I will give bitcoin advocates 50 Cain-Dollars each if they stop shilling for bitcoins here.
Perhaps I should also stop promoting Austrian principles elsewhere as well and just keep it all to myself? Much better to keep quiet, and abstain from advancing liberty as often as possible. We wouldn’t want to cross-polinate various useful ideas between disparate liberty groups, would we? All the Austrians can just circle-jerk here on Mises.org, the Ron Paulers can fence themselves in on the DailyPaul, and us Bitcoin folk can just keep quiet on our forum as well. Better yet, let’s all just sit at home and talk to ourselves, lest we risk schilling our thoughts beyond their proper place.
Or, maybe, we could all be friendly and open with each other since we all want the same thing.
If you hate Bitcoin so much, please explain to me how else one can move $0.10 or $10,000,000 across the world instantly with nobody knowing about it or having the power to stop it. Can you do that? No you cannot. Thus there is value in Bitcoin, and this makes it wholly separate from “Cain-Dollars” or whatever other money you think you can make up. Try sending me $0.50 worth of gold right now. You can’t. But I can send you any denomination of value instantly, anywhere.
If you’d like to debate with me the economic principles upon which Bitcoin operates, please do, but don’t dismiss it so fleetingly, for it reminds me of those who dismiss Austrian principles out of hand, believing it too far from the accepted wisdom to possibly be valid.
Most of the theory of what money is was built prior to the invention of the internet and digital transactions. Thus people are stuck in a pre-digital mindset.
This too shall pass with time.
I’ve never even seen a Cain-Dollar before. Ergo, they must be extremely rare. Ergo, they must be extremely valuable. This is an incredible offer!
Clayton -
evorhees,
Open and friendly is a wonderful idea. Are you open and friendly to summarizing your understanding of Mises’ Regression Theorem, and then explaining why it is wrong, or why it is right but bitcoin is an exception to it?
…how else one can move $0.10 or $10,000,000 across the world instantly with nobody knowing about it or having the power to stop it…
http://en.wikipedia.org/wiki/Begging_the_question. Are you open and friendly enough to grasp why that statement of yours is begging the question?
[Hint: You are trying to prove bitcoin is money by assuming it is money. For example. Say there was a magical machine that could transport camel dung, and only camel dung, across the world instantly with nobody knowing about it or having the power to stop it. Would that prove that camel dung is money? Can you think of something camel dung is perhaps missing that might keep it from being money, despite being so secretly transportable? Do the words “intrinsic value” possibly have something to do with it?]
Again it has exchange value as money, that -is- its intrinsic value. It is not a commodity value, but it’s still value per se.
Past economists assumed money must have commodity value. They couldn’t conceive of a currency based upon service value, such as Bitcoin.
Anenome,
- Where is your summary of Mises’ regression theorem, and your subsequent rebuttal of it, or else your subsequent explanation why bitcoin is somehow an exception?
Saying the past economists couldn’t conceive a currency based upon service value doesn’t cut it.
- Do you think camel dung would be money if there was a magical way to transport it as easily as bitcoin? Would camel dung then not have commodity value, but still be value per se? Would you accept payment for your hard work in camel dung, because it has service value? Do you think people who reject camel dung under such circs do so because they have an assumption that money must have commodity value, and cannot conceive of a currency based on service value, such as camel dung?
The point is, garbage in, garbage out. Being able to transport something all over the world etc does not give it value if the thing itself is just so much garbage, like camel dung. Bitcoin too, transports what exactly? Nothing. It too is just garbage moved quickly and secretly and securely from place to place. But it’s still garbage, not money.
It surprise me the ease to use the term “intrinsic value” when is totally misleading. Ignoring how close that is from the Marxian “Labor theory of value”. There’s no such thing as intrinsic value, value is always subjective and you’re supposed to have learned that from Mises.
People accept money because they want to exchange it for other goods and services. The price of gold would be much lower if it were completely demonetized (gold is still a functioning money despite what some peole may think), because it would depend only on its properties as industrial commodity. Gold is money because of its qualities as money not because it’s shinny or a good conductor.
Although I disagree with him when he says that mmoney is a natural monopoly and should be public, here’s how Gesell demonstrates that money doesn’t need that so called “intrinsic value”.
In fact, if you campare both monies only AS MONEY (ignoring the unimportant fact that gold-money can be “converted” into commodity-gold), it turns out that bitcoin is a superior form of money over gold. The value of bitcoin comes from its properties as money and it doesn’t need anything else.
I completely agree with Clayton’s view on this.
My comment.
Hi Smiling Dave, fair question.
