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> Bitcoin, by contrast, has no intrinsic value at all. This comes right after a paragraph describing how the US dollar has no intrinsic value other than the fa

> Bitcoin, by contrast, has no intrinsic value at all. This comes right after a paragraph describing how the US dollar has no intrinsic value other than the fact that it is the required currency for paying US taxes and that the Federal Reserve stabilizes it through the money supply (Modern Monetary Theory would argue these two points are effectively the same, but I digress). Does this mean fiat currencies have intrinsic value? If so, how is this value more 'intrinsic' than the value a network gives a cryptocurrency? Bitcoin's overextended and struggling network certainly makes it overvalued compared to the well-oiled machine that is the USD. But that's hardly a reason to write off cryptocurrencies in general.

hcknwscommenter 9y ago
Do not elide over the word 'required.' It is not a meaningless word. In my opinion it makes all the difference. In comparison, the 'intrinsic value' of the network is not intrinsic at all. Miners and hodlers and users are free to use any other cryptocurrency, or none.
wz1000 9y ago
> Does this mean fiat currencies have intrinsic value? If so, how is this value more 'intrinsic' than the value a network gives a cryptocurrency? Because you are required to pay taxes. > although Modern Monetary Theory would argue the two are effectively the same Actually, if I understand correctly, MMT would argue that a central bank has very little control over money supply(other than in the rare case of acting as a "lender of last resort"). Instead, money is created through the act of deficit spending. http://bilbo.economicoutlook.net/blog/?p=1623 http://bilbo.economicoutlook.net/blog/?p=1623 A helpful illustriation by MMT'er Warren Mosler > The question is, “How do you turn litter into money?” > So, I take my business cards out here, and these are twenty dollars a piece, if anybody wants to buy any. No? Any takers? No? Okay. > All right, well if anybody wants to stay after and help clean up the carpet and tidy up the room, I’m going to pay one per hour. Or five per hour, or whatever, one per hour. Anybody want to stay and help? Okay, not a lot of takers. > Then I add one more thing: Look, there’s only one way out of here and there’s a man at the door with a nine millimeter machine gun. Okay? And you can’t get out of here without five of my cards. > Now things have changed. I’ve now turned litter into money. Now, you will buy these, you will work for these things if you want to get out. The man at the door is the tax man and that’s the function of taxes.
- nordsieck 9y ago
  > money is created through the act of deficit spending A slight quibble: All federal government spending is money creation. All federal government taxation or fees is money destruction. If you ignore debt (not a very MMT thing to do), you could say that net money creation is deficit spending.
- jrcii 9y ago
  > a central bank has very little control over money supply(other than in the rare case of acting as a "lender of last resort") https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking
deleted 9y ago
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gooseus 9y ago
Well, your quote seems to be writing off Bitcoin, not cryptocurrencies in general... but I don't understand this logic that keeps being put out. The most powerful government in the world with long established laws and multiple powerful institutions guarantees USD as "legal tender for all debts, public charges, taxes, and dues."[0] and has been stable for decades, if not centuries. The concept of cryptocurrencies didn't exist 10 years ago and bitcoin hasn't been stable for more than a few years, probably only months and is guaranteed by a computer network controlled primarily by machines running in China[1]. If a solar flare brings down the internet, all cryptocurrencies are immediately worthless, and that's assuming they'll ever be widely accepted for goods and services. So long as the US government is functional USD will be accepted for all goods in services. That is the difference in "intrinsic value", as far as I see it. [0] https://www.law.cornell.edu/uscode/text/31/5103 https://www.law.cornell.edu/uscode/text/31/5103 [1] https://blockchain.info/pools https://blockchain.info/pools
- cableshaft 9y ago
  If a solar flare brings down the internet (presumably you mean via EMP), the amount of USD wealth that would be lost would be equally if not more catastrophic, because most of it is not kept in physical bills, but in 1's and 0's on computer systems as well. "In fact, economists estimate that only 8 percent of the world's currency exists as physical cash. The rest exists only on a computer hard drive, in electronic bank accounts around the world." https://money.howstuffworks.com/currency6.htm https://money.howstuffworks.com/currency6.htm Edit: Looks like the percentage is a bit higher if you're talking just USD. "All told, anyone looking for all of the U.S. dollars in the world in July 2013 could expect to find approximately $10.5 trillion in existence, using the M2 money supply definition. If you just want to count actual notes and coins, there are about U.S. $1.2 trillion floating around the globe." https://money.howstuffworks.com/how-much-money-is-in-the-world.htm https://money.howstuffworks.com/how-much-money-is-in-the-wor...
  - gooseus 9y ago
    I'm not actually talking about an EMP, I believe it's more of a CME[0]. Coronal mass ejections would have more of an impact on the long lines, so pretty much the core power and networking infrastructure. But yes, this would affect the ability to take out cash from ATMs and banks wouldn't be able to check your account balance, though most have local generators or they would pretty quick, so local credit unions might still be operational. However, anyone with cash on hand would be able to utilize it to make purchases and the local/state/federal government would fly into emergency mode to protect the ability for hard currency to be used. They would also make sure that financial institutions are the first ones back online in order to get the economy flowing again and the Fed would make sure that a dollar was worth the same after the lights came back on as it was before. Laws exist which ensure that manipulation of the currency and even opportunistic price gouging would be punished afterwards. Not so for bitcoin or any other cryptocurrency... no government guarantees it and if the network went down unevenly who knows what sort of manipulations would be attempted on those networks that now had players with over 51%... Since Chinese mining companies control well over 60% of the network, would the remaining miners be able to handle the load? Especially since many miners would just keep rolling in isolation and immediately start publishing simultaneous blocks when they reconnected with each other... If intercontinental infrastructure weren't repaired for many months, would Europe, US and Asia all end up with their own branches of the blockchain? Has the bitcoin community even run a model of what to do in a similar disaster situation? I know that after 9/11 every bank has super rigorous disaster recovery plans and backup mechanisms, so they for sure have hardened backups and power generators at core locations. I mean, this is ridiculous, bitcoin can't even be used to buy something and isn't accepted anywhere useful and probably never will. So if this scenario happened, the first thing that would happen is the price would collapse as everyone waited on Coinbase's doorstep to sell their coins to get cash so they can actually buy something useful. [0] https://sciencing.com/effects-solar-flares-technology-20402.html https://sciencing.com/effects-solar-flares-technology-20402....
deleted 9y ago
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jdoliner 9y ago
> US dollar has no intrinsic value other than the fact that it is the required currency for paying US taxes That's extrinsic value. A pretty simple test you can apply to figure this out: would the value still exist if you were all alone on a desert island? Food has intrinsic value, you'd still value food in this case because you still need to eat. Dollars do not, they're no good without another entity to give them to. Same for bitcoin. Mostly the same for gold although there are some uses of gold as a metal. So bitcoin is a bubble, in that it has no intrinsic value, and the same is true of dollars. The important question is which of these bubbles is going to burst first.

