90% of money in the world don't really exist?

[BWV]

Gold has very useful properties and is in demand as both an industrial and decorative material. Gold is very electrically conductive and is used as a ground plate in computer boards.

yes but water is an even more useful substance than gold, but hardly works as a standard of money.

what you have listed is gold's barter value, not its intrinsic monetary value

 

[russ_watters]

They aren't anonymous. The whole point is that the algorithm is open, not secretive. There is no secret that can be lost.

The person who developed it is anonymous. That's enough to make me nervous.

It's hard to say what they full faith and credit of the US government means. I guess it means that they are trusted both to avoid inflation that rapidly degrades the value of the currency, and also not to default on its debts.

It is trusted to be big and politically/economically stable. Which includes not defaulting on its debts.

Gold has very useful properties and is in demand as both an industrial and decorative material. Gold is very electrically conductive and is used as a ground plate in computer boards.

Yes, but the vast majority of gold's value is:
1. Because it is pretty.
2. Because people trade it.

Kinda like a Beanie Baby. Most of gold's value is not due to its intrinsic usefulness. That's why it has been so volatile after being taken off the "dollar standard". I say it that way because at first while the gold standard kept the dollar relatively stable, after the dollar got big and stable on its own, the roles were reversed and it was the dollar that was keeping gold stable. Not anymore.

To have a currency with a truly fixed value one would have to have a very controlled market in which the price of every commodity was fixed. Forbes appears to be arguing in favor of the economic system of the Soviet Union.

No, they are arguing stability due to mass/inertia. I'm sure they know that to be truly completely stable it would need to be fixed, but as a rule more stable - by force of nature rather than government mandate - is better than less stable.

The bitcoin people wanted to set up something that is self stabilizing and under no ones control.

If that's true, then it has been a spectacular failure so far. Perhaps at some point after its fad value has disappeared it will stabilize, but so far it hasn't. As I and others have said, that makes it pretty much useless as a currency, who's critical feature is stability.

I really can't tell whether it will work or not. The supply always increases and never decreases, so the long term trend would seem to be a steady decline in value. This is a good thing as it discourages saving of bitcoin.

[separate post]
Whoops! I was wrong. It gets harder and harder to create bitcoins as time goes by. So the value would tend increase over time, which I think is a bad idea.

Yep. The adoption rate is still pretty low so if Bitcoin becomes more popular its value will skyrocket as it becomes scarce. That's kinda the whole reason for controlling the supply of money to match demand. It helps keep it stable. That's part of how the FED manages inflation. Since Bitcoin's market cap isn't managed, it will have trouble ever being stable.

Of course, if you are a hacker who designed it like an electronic pyramid scheme scam (as the inventor, I assume he had an easy time mining bitcoins while its popularity was low), it'll make you extremely rich.

 

[russ_watters]

What do you mean by no intrinsic value? As in has no use other than as currency? There have been plenty of non-fiat currencies in the world before bitcoin where the physical currency had little or no use.

I think that what IL really means is that bitcoin's value isn't tied to anything, real or illusory. The dollar is tied to the economic value of the United States, which isn't physical but is still real and has an impact on the dollar's value. Bitcoin's value is purely a matter of supply and demand. It has no other use and nothing external to provide value to it. In a pinch, you can burn a Beanie Baby to heat your house* so while its value isn't, strictly speaking, zero, it is pretty close.

*Of course, you could also burn dollar bills for heat too. While that may sound nonsensical, it has happened before in hyperinflation situations that physical currency has been reduced to its intrinsic value:

 

[russ_watters]

Reference on the definition of a fiat currency:
That is, the US government can only produce more of the same on demand; there is no pot of gold or other alternative security behind the curtain. The US M2 money supply is around 10 trillion dollars and, for the last two year period, is continuing to grow faster than it ever has since 1980.

It's a summary and I don't like how simplistic it is. It seems like they mix together the words "money" and "currency" as if they are the same thing, when I'm pretty sure they aren't. Part of the issue may be that "currency" is a form of "money" but "money" isn't necessarily in the form of "currency"...at least that's how I understand it.

 

[ImaLooser]

what you have listed is gold's barter value, not its intrinsic monetary value

The price fluctuates, but there is a floor price that it is very unlikely to drop past because it has intrinsic value. It won't go to zero.

No one can name a specific number for its intrinsic value, but so what? It has intrinsic value because it is useful. It's useful for making computer boards, jewelry, guitars, etc.

 

[ModusPwnd]

This talk of value being intrinsic or not is philosophically moot. There is no such thing as intrinsic value. Nothing is intrinsically valuable. Only by assuming that a function is valuable can you purport some kind of value to the object, of course it not an intrinsic value because it necessarily depends on your assumption.

I think the talk of bitcoins here and elsewhere misses a point, the black and grey market. That is what bitcoin is good for. The market certainly has its share of speculators. But the users of bitcoin are not speculators, they are using it for sales and purchases in black and grey markets. Talk of replacing dollars with bitcoins for everyday transactions is pretty silly. I would say its a strawman except for the fact that the most vocal bitcoin supporters do seem to think it should displace dollars. I dont, I'm not afriad of fiat currency. But I still like bitcoins and see a role for them as many others do. Like it or not, the black market is here to stay. It will likely outlast every nation on earth.