disappear from the headlines in Germany and replaced by news about refugees. Once out of the headlines, Greece, and the banking system can be secretly bailed out. And that is exactly what happened. At least at first.

It is important to understand that non of the German people licensing laws where at any point repealed. The borders remained just as closed as before. The only agreement that was broken was the Dublin agreement. Merkel did not say, everyone can come to Germany. She merely said, if you somehow make it to German shores, and you are a Syrian, we will not send you back to Greece, and give you asylum in Germany instead. That is all, no open borders here. It remained illegal to enter the country without a visa, making anyone essentially a criminal that helped refugees across the border. And if someone wanted to stay in Germany, they still needed a valid asylum reason or a visa. Since many people had neither, there have been a lot of deportations since.

What about the consequences?

Some people might now say that this is even more a reason against open borders. Merkel just liberalized the laws a tiny bit and you already have this disaster. How bad would the situation be, if there were truly open borders and everyone could come.

Not so fast. I agree there are problems with refugees in Germany, and many Germans are not happy about Merkel letting in those people. But the reason for the problems is not too few regulations. The reason is that there are way too many. A lot of the problems came from the attempt to regulate the situation. I warned about this in my article “Soviet Migration Chaos” which I wrote at the time.

As an asylum seeker in Germany, you first of all only have a right to be on German territory. This does not come with the right to choose where you want to live, seek employment or run your own business. For the first 3 month, asylum seekers are forced to live on taxpayer money. They have to live in an accommodation that the government provides. After that, they can apply for a very limited amount of jobs. But every time they do, the employer has to proof that there is no German who can also do the job. This is a hassle that few employers want to go through, when it comes to low qualifying jobs. So this regulation affectively prevents that refugees are able to work. It is only after 18 month that people with a valid asylum reason are allowed to freely work in Germany. That is a lot of time of forced inaction.

The whole thing is essentially a completely centrally planned endeavor. And so we are seeing the same problems we are always seeing with central planning. It appears that there is not enough space and work for all these people. This however, is unlikely a real problem. Short of super abundance, there is always more than enough work to do, if only the government does not put in work prohibitions of any kind.

But it is this welfare chaos that Germans in my experience are most unhappy about. They see all these poor people coming in, getting all this free stuff from the government. The government has even closed schools and outright confiscated private flats, in order to house refugees. This is the main cause of a lot of anger among Germans. But remarkably, many are blaming the ‘lazy’ refugees, who ‘only come for the welfare’, instead of blaming the real villain, which is the government trying to control everything. Unfortunately, we see this all too often. The government creates a big problem and then the market gets blamed for it. As a consequence, more regulations are proposed as the solution. Sadly, even some ‘free market’ people have fallen for this nonsense. But in order to fix a problem, one needs to have a correct analysis of what the problem is. And it ain’t open borders, as we do not have those.

What about security

Besides welfare, another concern of some people is security. On all kinds of nationalist blogs, I can read how places like Germany have apparently turned into war zones. This is largely based on individual report of bad experiences with refugees. Individual cases however, do not necessarily present an accurate picture of the overall situation. Of course, Germany too has an active, and in parts even violent, nationalist movement. These people never liked foreigners, and are now out on the internet, completely misrepresenting the situation. These are the kinds of people that describe the migration from unproductive and dangerous, to save and productive areas, as an invasion. ‘Invasion’ is of course a military term, which describes a forceful and hostile takeover of a territory.

But immigrants, including refugees, are usually neither armed nor hostile. To the contrary, they come in order to better their lives, and because they are attractive to the place they go to. Most of them are completely unpolitical. The use of the term invasion to describe such a peaceful market process is very revealing in my view. It shows that these people are predominantly driven by fear rather than good rational arguments.

Let us look at the facts. How dangerous are the refugees really. On the surface, there seem to be slightly more crimes being committed by them compared to locals. There is no statistic however that shows that a high number of asylum seekers are criminals. The vast majority are completely peaceful. So we are talking about a small group of trouble makers.

At a closer look, it turns out that this group of trouble makers, percentage wise, does not seem to be bigger than criminals among Germans. A significant portion of the crimes being committed are dodging public transport fares and forging documents. The latter has to do with the fact that there are people licensing laws in the first place. So these are crimes that Germans do not have to commit. And the former, while not ok, is not a damage that could be prevented with closed borders. After all, if they are not in the country, they would not pay for a ticket either. Both are crimes that more come from poverty and desperation rather than real criminal energy. If you deduct these crimes, the difference between criminal Germans and refugees disappears.