hcknwscommenter 9y ago

Do not elide over the word 'required.' It is not a meaningless word. In my opinion it makes all the difference. In comparison, the 'intrinsic value' of the network is not intrinsic at all. Miners and hodlers and users are free to use any other cryptocurrency, or none.

wz1000 9y ago

> Does this mean fiat currencies have intrinsic value? If so, how is this value more 'intrinsic' than the value a network gives a cryptocurrency? Because you are required to pay taxes. > although Modern Monetary Theory would argue the two are effectively the same Actually, if I understand correctly, MMT would argue that a central bank has very little control over money supply(other than in the rare case of acting as a "lender of last resort"). Instead, money is created through the act of deficit spending. http://bilbo.economicoutlook.net/blog/?p=1623 http://bilbo.economicoutlook.net/blog/?p=1623 A helpful illustriation by MMT'er Warren Mosler > The question is, “How do you turn litter into money?” > So, I take my business cards out here, and these are twenty dollars a piece, if anybody wants to buy any. No? Any takers? No? Okay. > All right, well if anybody wants to stay after and help clean up the carpet and tidy up the room, I’m going to pay one per hour. Or five per hour, or whatever, one per hour. Anybody want to stay and help? Okay, not a lot of takers. > Then I add one more thing: Look, there’s only one way out of here and there’s a man at the door with a nine millimeter machine gun. Okay? And you can’t get out of here without five of my cards. > Now things have changed. I’ve now turned litter into money. Now, you will buy these, you will work for these things if you want to get out. The man at the door is the tax man and that’s the function of taxes.

