Bitcoin DO NOT WANT!?

Economics Economics Questions
, ,
61

@Seraiah: You’re all over the map. A medium of exchange is just any good that is used to enact an indirect exchnage. For example, let’s say you have milk and you want to barter for my bacon. But I want butter, not milk. So, you instead exchange your milk for some butter with someone else, then exchange that butter for my bacon. You never wanted butter and you didn’t exchange your milk for butter because you “temporarily wanted butter”… you used the butter to mediate an indirect exchnage.

Pay attention!

Clayton -

62

Clayton, I haven’t disagreed with any of that, I think you’re misreading me.

All I’ve said is I think the “commonly used” portion of your definition of money is a useless qualifier. Using the word “commonly” doesn’t work in a quantitative sense and therefore shouldn’t be used in any definition. I therefore would remove that qualifier and leave money as synonymous with a medium of exchange. It removes any confusion in the use of the word.

Money = a commonly used medium of exchange. ← That’s it!

I understand that you and Dave don’t like that definition and feel like “money” should be only used to refer to something that has reached an arbitrary point on a popularity scale. Hence, I have tried my best to use “medium of exchange”, despite my objections.

You and Dave insist that Bitcoins are not money because they haven’t reached your particular standards for “money”. Fine, whatever.

If we can agree that Bitcoins are a legitimate way to mediate an exchange for any good or service, can retain value, are scarce, have no industrial and little aesthetic purpose, could potentially replace any currency in the world, and are anonymous, then I don’t care what you want to call them. (I’d call it money.)

He’s going to peter out here shortly anyhow, the only question is whether it’s because he’s realised he’s wrong or whether he’ll convince himself that we’re naive and can’t understand anything he says.
For what it’s worth, I’m always amused by his subtle (Or maybe not so subtle!) condescension and less frequent ad hominems.

63

Seraiah earlier: “The baseball cards aren’t a medium of exchange and were never intended to be.”

Seraiah now: “I haven’t disagreed with [the definition of a medium of exchange]”

The baseball cards are not being exchanged for their own sake but in order to purchase something else (settlement of drinking tab debts).

How original of you to think of this without having clicked and read Mises in HA defining media-of-exchange and saying that we don’t need to use “in common use” for praxeological analysis.

But what you’re missing is that the current state of affairs where there are hundreds of “competing currencies” is inherently unnatural as Hoppe explains here. The key issue is that money is inherently eliminative. This is in contrast to other goods, such as cars or houses where variation is a key attribute of such goods. There are many different kinds of cars becuase there are many different kinds of transportation needs, and so on. But money, by its very nature, becomes more useful the more widely used it is so that the incentive is for users of monies which are “losing” the race to become the universal money to switch and join ranks with the users of the one, soon-to-be universal money.

Hence, there is no natural sense in which there are many kinds of money, each filling some small niche or serving some specific market. Rather, one medium-of-exchange will become so universally used and accepted in payment that there can be no doubt what is meant by the otherwise vague word “money.” Hence, there is no threshold at all, there is simply a criterion. Is this medium-of-exchange the most widely acceptable, that is, universally acceptable medium-of-exchange? If it is not, then it is not money. Money is that one medium-of-exchange that is more widely acceptable than any other.

Clayton -

64

That’s just quibbling, Clayton.

Cans of sardines can be money if they’re used to facilitate a single transaction between only two people.

If it’s a medium of exchange, it’s being used as money, and no qualifier of wide acceptance can change that.

65

No, it’s not. Watch the lecture and get back to me. It’s endemic to the econnomic account of how money arose in the first place. Why aren’t we still bartering? Answer that question and you’ll also understand why there can be only one, universally accepted medium-of-exchanged called money.

Clayton -

66

Yes they are. Am I missing something here?

This is a direct exchange. The bartender (Or whomever they’re paying back.) is agreeing to erase a debt in exchange for cards because he believes the cards are worth more to him than the debt.

There’s no indirect exchange here. For there to be a medium of exchange there needs to be at least 2 commodities and a(nother) fiat currency/cryptocurrency/commodity.

Likely the bartender was going to sell the cards*, but was I suppose to assume that? Even so, how does that diminish Bitcoins in any way?
*I would say the cards were acting as money, you wouldn’t, I got that.

The only reason there aren’t many currencies is because of government intervention and NEWS FLASH, there are a ton of different kinds of money in the world. There is no universally accepted medium of exchange at this time, heck not so long ago there used to be a ton of different competing currencies even from State to State in the United States.