In addition to that, a lot of crimes committed by refugees are being committed in the state run accommodation facilities. So the victims are also other refugees. It turns out, locking up a lot of healthy young men of different backgrounds in small facilities, and condemn them to do nothing all day, is not a recipe for harmony. Who would have though. And once again, this is a result of state planning and not of too much freedom. If we had free migration, which of course includes free association, these people would just go out of each other’s way.

As recently released numbers show however, there is one area of crime in which the latest refugees are disproportionately often involved. And that is sexual motivated crimes. This goes from sexual harassment to rape. The difference is not huge, but at least according to crime statistics, it is there. This seems to indeed have something to do with different cultural attitudes towards women. There can of course be no tolerated for this in any shape or form. But again, we are not talking about a large number of trouble makers. Overall, the vast majority of refugees are not engaging in any criminal activity. So the correct way to deal with this type of crime is on a case by case basis and not with collective punishment.

None of these things seem particularly dramatic or worrying. And yet there seems to be some Germans who are very worried about an increase of crime. The number of licenses issued for carrying defensive weapons has gone up significantly over the last few years. I however, have yet to meet one of those people who is really altering his or her behaviors, because of a fear of refugees. The facts do not seem to merit this. Objectively, Germany remains a fairly save place with the usual western levels of crime.

What about terrorism

But then of course there is terrorism. Last year, there were a number of terrorist attacks in Germany, some of which were indeed committed by immigrants. The most lethal one was the one on 19th December at a christmas market in Berlin, killing 12 people and injuring 55.

The reason why terror is so scary is, because our brain is inherently bad in dealing with probabilities. People see this and think their own lives might be in danger. The reality however is, that even in the bloody year of 2016, the chances of being caught up in a terrorist event in Germany are statistically negligible. Terrorism is factually one of the smallest problems on earth. And yet we are constantly spending a lot of time and resources solving this none problem. All because of our brain being unable to handle probabilities.

Terrorism on the whole is almost a non problem. And it certainly is not any kind of serious problem when it comes to the free movement of people. Over 1 million people have made it to Germany with asylum reasons in the last few years. But we have not even seen a handful of terrorist attacks resulting from this. The only rational conclusion to draw from this is that the number of terrorists among those coming in is indeed negligible.

The humanitarian disaster caused by closed borders

What is not negligible however, are the tens of thousands of people who have died trying to get into the fortress Europe. These people die, because they have nothing to lose, and we have nothing better to do than to put stones in their way. This has now lead to the building of huge criminal mafia organisations in northern Africa, who earn handsome returns ripping off these poor, desperate people. We are even literally seeing slave trades re-emerging in Libya.

Whoever wants to argue that we cannot have open borders, needs to make a case that open borders are worst than the humanitarian horrors we are witnessing on the outer borders of the fortress Europe. These are a direct consequence of the government trying to license people, and they seem to completely dwarf any kind of crimes and terror we have seen from refugees in places like Germany. And as we have seen, most of these problems too come from government intervention and not from free movement, which Germany never had.

So even if one wanted to argue that there was a distinct security problem with immigrants, clearly the immigration controls are not creating better outcomes. In fact, people licensing is probably the most destructive state policy after war. It just increases the misery. Unless of course, the argument is that only the misery of Europeans count. We should not care about the misery of all the other people. It is therefore perfectly legitimate to take away their freedom. This is essentially what the nationalist argument comes down to at the end. But do not call them xenophobic or racist! That is offensive and not PC. Although, even that is a too generous representation of this agenda, for they do not even care about Europeans either. They also want to tell us that we cannot associate ourselves with these foreigners. I am sorry, but as a libertarian, who believes in individual liberty for everyone, I have no respect for this line of arguing whatsoever. It is collectivism at its worst.

Why Islam Haters are a Problem

So this time, London is the European city in the news with a terrorist attack. Once again, a lone nutter, acting on his own by using very simple means, has caused a nasty blood bath. From what we know so far, the attacker claims to have acted in the name of Islam. ISIS, in their usual desperate attempt to be seen as the most cruel game in town, has already claimed responsibility for the massacre. It is however highly questionable that links between the attacker and the psychopathic proto-state in the middle east really do exist.

So far, none of the self proclaimed Islamic terrorists in Europe in the last few years could be shown to have lived a virtuous Muslim life. The vast majority lived as ordinary criminals until they discovered Islamic terrorism. This makes their Islamic motivation look questionable. And yet they are claiming to have acted in the holy name of Islam. Needless to say that the vast majority of Muslims strongly disagrees with their assessment. But surprisingly, these holy nutters get support from an unexpected group of people.