Technically, I don’t think it begs the question. If you have $10m in USD, and want to move that value to China instantly, Bitcoin works -as a payment mechanism- to enable that to occur. You buy the BTC in US, send BTC instantly, then sell BTC for CNY in China. In this specific case, Bitcoin acts as a secure payment transfer system and not really so much as a “currency”. It is this functional value - the ability of the Bitcoin network to provide this service - which justifies the BTC currency units themselves having a nominal price. For if a system exists which can transfer already-accepted monies across distance instantly and anonymously, and that system has a scarce quantity of units by which to enable these transfers, then it follows those units will command a market price of their own - for the wise speculator, seeing this system, is surely willing to bid at least $0.01 per Bitcoin because he could buy the entire technology for $210,000 (21m max coins).
Regarding camel dung, if it could be used to instantly and anonymously (and without stench or mess) transport value across the world, and it had a scarce supply, then yes I’d expect camel dung to command a certain price in the market. Of course, camel dung cannot do this, and thus there is no reason to pay attention to it as a global payment system. Bitcoin CAN do it, and IS doing it, right now. I don’t like the term “intrinsic value,” since all value is subjective to the person doing the valuing (gold was not valuable before humans arrived to value it), but if you need to find an intrinsic value in Bitcoin, then look at Bitcoin the payment system, not Bitcoin the currency, to find it.
It is quite possible that people get caught up in this, because they don’t realized “Bitcoin” refers to two unique things. 1) a payment infrastructure and 2) units of account within that infrastructure. The payment infrastructure is vastly valuable, and because the units of account are scarce within it, they command a price. Further, because these units of account have all the attributes of a good money (scarce, divisible, verifiable, fungible, etc) it should not be suprising that people use them as money.
To claim Bitcoin has no fundamental value is to be unaware of its profound usefullness, and it is not “theoretical” usefullness, but is in fact being used as I type this to transfers value around the world beyond the clutches of the State.
The best way to create a theory is to make observations and work from there.
Reality: Bitcoins is a cryptocurrency that is currently being used to facilitate trade.
It doesn’t matter whether you like it, or I like it, that is a fact of life. You can purchase bitcoins, transfer them to someone in Kentucky, and that person could mail you a copy of Common Sense.
Because of this observation we can rule out some blanket statements:
-Only physical objects can be a currency.
-Bitcoins have no value.
-Bitcoins can not store value.
-All currency must be able to trace its value back to a valued physical good.
Any theory that espouses any of the previous ideas is FALSE. That’s the beauty of theories; They can be tested against reality.
Your theory, Dave, has been tested, and it’s wrong. You and anyone else can argue until your blue in the face; it will never ever change the facts.
The only real argument left is to find out not whether but why your theory is wrong. (HINT: It’s wrong because Bitcoins are not a fiat currency.)
And welcome back to the discussion! I was starting to miss you.
@Seraiah: Wow, I haven’t seen that many red-herrings in one post in a long time.
I suppose this applies to Geometry and Number Theory, as well?
It is a medium of exchange. A real Austrian economist (Bob Murphy) has stated that this is the case. But that doesn’t make it money… a medium of exchange becomes money when it is widely accepted for all goods. That is definitely not true of BC.
Who said this?
Who said this??
Who said this??
Who ever said any of this???
Again, who ever said this??? Bitcoin is an unbacked digital currency (medium-of-exchange). No one on this forum disputes that definition. You need to pay attention to what people write instead of building straw men stuffed with red herrings.
Clayton -
Haha, Clayton. If none of that was said (Which it has, I can’t believe you’re serious.), then nothing in essence has been said against Bitcoins and my point is even stronger. Nice try though!
And yes, it does apply to Geometry and Number theory. They are both observations about reality. Literally; observations about reality. I don’t know how that could prove my point any better.
Ignoring that that’s irrelevent… I will personally provide you with any good you want if you provide enough bitcoins.
I don’t think we’re even close to on the same page, what do you think these debates have been about exactly?
@skylein: Nice analogy with the prison-communication… I heartily agree.
Money is a medium of a exchange, they’re synonymous. Robert Murphy actually said that?
How silly.
This is a common dispute that appears in this kind of conversations, but I think it only depends on the definition you use.
Is unbacked equivalent to fiat?
I would say they are, As in fiat lux, something becomes money just through the agreement of a community of users.
Others claim that money is only fiat if a state enforces its use. The state, according to them, would be the only one that can say “fiat pecunia”.
The more radical ones simply say that money and fiat are just incompatible, money is never fiat and only currencies can be. On this point I’m with Huerta de Soto when he says something like “USDs are money nowadays we like it or not”.
Still on the point of fiat/unbacked, let’s see some extreme examples. WIR is a private currency in Switzerland based on mutual credit among businesses.