There tends to be less competition in currencies for obvious reasons, but there are a ton of reasons why a competing currency could overtake another.

And as before; So what? You don’t have to call Bitcoins money if it hurts your feelings.

Alot of mediums of exchange compete and the one with the most desired qualities wins out and becomes drum roll Money!
Big deal, you could call it the “El Presidente of all mediums of exchange” if you wanted to. (Your definition is still vague as it now has to impose arbitrary imaginary lines where the best competing currency cough, I mean “medium of exchange” is called money.)

Did you add that later or did I just miss it? Please look three posts above where you wrote this quote. There’s no need to refute the Regression Theorum. It doesn’t apply.

67

That’s what I’ve been saying…

Go back to my initial illustration of exchanging milk for butter in order to exchange the butter for bacon. That is indirect exchange. The butter is the medium or mediating good in the exchange.

Why are you repeating what I said back to me as a news flash? There “are a ton of different kinds of money in the world” and that situation is the result of central banking (government intervention in the market). More than 100 years ago, there was one, global money called gold. That situation has been dismantled with the rise of central-banking.

Gold- and silver-backed banknotes are money-substitutes. There is no reason you can’t have many kinds of money substitutes. But money proper is eliminative.

I don’t think anything in this discussion can be left unspecified as “obvious”. You are deeply confused about even basic definitions.

Clayton -

68

So now only Gold and Silver are money proper?
What happened to your old definition of money being a “common medium of exchange”?

And even your new definition is self defeating because Gold and Silver are seperate competing mediums of exchange. (In fact, silver has historically been the far more used currency.)

If you can agree that “Bitcoins are a legitimate way to mediate an exchange for any good or service, can retain value, are scarce, have no industrial and little aesthetic purpose, could potentially replace any currency in the world, and are anonymous”, I’ll agree that Bitcoins are not money based on your bizarre definition of the term.

You can’t have your cake and eat it too. If there can be only one universally accepted medium of exchange, then there can’t exist a ton of competing currencies. Since, in reality, competing currencies do exist, this statement cannot be true:
There can be only one, universally accepted medium of exchange.

Gold and silver are not the same thing. They too are competing currencies, and guess what? They don’t eliminate eachother.

Mkay sir, but you can’t deny that my definitions are extremely easy to follow, which is the reason I objected to your definition in the first place.

!@#$ !

Wait, what? I need to stop browsing over your posts (I’m sorry, you tend to be very wordy.), what’s HA? Wow, I must be a freakin’ genius. Did he really say that or are you just messing with me?
Well since I’m on a roll, I’ll take it a step further than Mises and say it’s not only “not needed”, it’s actually destructive to a coherant definition of the term.

69

I thought they were answered, well that’s depressing. Anyways,

I refuse to do any research for you, sorry.

I’m just way too lazy for that.

Plus I’ve never seen any professional in the field ever talk about a significant vulnerability in the system anyway. So if you find one, let me know. (Though I have seen quite a few people apologize for their initial demonization of bitcoin.)

Also, go read Ramon’s posts. I thought they were very interesting.

70

I’m sure someone mentioned this already, but I havent read the thread. OP, you forgot the characteristic of money that all non-austrians forget: it has intrinsic value which manifests as market value for purposes other than money BEFORE it is used as money.

71

Clayton’s basically defining money as a commodity :stuck_out_tongue: Now paper certificates can’t be money. Okay Clayton, whatever you say.

As for Hashem, while moneys in the past tended to be drawn from commodities, it’s true for practical reasons, not principled ones. There are several moneys that did not arise from commodities at all, such as the cowry shell or the giant ten-ton boulders of some pacific islanders, both used as money with no commodity value, not even for art.

The reason commodity money has tended to be used as money is because its nature as a commodity makes it relatively safe from large fluctuations in price, especially inflation.

That said, a cryptographic limit on supply is a far better mechanism to create value protection against inflation than being a commodity. It’s a situaiton that would’ve been unthinkable even 10 or 20 years ago before Bitorrent came out and the arrival of P2P concepts generally.

Let’s say you wanted to obtain some gold to use as a commodity money. You buy the gold, some $1600 an ounce or w/e.

Let’s say you want to obtain some bitcoin to use as money, you buy the bitcoin, at w/e its current price.

