Dear Mr. Berko:
I’m very interested in investing in Bitcoin. We are working with a professional financial adviser we heard on satellite radio. He has earned doctorates from the University of Phoenix, Brixton University and Concordia College. He is very knowledgeable in this market and has advised us to invest 40 percent of our $343,000 individual retirement account in Bitcoin, which he thinks could at least double in price. Among the many reasons for Bitcoin’s continued increase in value, he says, are the decline of the U.S. dollar and the eventual collapses of the economy, pension funds, the stock market and future real estate prices. He predicts increased business and personal bankruptcies and points to an out-of-control national debt and the trillions of dollars owed by our government to China and Japan that will never be paid. He believes, as do many of us, that the government is out of whack and going to heck in a handbasket. Please tell me what you know about Bitcoin and whether you think this will be a good idea.
-- HK, Vancouver, Wash.
Dear HK:
What is a “professional financial adviser"? What are the University of Phoenix, Brixton University and Concordia College? And I think we had all those “collapses” a couple of years ago.
Do you folks know the difference between speculation and investing? Think about it, though perhaps you don’t have to. Many folks don’t have to think anymore because they get their education directly from the media, which have the help of corporate America to tell them what to think. However, if you still possess modest reading skills, I suggest that you purchase a copy of a great book by Charles Mackay, a British journalist. It is titled “Extraordinary Popular Delusions and the Madness of Crowds” and was first published in 1841. You can buy it on Amazon.com (which is also an extraordinary and popular delusion) for $10. It clearly explains the real estate bubble, the dot-com bubble, the chewing gum bubble, the gold bubble, the carbon bubble, the Pet Rock bubble, the IT bubble, the semiconductor bubble and the soon-to-be Bitcoin bubble. This classic book explains economic behavior far more clearly than all those highfalutin economists who doodle daily on computers in ivory towers and can’t predict rain even on a cloudy day.
Read Mackay’s fascinating story of tulip mania during the Dutch Golden Age. In the 1630s, single tulip bulbs were in such high demand that many sold for a dozen times what the average highly skilled worker earned in a year. During this madness, people mortgaged their homes, sold their valuables (precious metals and jewels) and borrowed heavily from money-changers to “invest” in tulip bulbs. The prices of tulip bulbs exploded. Family fortunes were made overnight, encouraging even chuffs, gaffers and swains to borrow money to speculate. Tulip bulbs were in frantic demand throughout most of Europe and Russia. Royalty, diplomats, the wealthy and government dignitaries clamored for the promising wealth of the bulbs. Demand was so hectic that by 1636, tulip bulbs were 19 percent of the Netherlands’ gross domestic product and became the country’s fourth-leading export, after gin, herring and cheese. Trading in the futures market was so frenzied that brokers (think commodity traders) made staggering commissions while the same bulbs changed hands a dozen times a day. But this mania crested in February 1637, when, for the first time, buyers refused to attend a routine bulb auction and prices forcefully collapsed like a giant house of cards. In the following crisis, family fortunes were lost; lives were ruined; businesses collapsed; homes were forfeited; and suicides (no skyscrapers in those days) were a daily phenomenon.
Some blame the bubonic plague, which broke out in Haarlem. Others suggest that the market collapsed on its own weight. And others insist it was orchestrated by short sellers. Nobody blames it on ignorance or stupidity. But no matter. I suspect that in the next year or two, Bitcoin will follow suit and bite the dust.
Find yourself a real financial adviser, or you may find yourself in the poorhouse.
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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.
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