I must be missing something. When you say “Real Economics” you seem to imply that the opinions of those who you disagree with do not follow “Real Economics”.
This is particularly interesting considering you’ve never actually addressed my criticisms from like 10? pages ago. I notice how no one is trying to refute Mises and Menger any more.
In this example, what is stopping a new friend from joining me and my old friends in trading BTCs for goods/services we offer? If people can freely join in trading BTCs for goods/services then there is nothing stopping BTCs from becoming a world currency, even if the chances are unlikely. At this point in our discussion I am not arguing the probability of success of BTCs, only the possibility of success.
Using your example it would seem that there is nothing stopping BTCs from spreading one person at a time until it is the most common medium of exchange. I get the impression that you disagree and do in fact believe that there is something stopping your hypothetical BTCs from becoming the most common medium of exchange. This is the part that I don’t understand.
Once again it seems we are back to your definition of currency/money. You keep using the word “most” which is a term that, by definition, is singular. You can not have two "most"s, one of them has to be less than the other and therefore not the most (possible exception in the case of a perfect tie). So, would you say that on a global scale there is only one money (USD I assume) and all other currencies (GBP, YEN, RMB, EUR, etc.) are not money?
This seems like a pointless determinate for whether something is a currency/money or not. I could easily do all my record keeping in BTCs and when I am required to make a purchase or a sale in USD or EUR (because it is most economical for me to use USD or EUR in some situations) I convert it to BTCs for book keeping. This doesn’t change anything at a macroeconomic level, this is just the language I choose to use for my personal book keeping. Chances are I will use a unit of measurement that is most convenient for me.
If I purchase business supplies in USD, sell products to people in RMB, and spend my profits in EUR I may choose to do my book keeping in any of those three currencies. Which currency I decide to go with depends on which I find most convenient for my company. I could choose to do my book keeping using bottle caps as my unit of measurement of choice.
This is loosely analogous to arguing that my car drives miles versus drives kilometers. How I choose to measure my distance is entirely unrelated to how my car got there, how far it actually went, and whether it used unleaded or diesel fuel to do it.
Demand to carry in the first place is what stops it. People have to have a reason to want to hold it. Currently BTC’s offer nothing that gold can’t already do. I believe this point has been stated numerous times. Do you want to keep raising it or directly address it?
Except that there already exists other more demanded candidate currencies. Stocks and commodities come to mind. More people currently barter with stocks and commodities then the entire exchange history of BTC’s offered. The exchange ratio’s for those objects would be far more historical and acurate for traders. This point has also been brought up already.
Money can be interchangable with money. Gold/silver ect… Gold is divisible in silver, silver into copper. All of these are extremely vendable goods(More then any others) and can be equally demanded in a hypothetical gold standard economy. The same could apply to security backed stocks. The point of the exercise is that “money” is highly liquid. You keep ignoring that point and focusing on inconsequential details of my wording. Dont turn this into a semantics argument please. Stay focused.
BTC’s are not highly liquid, they are not a marketable good. They have a very short exchange ratio history and that will likely remain that way forever.
Stay focused and keep the red-herrings out of the discussion if possible. We are not talking about Money’s of decree which are artificially limited to an arbitrary geographical region. Furthermore USDollars are in fact demanded around the world and are accepted in many countries outside of the US.
Yes indeed you could. But all of your vendors, and all of the capital in general that runs through your business would be limited to only vendors and capital goods sold/traded in BTC’s. In other words you’ve just shrunk the size of the economy that you can use as a resource to a fraction of a percent. A good example is that terribly poor lookign website NLS provided above. You will have a hard time finding a copier vending BTC wanting Xerox wholesaler. You will have a hard time finding food from which your employee’s can purchase via BTC’s so that they can eat.
The point isn’t that it can’t be done. Anyone can make up some random numbers, peg them to the dollar, and do accounting.
Eventually if you want to grow you would have to adopt trade in currencies that are in real demand. Not restrict yourself to BTC’s.
Honestly I feel as if we are spiraling in circles. How constructive is this really?
There are a few points I would like to argue on this topic:
You are stating that popular demand must precede any production. This can be shown as false by looking at any kind of luxury good. When the luxury good is first produced it is done so by speculators hoping that a market will exist for it. It isn’t until after the good is produced and stocked on store shelves, advertised, etc. that consumers start wanting the good. Such a luxury good can start off with only a few speculators thinking “people will like this” and then have the market for grow as word spreads. I want to note that this is meant as an analogy arguing only the point that demand does not need to precede production, please don’t think I am trying to argue that BitCoins are a consumable good.