One could say that “is backed by the goods/services the businesses offer” but let’s not complicate it more. The currency is unbacked, is it fiat?
If one takes the definition that requires a state, it’s not, since the currency is private.
Now there’s another currency in Uruguay very similar to WIR called C3. The main difference is that this one is accepted as payment of taxes (you can still pay in the national currency so it’s usage is not technically enforced, just encouraged through the state).
Is it fiat?
I prefer the definition in which fiat money is just the opposite of commodity money. So according to my definition all Btc, WIR and C3 are fiat. But I don’t have anything against unbacked money, only agaisnt money monopolies enforced by the state (even if what they enforce is a gold standard).
I think that the problem is just that fiat has become a dirty word that no one wants to use but as an insult. Being bitcoiners mainly austrians, they prefer the definition in which bitcoin is not fiat. But I think that being commodity money (that is, coupled with a real good with money, that could be used for other purpose) is actually a disadvantage of gold-money. The public is indiferent of the money material. Blocking the comodity when monetizing gold is just a price to pay to prevent the abuse of governments and conterfeiting, not an advantage per se. Bitcoin just solves this same problem through cryptography rather than phisycal laws.
To avoid the term fiat for bitcoin others claim that bitcoin is a “digital commodity”. I don’t buy that.
The ebook example will lead us to another debate about the so called “intellectual property” and maybe even DRM or Diablo3.
The instrinsic value believers can still say that gold is a better storage of value because it would still have some value even if it is demonetized. But you were storing the value it had when it was money, you will suffer a tremendous lost if what you hard as money gets demonetized. Yes, you would retain some value from the gold as commodity but the same applies to paper-money (in a much lower scale). When paper money is demonetized (hyperinflation), it is still useful as a firestarter or to cover walls one could argue.
And now my most daring claim: storing value with an abstract agrement like money is directly impossible, is a phantom property of money. Let’s better leave this for another thread…you probably hate me enough already.
To summarize my position, bitcoin is a fiat money. So what? That doesn’t make it worse than gold.
You seem to be hung up on “storing value”. All money has and retains value because it is traded in a marketplace. The value of money always exceeds the value of the base item (Fungibility is valuable after all.)
Bitcoin is neither a fiat money nor a commodity money.
Commodity money is a money based on a physically scarce resource with decentralised control.
Fiat money is a highly inflatable centrally controlled currency. It always arises out of a commodity money because its utility as money is less than the commodity money. (Hence the Regression Theorum Dave obsesses about.)
I could argue that Bitcoin is more of a commodity money than fiat, but strictly speaking, it doesn’t fall into either category.
Do you see?
Clayton -
Oy.
Some definitions:
- medium of exchange - Anything which is used to mediate an exchange, that is, to facilitate indirect exchange
- money - a commonly used medium of exchange
- value - the subjective ranking that an end has in an individual’s schedule of wants or available courses of action
- money substitute - a title (warehouse receipt) to money which is being securely stored
- fiat money - a money (and equivalent money substitutes) which is redeemable by decree (fiat)
- unbacked money - a money (and equivalent money substitutes) which is not redeemable for anything
- USD - an unbacked (since 1971), fiat money
- Bitcoin - an unbacked, non-fiat medium of exchange. No government has ever decreed anything about Bitcoin so it can’t be fiat.
Note that even backed currencies are not necessarily secure - a bank issuing private banknotes can go bankrupt and its notes can become worthless. So, a “backed” currency which is not also secured is no different than an unbacked currency. In other words, the real issue here is not backing or no backing, it is securing or no securing. If you have a corrupt legal system where bank owners are protected and bank customers (including holders of banknotes) get screwed during bankruptcy, it doesn’t matter even if the government permits private issue of banknotes. Such notes are no better than the government’s own funny-money.
Gold/silver coins/bars are different in that they are not money substitutes - they are money proper. The confusion arises in that funny monies blur the distinction between money proper and money substitutes.
Clayton -
Ive read about 75% of this thread so far, so hopefully this hasnt been mentioned.
Can’t just about any nerd or group of nerds that are highly educated in programming duplicate what bitcoin is doing? I mean, couldn’t there fairly easily be created bitcoin2, bitcoin3, bitcoin4, bitcoin5, bitcoin6, bitcoin7, etc, etc, ad infinitum? If so, then this would seem to indicate that bitcoin and it’s successors are easily duplicated. Granted, some may be able to set themselves apart based upon their history, patronage, network of users, etc, but I don’t see how such an easily duplicated ‘me-too’ currency could gain a decisive edge. It seems as though every single person in the world could be given his own software tools to create his very own currency or his own set of currencies.