Ultimately we don’t need to win this argument, because bitcoin will undoubtedly continue to be used as money just fine, despite everyone’s carping that it isn’t money, when it’s clearly being used as money. Keep citing theories and economists that were formulating their concepts before the creation on P2P.

As with so many things, practice will come first and theory will follow after. But the biggest factor against anyone arguing against Bitcoin is that Bitcoin is in use right now as money. Your theories of why it’s not money isn’t today explaining why bitcoin failed as a currency and why no one is using it, rather your theories are flying in the face of actual use.

You are like Sir Thomas Gresham, claiming sandwiched coins can’t be money and the people will revolt and reject the currency, only to discover the exact opposite is happening.

72

If we can agree that Bitcoins are a legitimate way to mediate an exchange for any good or service,

Any thing the two parties agree on is legitimate, yes.

can retain value,

Bitcoins cannot retain value because they have no value in the first place.

are scarce,

Not sure about this one. But it doesn’t matter.

have no industrial and little aesthetic purpose,

Glad we agree on this one. But we disagree on the significance of this crucial fact.

Again, you have yet to refute Mises’ Regression Theroem. Let’s make one thing clear. Mises’ theorem does NOT say bitcoin will never be used by a few people for a limited number of transactions per person. [After all, in a world of billions of people, some of them will be eccentric]. That is not what his theorem is saying at all.

What he is claiming is that *it will never be commonly accepted.*Thus your saying that a few people use it already for a few very limited things is not relevant. You cannot buy anything for sale in Walmart, say, with bitcoin, only a few odds and ends. Also, people who use bitcoin do not use it for all ot most of their business. Their wallets are still packed with dollars, which they use in over 99% of their transactaions.

could potentially replace any currency in the world,

No. Again, show us your disproof of the theorem.

and are anonymous,

not sure about htis one either. But again, it is not relevant.

then I don’t care what you want to call them. (I’d call it money.)

You make it sound like “commonly accepted” is some weird Austrian definition of money, that you are in the mainstream with your calling it money. But the fact is that you are using some weird defintion of money that no one else uses. It’s like you are proving that squares are round by calling circles squares.

Let’s go to wikipedia on money, where the very first thing they write, which they back up with three sources, is this:

Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context or country.[1][2][3]

Generally accepted. Generally accepted. Generally accepted.

So I hope we can agree on the following.

  1. You have erred in your understanding of what money is.

  2. You have erred in your understanding of what Mises’ Theorem states.

  3. Mises’ theorem has not yet been refuted.

  4. Trying to refute it is like trying to find a way squaring the circle with straightedge and compass, i.e. impossible.

73

Nothing in the entire universe has value “in the first place”. Humans place value on objects (and even units of account.) because of their own needs and desires.

Bitcoins, through very unique properties, fulfill a desire and therefore are valued. Because they are valued by many people, they can be exchanged for goods and services.

As long as Bitcoins fulfill’s the desire of a decentralized, deflationary, and easy/cheap to transfer currency better than anything else, it will retain value. There is no competitor currently on the horizon.

Again, I don’t need to. I’ve written several posts describing why the Regression Theorum doesn’t apply. My favorite one is in this very thread.

That is not what he’s saying, and there’s no theoretical reason why this would be true. As I’ve said, you’re misusing the Regression Theorum.

Some people argue that it’s not anonymous because if you transact online you need to provide a shipping address. That’s pretty silly for two reasons.

1.) Every other method of payment online provides an enormous amount of personal information.
2.) The Bitcoin system itself does not impart any knowledge to the recipient.

“Generally accepted“ is a much more specific phrase than “commonly accepted”, but that wont keep me from arguing against this definition as well!
Who cares if a commodity is accepted by at least 50% of the population? And which population? What if only 3 people existed on the planet?
Now you have to go through a complicated set of procedures, like perhaps gathering an aliquot in a region and then finding out what at least half of them will accept.

And what happens if there are two commodities that are equally acceptable in a society as is the case with silver and gold? What do you call locally accepted currencies?

And at the end of the day, what have you added to the term besides headache and confusion? If it makes you feel better, you don’t have to call Bitcoins money, that’s quite alright.

I’m quite aware that you don’t want to call Bitcoins money. That’s fine, I’m sorry it hurts your feelings. And for what it’s worth I do understand why you don’t call Bitcoins money. It doesn’t diminish Bitcoins in any way.

Yes, yes, and I’m a dirty poo poo head. (How many times do I need to summarize this Theorem?)

That doesn’t bother me any.