BitCoins have several qualities that other forms of currency do not have. Digital, anonymous and decentralized all in one product. Other forms of money and attemts at money in the past have had one or more of these qualities but BitCoin is the first (that I know of) to have all three qualities. Hemp as a form of currency is decentralized. Cash is anonymous. eGold is digital. Having all there in one currency is what BitCoins bring to the table that other currencies do not and I believe this is a significant thing to provide.
Demand only needs to reach critical mass in order for BitCoins to reach the top. If you have 10 people on an island and 9 of them accept BitCoins then the other 1 has no reason to not accept BitCoins for any logical reason. Since they can trade with the majority of the people on the island in BitCoins and they know that the majority of people on the island have BitCoin liquidity, it is illogical (from a business perspective) not to accept them at this point. We can not know what that critical mass is, but we can show that it exists somewhere between 1 person and everyone. Therefore we can extrapolate and say that if the maximum number of people willing to use BitCoins for “hobbyist” reasons is between [1, everyone) and critical mass is between [1, everyone), you can not say with certainty that the maximum BitCoin hobbyist community size is definitively less than the critical mass required for a currency to hit off.
This is a strawman. You are arguing here that BitCoin is not currently a highly liquid and highly vendable good. You are not arguing that BitCoins cannot become highly liquid and vendable. I do not disagree with you that BitCoin is not currently the most (or even close to the most) vendable good.
You have previously stated “most vendable good”. I have no problem with the statement, “highly vendable good” and am willing to use that definition of money in our discussion. I am not trying to dodge your arguments, I am trying to understand them which requires I understand the language you are using.
This last statement has me a bit confused, though it may not impact our discussion and you can feel free to ignore it if you wish. Are you suggesting that money by decree is not money or is money? Based on the context it seems that you are suggesting money by decree (USD, EUR, RMB, etc.) are not but I thought previously you indicated they were. Globally, if I am not mistaken, the USD is the most vendable good and the most liquid good so by those definitions it seems that the USD would be considered money regardless of why it is the most vendable/liquid good (decree). For the sake of defining the term money, I was under the impression that the why (by decee or by demand) didn’t play a role in the definition.
This is not an apples to apples comparison. We are talking about the ultimate realization of money. Not goods being valued out of prestigue.
There is no reason whatsoever why a a commidty based money could not have these attributes. The fact that they don’t leads further evidence that peopld just don’t care that much about those attirbutes yet.
A few special attributes does not make everyone racing for this new magical currency. You have to address the issue your arguing in point 1. Where you had a false furniture analogy.
Precisely. For the same reason it’s illogical for BTC users to use BTC’s as opposed to a USDollar. Or even gold.
I am not concerned with what a closed community chooses todo. I have never argued that the closed community could not make it’s own currency. It could even easily reach it’s critical mass as you stated. My argument is, and consistently has been, about the feasibility of BTC’s replacing something like the dollar and/or out competing Gold/Silver/STocks which are already widely used medium’s of exchange and already have a longer historical track record.
The question I have raised is this. For BTC to be the generally accepted medium of exchange in society HOW does it reach this critical mass? What reason do people have to start inreasing their holdings in BTC’s as opposed to dollars? I have asked this how many times now? You have failed to answer on every occasion.
I hope that you do not think I am giving up simply because I begin ignoring these posts. I don’t have the time to repeat myself here everynight to you kind folks.
To the contrary, I am arguing that bitcoins cannot become a highly liquid good. That was the purpose of that statement, and several statements related to it. So you would have to further explain how exactly it’s a strawman(Don’t start behaving like rettoper pls). I have asked more then once from you specifically how BTC’s would increase in demand. You only mentioned once that I can recall it just spontaneously will. That people will begin holding and trading in BTC’s for no reason at all. Not because BTC’s offer any tangible value.
Or you state perhaps since people can trade anonymously. But if people wanted that tools would have been more widely available to transact in dollars anonymously. For sure some people find use out of this but most people just don’t care.
So Im sorry but I have consistently rejected your assertion. You have no other argument beyond the naked assertion that you think it will just start to gain traction. No reason was ever provided, only that it will just magically begin gaining acceptance. Well here is an assertion back to you. I assert that it is more likely that Gold, Silver, Stocks, or any combination of these items are far more likely to be realized as a generally used currency before Bitcoin ever does. Mostly because they are already established as an object highly sought for in exchange and for a medium of exchange.
The only reason why gold/silver isn’t more widely used is because of legal tender laws. That is one advantage BTC’s have over Gold/Silver, State interventionism.
Well you falsly assumed that I was arguing that there can be only 1 specific objective money. But you forget that money is a logical term. It does not necessarily represent 1 thing. Gold/Silver/Copper in their hayday were the most vendible goods. They were the most marketable goods. They could, on demand, be exchanged between each other and there existed a very acurate and lengthy historical exchange ratio between them.
