From Bartering to Bitcoin – The IRS Virtual Currency Guidance leads us further down the rabbit hole

The IRS ruling ((http://www.irs.gov/uac/Newsroom/IRS-Virtual-Currency-Guidance)) treating bitcoin as property and essentially viewing its use as barter touches on the underlying reality of what government, in its current form, hopes to accomplish.  Let us not think that there is anything positive to glean from this development other than the fact that it shows bitcoin is becoming a force to contend with and cannot be ignored.  The ruling is just another affront against an individual’s ability to voluntarily associate with whomever they wish, and to not be burdened with the obligation of sending a record to authorities regarding that association.  Using the tax system to do this is especially despicable because it provides a lot of opportunity to deflect the conversation away from questioning what the original purpose and mandate of government is, and whether it continues to have relevance and credibility. The subtext is that we cannot and should not escape the manipulation of fiat- there will always be a penalty and they will always try to collect because, in a way, we are only being allowed to use federal reserve notes. They are Caesar’s and are to be rendered onto him. A far more tenable situation would be to encourage borrowing in fiat and saving in appreciating assets instead of everything being about consumption, but that would give individuals too much control over their own financial destiny which erodes command and control over economic activity.

Apparently, back in 1982 Mr. Reganomics himself signed off on an act ((http://en.m.wikipedia.org/wiki/Tax_Equity_and_Fiscal_Responsibility_Act_of_1982)) that encumbers individuals with having to declare the “fair market value” at the time of the barter transaction as income to the IRS if a profit is realized. So even though there are no government backed notes in play, there is still an assumed debt that one has to the government no matter the nature and origin of the human behavior definable as economic activity resulting in your barter transaction. So if two peoples’ mental state and behavior results in a swap of two physical items from one hand to another, suddenly there are two debts to the government depending on how each measures the “fair market value” of the transaction and two obligations to notify the government about it. But how could even the government determine what the true “fair market value” is in such a situation when no markets or exchange can now legally exist without some kind of tax distortion? It appears to be operating under the misguided notion that there is an inherent nominal value to everything when actually that nominal value comes from an unfettered price discovery process known as ‘the market’ having been laid subject to the whims of every market participant. We can only imagine that government, in its infinite hubris, thinks it is the origin of all notions of markets and economy.  It sees itself as descending upon us with an offering of ‘civilization,’ then rendering upon us as if by divine will the social obligation to pay the arbitrary debts we’re surmised to owe by the whims of technocrats, paid-for politicians and overzealous voters all trying to pick winners and losers to the amusement and dread of anyone grounded in an honest reality.

Taxation (or more correctly described as forced ‘donation’) is a reality we probably cannot escape but we cannot allow governments to think they are the arbiters of value.  If you could ever construct a situation where money as we know it is out of the equation, we would still be trading things based on perceived value- food, sex, protection, entertainment, etc. and be right back where we started.  Therefore, an attempt to tax outside of fiat is an attempt by government to have an arbitrary hook into yet another instance of human behavior, harming peoples’ ability to self-determine and associate voluntarily.

The fact that government tries so hard to defend its brand as the only game in town possible when it comes to currency concedes the fact that they are absolutely terrified about having to stick to a budget and be held accountable for how the money is truly spent.  So not only does the monopoly on money creation create an inherently unfree situation, it provides the perfect cover for unbridled corruption.  Can’t want to see what’s next.