First of all, I’m sorry I’ve offended, would you like a band-aid for your boo boo? Welcome back, I’m so glad you’ve actually brought this back to the subject at hand.
Secondly, how many times do I have to point out to you that the Theorem doesn’t apply to Bitcoins? How can you sit there and say I haven’t presented any arguments when time and time again you’ve ignored my argument that the Theorem doesn’t apply. Go back up to my post that literally starts with “Regression Theorem”.

You’ve also ignored Anonome’s accurate point that Mises himself said that money gains value due to being used as money. (If you stop using a commodity as money, it loses value.)

The fact that there’s a “price floor” on silver and gold is a way overblown advantage. How much do you suspect gold would be worth if it was not valued for anything other than it’s manufacturing purposes?

74

Seraiah’s arguments thusfar;
Argument: People complain about Bitcoins not being backed by a commodity, but there’s nothing preventing people from backing Bitcoin with whatever they like.

Rebuttal: People would just exchange Bitcoins for the backing.

Response: The backing is necessarily less valuable than Bitcoin because of Bitcoins unique attributes.

Argument: Bitcoins have value based on mutual voluntary exchange throughout society. Certain people see that Bitcoin has attributes that they value for a certain function. This is exactly how everything else attains value, including gold.

Rebuttal: Bitcoins have no value to begin with.

Response: Neither does gold.

Argument: If nearly worthless paper can be a medium of exchange, Bitcoins can be a medium of exchange.

Rebuttal: The paper money is secured by government manipulation.

Response: Bitcoins do not require security since they do not share the disadvantages of fiat money. (Specifically: Inflation.)

Argument: Since Bitcoin is currently being used as a medium of exchange, that’s proof that it’s useful for more than just speculation. It’s also proof that it can be used as a medium of exchange…

Rebuttal: Settling drinking debts with cards doesn’t make the cards money.

Response: Pardon?

Argument: The best way to create a theory is to make observations and work from there.

Rebuttal: This doesn’t apply to Geometry or Number theory.

Response: Geometry and Number theory were created in exactly this fashion.

Argument: It doesn’t matter if Bitcoins are classified as “money” if they’re used as a medium of exchange that has better attributes than the prevailing currency. You can call it what you like.

Argument: 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.) The Regression Theorum doesn’t apply to Bitcoin because Bitcoin is not a fiat money.

Argument: Bitcoin is anonymous since it does not transfer personal information in any transaction.

Argument: “Money” is synonymous with “a medium of exchange.”

Rebuttal: “Commonly used medium of exchange” is how the word is popularly used.

Response: That definition doesn’t make sense since “commonly” is subjective, and by the way that isn’t a popular definition.

Rebuttal: Well actually money proper is only gold and silver, only one money proper can exist.

Response: Since gold and silver are different commodities, clearly more than one “money proper” can exist, and on top of that there are a ton of other competing currencies that are accepted to varying degrees all over the place.

Rebuttal: Well actually the definition of money is a “Generally accepted medium of exchange…”

Response: That’s a very different definition, but still vague as it doesn’t clarify the geographical location, population requirement, or what you call all of the other things that are generally accepted. (Gold, Silver, and various fiat currencies –local and national-.)
The definition is unnecessarily confusing, but still doesn’t affect Bitcoins in any way.

I guess I’ve been talking to myself this entire time.

75

As for Hashem, while moneys in the past tended to be drawn from commodities, it’s true for practical reasons, not principled ones.
Except, all the characteristics of money are practical ones, it has nothing to do with a persons opinion on principles, these are the objective facts regarding money hashed out by geniuses over time. The necessity for money to have market value apart from and prior to it’s use as money is entirely relevant.

I’m not saying bitcoin has no place, even though I think it’s a scam. What I am saying is that it’s not properly money, in this sense it’s fiat. It works to the extent that people play along, whereas money is always valued.

76

1.) Anything scarce may have value.
2.) That value is based on the attributes of the item.
3.) If those attributes are valued, then the item will be desired, and holders will be more resistant to give them up.
4.) People will offer more goods/services for the item until both parties think they have made an advantageous exchange.

This is subjective value. It applies to pens, houses, cars, gold, and even bitcoins. They all start with ZERO value.

Bitcoins are scarce and have attributes that people desire. What qualifier does Bitcoin not live up to?

77

Try to keep up… I defined money as the universally acceptable medium-of-exchange.