I am suggesting that money by decree follows a different set of rules and does not apply to my argumentation. I have pointed out that it has no place in this discussion. So in an effort to avoid fallacious reasoning we must exclude “Money’s by decree” from any source of comparison. You seem as if you are nitpicking now.
I brought this up because you were using government based fiat as a comparison to our mental exercise.
A) You are nitpicking over inconsequential things
B) It’s a fallacy since we aren’t discussing Money by decree
C) Why would I call it “Money by decree”. Using the word “Money” in the name and then argue it’s not money? In many cases it is the most generally accepted medium of exchange. Especially in the case of the USDollar.
But all of this is sidetracked. As is much of your other points. Try focusing on point 1 that you raised. That is where the “money” is. Pun intended.
It is your task to convince me is how BTC’s will somehow spontaneously grow in circulation. Why and how people will just all of the sudden decide to hold BTC’s even though they cannot purchase anything useful with them.
Your really stuck in a Chicken/Egg paradox you know that? 
Micah have you read anything on the Origins of money from Menger prior to this discussion? Had you ever done any homework on this topic prior to the debate?
After reading your latest post, this seems to be the core of our disagreement at this point. How would you propose that a commodity based currency achieve all three of these things simultaneously? I believe that the these three attributes happening simultaneously is what sets BitCoin appart and while you can argue that this has been theoretically possible since the early 90s (dawn of the internet) no one figured out how to do it prior to the BitCoin.
I do not believe that a commodity based currency can achieve all three of these attributes simultaneously. If you believe this is possible I would be very interested in hearing about it because such a thing would add the advantage of having a commodity backing, thereby making it superior to BitCoin. I make no claims that just because I cannot concieve such a concept that such a concept doesn’t exist.
If you agree that having all three attributes simultaniously requires the internet then the “it hasn’t been done until now” argument only means it hasn’t been done in the last ~20 years. In a time frame like that, just because it hasn’t been done doesn’t mean it isn’t a desired concept it just means no one implemented it. Peer to peer networks are also relatively new, I would say the past ~10-15 years. Personal cryptography, while not new, has only recently become a mainstream science, previously being utilized only by governments and large corporations. BitCoins are a culmination of the past 20 years of computer science all being put together. It is not unreasonable, considering the time frame and technological advancements, that BitCoin has only now just been established even if demand preceded it.
Let us assume for the following statement that some crypto-currency has an advantage over commodity based currencies. Would you agree that it has potential to become a money (generally accepted medium of exchange)? If so then our entire debate should center around whether or not BitCoin has an advantage over it’s competitors (gold, silver, oil, etc.).
Addendum: After thinking about it more I would like to add a fourth attribute to BitCoin which is security. BitCoins can be secured by “something you know” plus “something you have”. This offers personal level security (no 3rd party such as a bank required) that can only be defeated by both having physical access to your person (something you have) and theft of your knowledge (something you know). This attribute is not a big deal but I was able to think of a way to setup a commodity based system that had the other three attributes but did not have this attribute so I felt it would be reasonable to include it here since it is important enough to be necessary in my opinion.
I was able to think of a way to setup a commodity based system that had the other three attributes
That sounds very interesting, could you share this idea?
Cash seems to fit the requirements if you consider something like Western Union a form of remote payment (digital attribute) except the average person cannot reasonably secure large amounts of cash without the help of a third party institution (centralization). I don’t personally believe that a service such as Western Union qualifies for the digital or decentralized attributes, but it lead me down a line of thinking that I could see being debatable given the original three attributes and not debatable with the added fourth attribute.
Then the government agent comes to this “Western Union” and asks politely to fix “issues” of tracking/recording customers, or else. Bye-bye, anonymity.
This is why I believe that all attributes together result in a currency very different to a currency that only has one or two of the attributes. Decentralization is necessary for anonymity to be meaningful. Anonymous but centralized (which has been tried many times) can result in government (or any large enough party) exerting control over your money.
Anonymous but centralized (which has been tried many times) results in government (or any large enough party) to exert control over your money.
I fully agree, thus my interest to a solution having all three attributes.
You completely avoided my argument.
Ultimately someone needs to pay in dollars for the electricity , the manufacturing of the computers etc. before those factors of production can be used to do anything with Bitcoin.
Ultimately someone needs to pay in dollars for the electricity , the manufacturing of the computers etc. before those factors of production can be used to do anything with Bitcoin.
Come on, this one is simple: “Ultimately someone needs to pay in dollars for the fuel , the manufacturing of the mining machines etc. before those factors of production can be used to do anything with gold.”
Gold isn’t used as money either.
All I see are assertions that BTC’s will just magically become popular. No one has yet bothered to explain how or why.