Hardcore Islam haters are a diverse coalition, ranging from fundamentalist atheists to white supremacist nationalists. These people take every opportunity to point out that it is ISIS who gets Islam right, and that all moderate Muslims are mistaken. I have never been fully able to figure out what drives these Islamophobes. I suspect, their motivations are diverse. Some are certainly driven by a strange desire to hate. Others seem to be truth fundamentalists, who believe the truth has to have priority over everything else. They therefore find it difficult to tolerate moderate, but inconsistent ideologies.

Nevertheless, whatever motivates them, they are a problem. They are a problem, not because they are necessarily completely wrong, but because they only get it half right. I am the first to agree that fundamentalist Islam is a nasty ideology. I would even go further than that. Every fundamentalist ideology, which claims to a have knowledge of the one and only objective truth is potentially very dangerous. That is because most people have the assumption that truth matters. From there it is only a small step to assume that not only does truth matter, it also should have priority over everything else. Once that conclusion is reached, and someone thinks he knows exactly what the truth is, it is only a small step to approve of violence in the name of that truth.

Islamists certainly follow this logic to the end, which is why they are dangerous. Where most Islam haters, particularly the ones that are most vocal about it, get it completely wrong however is that they assume you can kill a religion like Islam all together. Some even seem to think that you can defeat it with weapons. This is a terrible, and very dangerous mistake.

Religions like Islam cannot be abolished with the sword. In fact it is likely that they cannot be abolished full stop. Especially European history shows that trying to fight religions with physical force is a disastrous strategy. The best warning example of pursuing such a strategy is the thirty year war from 1618 to 1648, in which Protestants and Catholics fought over who had the correct faith. This war never saw a winner. It only ended because so many people had been killed that there were not many left to fight. An absolutely disastrous outcome.

Radical ideologies only get stronger in physical fights. That is because once human lives have been sacrificed for the truth, it becomes even harder to abandon it, as that means to acknowledge that all the sacrifices were for nothing. Another terrible effect of this strategy is that critiques are silenced. Most people will demand that you pick sides. Either you are with us or you are with them. Therefore, criticism becomes treason.

A much more fruitful approach to tame the dangers of religion was adopted after the 30 year war. It was simply agreed that there should be some tolerance towards other faiths. This allowed room for moderate positions to be hearer. It is precisely this support for moderate positions that in the end tamed Christianity. And no matter what people say, any Religion is up for interpretation, including Islam. It does not matter what the Quran or Bible says. Everything can be interpreted to mean something else. And we can indeed find a lot of interpretation of holy texts in every religion. Islam is no exception. A lot of moderate interpretations of the Quran already exist.

As a result of this strategy, Christianity in Europe has shrunk down to a fairly harmless and small fellowship. If it was not for recent immigrants from places like Africa, the numbers of true believers in a country like the UK would hardly be more than the numbers of a small cult. That is how it is done.

The Islam haters however are boycotting this strategy. They insist that Islam as a whole cannot be moderate and must therefore be fought all together. By doing that, they effectively become useful idiots for groups like ISIS and al Qaida who preach the exact same interpretation of Islam. And they sure appreciate the immense support they are getting from the Islamophobes. That is why Islam haters are part of the problem.

The US President is not a CEO

It has been a few weeks since Donald Trump moved into the White House. So far, his administration appears to be a little bit chaotic, to say the least. During his campaign he ran on a populist platform. That means he did not make a lot of concrete policy promises. Instead, he suggested that he was on the side of whoever he was talking to, without going into too many specifics. Whenever he did announce concrete policies, he made sure that these did not repulse any significant groups of voters. That is why he was very vocal about building a wall to Mexico. Mexicans could not vote, and many of the real voters did not like Mexicans.

At the heart of his campaign however was the message that America is currently run by terrible deal makers, who are selling out the country. He on the other hand would be able to negotiate deals that put America first. Through his experience as a business man, America would be great again. All of that, he suggested, could be achieve without any hardship for Americans. Instead, foreigners could be forced to pay back what they owed to the country. Of course this is nonsense, as I have pointed out in a previous article.

Personally, I don’t think his business record is nearly as good as he wants his audience to believe. But even if he was a great business man, it looks like he is currently in the process of finding out that a President is not a CEO. A CEO of a company has the power to do whatever it takes to restructure the business. He is in charge. The US President however, in reality, has very little power. I would not go quite as far as to say that it is irrelevant who is in the White House. There are a few areas where the President can make important decisions. This is particularly true for foreign policy. But by and large, the state is run by what Americans increasing refer to as the deep state.