It follows from very simple praxeological arguments - given by Hoppe in the above-linked lecture - that no money can arise in the unhampered market in money production that does not already have a value by virtue of its non-monetary uses. That money must have non-monetary value is not a definition, it’s a conclusion of a praxeological argument. If you want to disagree, disagree. But don’t pretend you’re merely disagreeing with a definition, you’re disagreeing with a praxeological argument which rests on basic assumptions (humans act, division-of-labor leads to greater social and individual wealth, etc. etc.)

Clayton -

78

Your re-wording of mine and Dave’s arguments are mostly strawmen or red-herrings. Try direct-quoting, not only does it increase the audience’s confidence that you’re not distorting our arguments, it helps you make better arguments.

This phrase contradictions STV.

Paper money isn’t secured by government manipulation, its existence is a unique historical artifact created by an original act of government manipulation. In Somalia, for example, the Somali shilling has been used from 1993 to the present despite the fact that the country has been in a de facto state of anarchy during this period. There is no prevention of counterfeiting. Anyone who wishes may print up their own shillings and exchange them on the market. So, you don’t need active participation of a government to keep a paper money going once it has been started.

Where the government involvement is crucial is during the advent of the paper money. In an unhampered market in money production, it is impossible to print up paper money and exchange it for thins of real value, cf the Hoppe lecture linked above. However, the government is in a position to create incentives for people to exchange its paper money for real goods and services.

The fact that Bitcoins can be exchanged for real goods and services is a symptom of the fact that the market in money production is not unhampered.

Wha?!? So now number theory is an empirical science???

Clayton -

79

Mises own quote, from your own blog, showed that money has intrinsic value as money.

Someone doesn’t know how to read a blog. Please quote for us where Mises or my blog says such a nonsensical thing. Hint: You are making the same old mistake all the bitcoin people make, confusing intrinsic value with value as a medium of exchange. Mises goes to great pains to make clear the difference between the two.

Until you address that, I see no need to continue with you.

That’s fine with me.

So bottom line the defense of bitcoin against the regrssion theorem is three fold.

First, bitcoin is so convenient to use when buying and selling stuff. This gives it intrinsic value, and so the regression theorem is OK with bitcoin.

Second, a handful of people buying a handful of things with bitcoin makes it a legitimate currency, by defintion, right now as we speak. Thus Mises regression theorem is disproven by the real world, where bitcoin is a money. There is therefore no need to refute the theorem logically.

Third, Mises was not talking about digital money, which did not exist in his days. Thus the train of abstract logical reasoning he builds does not apply to digital money.

OK guys, if you are happy with that kind of thinking, go ahead and party.

Hints for my rebuttals, to those interested.

To first one, reread my blog Bitcoin Takes a Beating, slowly and carefully.

To second one, reread the wikipedia article about Money, slowly and carefully. Understand that Mises explicitly uses wikipedias definition as well, and so his proof that bitcoin cannot be a “money” is proof that it will never be generally accepted, or commonly accepted. Indeed, careful reading and understanding of his argument shows exactly that.

And although the precise dividing line of when something is generally accepted is not clearly drawn, it still gives us useful info. For example, if a certain mama tells her girl to make sure she marries a rich man, she has not given a precise number, has she? And yet it teaches the girl not to marry a homeless, disease ridden crippled alcoholic with not a penny to his name. That guy is bitcoin. Stay away from him.

Third one is just silly. It’s like saying the laws of physics discovered by Isaac Newton do not apply to automobiles, which did not exist in his time.

80

Hi Clayton! You don’t get to throw Red Herring and and Strawmen at anything you don’t like. That’s not how this works. That is how I read your arguments, and since I’m fairly proficient at reading English, perhaps you should ask yourself why I’m routinely misunderstanding you.

Gold + Acting as a medium of exchange > Gold
Gold is necessarily less valuable than it is when acting as a medium of exchange. There is no contradiction here.

It certainly helps, but Bitcoin would be a superior form of currency regardless due to it’s almost universally better attributes.
The whole thing about the shilling was interesting, but the point still stands that Bitcoin doesn’t require a government to either secure or start it.

It is a theory that began through observable, testable, facts about reality. I don’t know what you’re not getting here. If he wrote down 1+1=2 and then went and put two rocks together, counted them, and got “3”, then number theory wouldn’t have gotten very far. All theories should be able to predict observable, testable, facts about reality or they’re useless/wrong.

And they all start with an observation about reality, though sometimes it’s much harder to trace than other times.