6 ms·

My store of wealth, denominated in GBP, is no more 'real' than bitcoin, however, the issuer is a large entity, with deep and diverse global assets and the milit

by tudorw 9y ago

My store of wealth, denominated in GBP, is no more 'real' than bitcoin, however, the issuer is a large entity, with deep and diverse global assets and the military means to protect those assets. The GBP I hold is a promise that the issuer will go to almost any means necessary to maintain the value of my wealth in respect to its fungibility. While there is a raft of risk associated with my wealth, it may diminish in respect of its inter currency value, it may suffer hyperinflation, as a part of my 'deal' with the issuer, they additionally provide a framework for a bank to operate, the bank has insurance, this means that a proportion of my wealth would be preserved even if the institution with which I entrusted my wealth turned out to be a bad actor. Furthermore my currency is protected from entropy, the accounting system used to store the value of my wealth is secure, by design, and by insurance by the issuer. In 'good times', I am rewarded for making my wealth available as capital for other users, or interest as it is known. Bitcoin is exciting, as a follow of everything from e-gold to beenz and an original CPU miner, not to mention possibly the only person to actually profit from the first generation ASIC you have to believe me when I say I am not here to detract from Bitcoin, I'm here to say it's not a currency, it's not an asset, it's really something novel, the value is indeterminable.

alanfalcon 9y ago
Seems to me the market has found a value, and while it changes from day to day and even hour to hour, it’s still pretty determined.
- nwah1 9y ago
  The market found a value for beanie babies too. You are mixing up what classical economists called exchange value and utility.
  - hndamien 9y ago
    The exchange value in this case directly impacts the utility. If you are moving large amounts of wealth and the price is high, then the transfer bandwidth is also high. If the price is low then the transfer bandwidth is low. Ability to transfer wealth geographically with no counter party is the utility.
makomk 9y ago
With current interest rates and inflation, I believe that GBP stored in savings accounts actually decreases in value over time in real terms... There doesn't seem to be many great places to store money in general, which arguably has resulted in bubbles in absolutely everything.
- wils1245 9y ago
  GBP inflation is currently less than 2%, and there are many very low risk options to account for it. The fact that money sitting in a checking account depreciates due to inflation is a terrible argument for cryptocurrency. No one actually does that with any significant amount of capital.
  - dharma1 9y ago
    GBP inflation is around 3%. However, due to the way inflation is measured with CPI, I think the actual figure is higher https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/october2017#main-points https://www.ons.gov.uk/economy/inflationandpriceindices/bull...
    - wils1245 9y ago
      Ok, fair enough, I was lazy in my Googling. But the point stands. Money yielding 0% and wasting away due to inflation is a straw man.
      - cloakandswagger 9y ago
        A straw man for what? Once your net worth reaches a certain level, it would be silly to let it sit in any one asset, whether that's a specific currency or commodity or whatever. Diversifying with a deflationary asset like Bitcoin is a wise strategy, one that is likely responsible for its $160B market cap.
      - dharma1 9y ago
        People who have surplus wealth usually have a mix of assets - stocks, bonds, commodoties, cash, property, and sometimes more exotic assets like art, collectible cars, cryptocurrencies, whatever. Everyone has their own preferences and risk appetite and as such a different mix of assets. Cash (at least major currencies) is one asset class that is relatively safe but tends to depreciate due to inflation, especially due to recent monetary expansion by central banks. Cash can also be easily seized, and this is a cause of concern for some. Contrasted with other asset classes that have yield, having all your net worth in cash would not be something you want to do.
alexasmyths 9y ago
Your GBP is not made valuable by 'the military'. It's made valuable by the credibility of numerous UK institutions and the social contract inherent in the every day trust that people have in it as a currency. That said - it's a currency, not really a store of value. And FYI - your GBP holdings are definitely generally worth more than you BTC, mostly because of the inherent volatility of BTC and the fact that it could go to 0 tomorrow. BTC owns the high end of the probabilistic outcomes - but also the low end. You won't get rich owning GBP, but they won't go to zero or near zero either. And if you live in an are where GBPs are useful, like the UK, well there is that added value.
ric2b 9y ago
> The GBP I hold is a promise that the issuer will go to almost any means necessary to maintain the value of my wealth in respect to its fungibility. That's an absurd notion, if that were true they wouldn't keep printing more of it and giving it to someone else.

by tudorw 9y ago

alanfalcon 9y ago

Seems to me the market has found a value, and while it changes from day to day and even hour to hour, it’s still pretty determined.

nwah1 9y ago
The market found a value for beanie babies too. You are mixing up what classical economists called exchange value and utility.
- hndamien 9y ago
  The exchange value in this case directly impacts the utility. If you are moving large amounts of wealth and the price is high, then the transfer bandwidth is also high. If the price is low then the transfer bandwidth is low. Ability to transfer wealth geographically with no counter party is the utility.

makomk 9y ago

With current interest rates and inflation, I believe that GBP stored in savings accounts actually decreases in value over time in real terms... There doesn't seem to be many great places to store money in general, which arguably has resulted in bubbles in absolutely everything.

wils1245 9y ago
GBP inflation is currently less than 2%, and there are many very low risk options to account for it. The fact that money sitting in a checking account depreciates due to inflation is a terrible argument for cryptocurrency. No one actually does that with any significant amount of capital.
- dharma1 9y ago
  GBP inflation is around 3%. However, due to the way inflation is measured with CPI, I think the actual figure is higher https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/october2017#main-points https://www.ons.gov.uk/economy/inflationandpriceindices/bull...
  - wils1245 9y ago
    Ok, fair enough, I was lazy in my Googling. But the point stands. Money yielding 0% and wasting away due to inflation is a straw man.
    - cloakandswagger 9y ago
      A straw man for what? Once your net worth reaches a certain level, it would be silly to let it sit in any one asset, whether that's a specific currency or commodity or whatever. Diversifying with a deflationary asset like Bitcoin is a wise strategy, one that is likely responsible for its $160B market cap.
    - dharma1 9y ago
      People who have surplus wealth usually have a mix of assets - stocks, bonds, commodoties, cash, property, and sometimes more exotic assets like art, collectible cars, cryptocurrencies, whatever. Everyone has their own preferences and risk appetite and as such a different mix of assets. Cash (at least major currencies) is one asset class that is relatively safe but tends to depreciate due to inflation, especially due to recent monetary expansion by central banks. Cash can also be easily seized, and this is a cause of concern for some. Contrasted with other asset classes that have yield, having all your net worth in cash would not be something you want to do.

alexasmyths 9y ago

Your GBP is not made valuable by 'the military'. It's made valuable by the credibility of numerous UK institutions and the social contract inherent in the every day trust that people have in it as a currency. That said - it's a currency, not really a store of value. And FYI - your GBP holdings are definitely generally worth more than you BTC, mostly because of the inherent volatility of BTC and the fact that it could go to 0 tomorrow. BTC owns the high end of the probabilistic outcomes - but also the low end. You won't get rich owning GBP, but they won't go to zero or near zero either. And if you live in an are where GBPs are useful, like the UK, well there is that added value.

ric2b 9y ago

> The GBP I hold is a promise that the issuer will go to almost any means necessary to maintain the value of my wealth in respect to its fungibility. That's an absurd notion, if that were true they wouldn't keep printing more of it and giving it to someone else.