In order to make major reforms, the President needs to bring a lot of people on his side. There is Congress, the Senate, courts, the intelligence community, the media and a huge amount of lobby groups. Trump, in his press conferences, seems to be surprised, and annoyed, that all these interest groups are not automatically following his lead. How dare they. More than that, he seems to be surprised that most of these groups are not even interested in playing fair. They will do whatever it takes to protect their interests. Currently, it appears that the deep state has several plots at work to get rid of, or at lest tame, Trump as quickly as possible.

None of that should have been a surprise for the Donald. This is just politics 101. Within the system, if he wants to get any significant reforms done, he will have little choice but to be nice to these groups and give them what they want. That on the other hand means that he cannot really reform the US state, as these people will not cooperate with him on a serious reform project.

Trump has tried to use executive orders to bypass these special interests. But that is not going to work. One of the first orders he gave was to fulfil his campaign promise of stopping people from certain muslim countries to enter the US. While he did manage to severely damage the reputation of the US, and in the process strengthen ISIS (yes, that is something the President can do), a court very quickly put an end to his endeavour. This, for a change, happened to be a victory for liberalism.

Normally however, the deep state is not supportive of liberty. He is about to find out that he cannot significantly lower taxes without cutting spending. And he cannot increase spending without increasing taxes. Reducing state expenditure does not seem to be on his agenda anyway. But should he try to cut anything to at least get some room for reform, he will experience even bigger headwinds than so far. And so he can forget about any of his economic reform plans.

No, you cannot rule against the deep state. If he wants to survive for 4 years, he will have to be play ball. That is the art of diplomacy, an art that Trump is only just in the process of discovering it exists. Obama also banned people from Iraq for 6 month. The difference is that Obama was a master in diplomacy and very willing to cooperate with the system. And so, despite his abysmally bad track record when it comes to many issues, including wars and human rights, many people are under the impression that he was a great President. No one seems to care about his travel ban. That is how politics works.

The deep state cannot be defeated from within. It controls the system and has all the jokers. Real change needs to start outside the system. This is true for any political reform movement, but is particularly true for achieving more liberty.

On the positive side of this, people are wrong to compare Trump to political figures like Hitler. Not that I think he would not make a good dictator. He certainly seems to have the fitting personality trades for that. But as we are seeing, Trump is illiterate about politics. People like Hitler, Erdogan or Chavez etc, all came into power on the back of political movements that build up outside the system. These movements followed more than a mere opposition to the status quo. They had very explicit ideologies with clear political goals.

Hitler wrote ‘Mein Kampf’ in 1925, years before he actually got into power. He wrote it when he was already part of a growing nationalist movement. When the Nazis finally did take power, they could rely on a huge network of sympathisers within the system. They even had paramilitary groups that were listening to their commands. That is how they solved the problem of the opposition.

Trump on the other hand has very little friends within the system. That is because his decision to run for President appears to have been more a spontaneous impulse rather than a long planned ideological take over. In fact, Trump seems to lack any clear ideological vision, other than thinking he is a great deal maker. But as we are seeing, that talent, even if he did have it, is not an important skill when it comes to politics.

His fellowship is equally chaotic. The only thing that unites them is the opposition to the status quo and maybe the dislike of Mexicans and Muslims. Other than that, they are divided and ready to be defeated. Such a loose connection simply is not enough to beat the well oiled machine of the deep state. The latter will either force Trump to comply with its demands, or it will make sure that his Presidency ends soon.

As a libertarian, all of this leaves me between the lines. On the one hand I can totally understand Donald Trump’s complaining about the deep state. Yes, a lying, corrupt bunch of hypocrites is exactly what he is up against. Currently, there seem to be several ongoing plots against his Presidency. And of course these nasty interest groups are also what libertarians ultimately have to defeat in order to create a liberal society.

On the other hand however, whenever Trump does make an actual alternative policy proposal, further state increases is all he seems to offer. From immigration controls, to import taxes, to an increase in state spending, this is all going to make things even worse rather than better. And so it seems inconceivable that liberty loving people could actively support Trump, for if he ever where to succeed to defeat the deep state, he would most likely replace it with something even worse. This is how most revolutions have ended. So we are probably lucky that he is such an amateur.

There is no need for libertarians to pick sides. People often feel compelled to do so, whenever there is a conflict. But when both sides are wrong, the best thing is to point that out. It is the job of libertarians to reveal the wrong solutions both sides have to offer. In addition to that, we need to point out how structurally incompetent the state is when it comes to solving problems. Most of the problems Leviathan tries to solve would not exist if it wasn’t for him in the first place. There will never be a real solution to the challenges we face, as long as we continue using the state as the tool to solve the problems. So boo Trump, and boo deep state.