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Currencies are goods like any other goods and the people who own them have divergent purposes. When Krugman writes "we want [a monetary system] to facilitate tr
by hexis 15y ago
Currencies are goods like any other goods and the people who own them have divergent purposes. When Krugman writes "we want [a monetary system] to facilitate transactions and make the economy as a whole rich", he's assuming a lot. Obviously, some of the people who own bitcoins right now are not interested in facilitating financial transactions to the detriment of their net worth. So, for people who want that facilitation, bitcoin isn't getting the job done, but the people who are using bitcoin as an investment are getting just what they want. Those two conditions could flip fairly quickly down the line, but that's how these things go. But for Krugman to just assume that only one of these is an acceptable condition just begs the question.
- johnny22 15y agoI prefer currency to asset. I wouldn't hold bitcoins to spend.
- endersshadow 15y agoCurrencies are not goods and should not be thought of as goods. They are mediums of exchange[1]. They may be backed by goods (such as gold), but currency itself should have no inherent value (otherwise, it's a terrible medium of exchange). What you're talking about are securities[2]. There is a distinct difference. Bitcoins are ostensibly a security masquerading as a currency. [1] http://en.wikipedia.org/wiki/Currency http://en.wikipedia.org/wiki/Currency [2] http://en.wikipedia.org/wiki/Security_(finance) http://en.wikipedia.org/wiki/Security_(finance)
- hexis 15y agoNo, I think I am correct. Currency exchange rates are prices and in that sense a currency is a good. The typical use of a currency is as a medium of exchange, but people use goods for different reasons. That was my point originally.
- brown9-2 15y agoI don't think it's just an assumption - I think it is fair to state that a currency whose primary mission is not to facilitate transactions will fail to catch on. So far BitCoin has failed to catch on.
- hexis 15y agoPart of my original point was that currencies don't have "missions", people do. A person may or may not wish to own a bitcoin in order to facilitate transactions. A person might also wish to own one as a speculative investment. Neither "mission" is necessarily better than the other. Krugman just assumes otherwise.