nordsieck 9y ago
> money is created through the act of deficit spending A slight quibble: All federal government spending is money creation. All federal government taxation or fees is money destruction. If you ignore debt (not a very MMT thing to do), you could say that net money creation is deficit spending.
jrcii 9y ago
> a central bank has very little control over money supply(other than in the rare case of acting as a "lender of last resort") https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking

deleted 9y ago

[deleted]

gooseus 9y ago

Well, your quote seems to be writing off Bitcoin, not cryptocurrencies in general... but I don't understand this logic that keeps being put out. The most powerful government in the world with long established laws and multiple powerful institutions guarantees USD as "legal tender for all debts, public charges, taxes, and dues."[0] and has been stable for decades, if not centuries. The concept of cryptocurrencies didn't exist 10 years ago and bitcoin hasn't been stable for more than a few years, probably only months and is guaranteed by a computer network controlled primarily by machines running in China[1]. If a solar flare brings down the internet, all cryptocurrencies are immediately worthless, and that's assuming they'll ever be widely accepted for goods and services. So long as the US government is functional USD will be accepted for all goods in services. That is the difference in "intrinsic value", as far as I see it. [0] https://www.law.cornell.edu/uscode/text/31/5103 https://www.law.cornell.edu/uscode/text/31/5103 [1] https://blockchain.info/pools https://blockchain.info/pools

cableshaft 9y ago
If a solar flare brings down the internet (presumably you mean via EMP), the amount of USD wealth that would be lost would be equally if not more catastrophic, because most of it is not kept in physical bills, but in 1's and 0's on computer systems as well. "In fact, economists estimate that only 8 percent of the world's currency exists as physical cash. The rest exists only on a computer hard drive, in electronic bank accounts around the world." https://money.howstuffworks.com/currency6.htm https://money.howstuffworks.com/currency6.htm Edit: Looks like the percentage is a bit higher if you're talking just USD. "All told, anyone looking for all of the U.S. dollars in the world in July 2013 could expect to find approximately $10.5 trillion in existence, using the M2 money supply definition. If you just want to count actual notes and coins, there are about U.S. $1.2 trillion floating around the globe." https://money.howstuffworks.com/how-much-money-is-in-the-world.htm https://money.howstuffworks.com/how-much-money-is-in-the-wor...
- gooseus 9y ago
  I'm not actually talking about an EMP, I believe it's more of a CME[0]. Coronal mass ejections would have more of an impact on the long lines, so pretty much the core power and networking infrastructure. But yes, this would affect the ability to take out cash from ATMs and banks wouldn't be able to check your account balance, though most have local generators or they would pretty quick, so local credit unions might still be operational. However, anyone with cash on hand would be able to utilize it to make purchases and the local/state/federal government would fly into emergency mode to protect the ability for hard currency to be used. They would also make sure that financial institutions are the first ones back online in order to get the economy flowing again and the Fed would make sure that a dollar was worth the same after the lights came back on as it was before. Laws exist which ensure that manipulation of the currency and even opportunistic price gouging would be punished afterwards. Not so for bitcoin or any other cryptocurrency... no government guarantees it and if the network went down unevenly who knows what sort of manipulations would be attempted on those networks that now had players with over 51%... Since Chinese mining companies control well over 60% of the network, would the remaining miners be able to handle the load? Especially since many miners would just keep rolling in isolation and immediately start publishing simultaneous blocks when they reconnected with each other... If intercontinental infrastructure weren't repaired for many months, would Europe, US and Asia all end up with their own branches of the blockchain? Has the bitcoin community even run a model of what to do in a similar disaster situation? I know that after 9/11 every bank has super rigorous disaster recovery plans and backup mechanisms, so they for sure have hardened backups and power generators at core locations. I mean, this is ridiculous, bitcoin can't even be used to buy something and isn't accepted anywhere useful and probably never will. So if this scenario happened, the first thing that would happen is the price would collapse as everyone waited on Coinbase's doorstep to sell their coins to get cash so they can actually buy something useful. [0] https://sciencing.com/effects-solar-flares-technology-20402.html https://sciencing.com/effects-solar-flares-technology-20402....

deleted 9y ago

[deleted]

jdoliner 9y ago

> US dollar has no intrinsic value other than the fact that it is the required currency for paying US taxes That's extrinsic value. A pretty simple test you can apply to figure this out: would the value still exist if you were all alone on a desert island? Food has intrinsic value, you'd still value food in this case because you still need to eat. Dollars do not, they're no good without another entity to give them to. Same for bitcoin. Mostly the same for gold although there are some uses of gold as a metal. So bitcoin is a bubble, in that it has no intrinsic value, and the same is true of dollars. The important question is which of these bubbles is going to burst first.