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With all due respect I think you both misunderstand the principle of Gold as currency (or bitcoin as currency for that matter). Currency at its most basic leve

With all due respect I think you both misunderstand the principle of Gold as currency (or bitcoin as currency for that matter). Currency at its most basic level is a representation of the value generated by the society it is used in. So the number of U.S. dollars represents the entire value of what U.S. citizens produce at any given time. What makes commodities valuable as currency is they are finite. There's only so much Gold, Silver, and Bitcoins in the world. Since all these commodities can be used as currencies (i.e. they can be converted to paper currency) they represent value beyond just its practicality because it stays consistent as the amount of each fiat currency available grows. So Gold goes up in value because it isn't really going up in value. Everything else is going down.

jerf 15y ago
"So the number of U.S. dollars represents the entire value of what U.S. citizens produce at any given time." That's not even close to correct under any theory of economics, I don't even know where to start explaining that. "What makes commodities valuable as currency is they are finite." No, that just means they happen to exist in the real universe, in which everything is finite, which is hardly a way of distinguishing between "currency" and "not currency" (in information theory terms, that has no information in it). What makes currencies valuable, and what makes things valuable in general, is that people want them. People want the government not to smash their doors down and haul them away and put them in jail, or freeze their assets, etc. The rest of the value of a dollar recursively emanates out from that. There's a value to having a dollar beyond just the goods and services that can be obtained, it prevents Uncle Sam from destroying you. There's no value to a BitCoin; the base case of BitCoin is "zero", unlike a dollar or any other government fiat currency, unlike gold (which has industrial and decorative uses which may not stay constant but won't drop to zero for a long time), unlike anything else called a "currency". Currencies aren't arbitrary numbers. (Not being jailed/fined/killed by something may seem like a bizarre base for a currency if you think about it, and I wouldn't disagree. I do rather wish people understood the gravity of treating "government" like a silver bullet and just firing it every which way to solve every problem, especially when turning everything into a criminal law offense. However genteel we've made it over the centuries, it's still pointing guns at people, and I'd prefer to reserve that for truly important things.)
- grinnbearit 15y ago
  Having dollars does prevent Uncle Sam from destroying you and assuming no one wants to be destroyed, everyone wants them. This makes the dollar a pretty good medium of exchange (a short term store of value) but not very good as a long term store of value. Gold is still valuable as a medium of exchange largely due to historical reasons but the problems of moving gold, storing gold and using gold for very small transactions outweigh its benefits for anything other than a store of value, gold is simply too crippled to be used as a currency. Bitcoin aims to fill that gap by having similar properties to other successful stores of value, (durability, reasonable finiteness) along with medium of exchange properties like fungibility, but at the same time being digital and thus adding properties like near instant transfers (on a global scale) and near infinite divisibility. Its not certain if Bitcoin will be successful, something better might turn up to replace it, but IMO a purely digital currency definitely has a future.

jerf 15y ago

"So the number of U.S. dollars represents the entire value of what U.S. citizens produce at any given time." That's not even close to correct under any theory of economics, I don't even know where to start explaining that. "What makes commodities valuable as currency is they are finite." No, that just means they happen to exist in the real universe, in which everything is finite, which is hardly a way of distinguishing between "currency" and "not currency" (in information theory terms, that has no information in it). What makes currencies valuable, and what makes things valuable in general, is that people want them. People want the government not to smash their doors down and haul them away and put them in jail, or freeze their assets, etc. The rest of the value of a dollar recursively emanates out from that. There's a value to having a dollar beyond just the goods and services that can be obtained, it prevents Uncle Sam from destroying you. There's no value to a BitCoin; the base case of BitCoin is "zero", unlike a dollar or any other government fiat currency, unlike gold (which has industrial and decorative uses which may not stay constant but won't drop to zero for a long time), unlike anything else called a "currency". Currencies aren't arbitrary numbers. (Not being jailed/fined/killed by something may seem like a bizarre base for a currency if you think about it, and I wouldn't disagree. I do rather wish people understood the gravity of treating "government" like a silver bullet and just firing it every which way to solve every problem, especially when turning everything into a criminal law offense. However genteel we've made it over the centuries, it's still pointing guns at people, and I'd prefer to reserve that for truly important things.)

grinnbearit 15y ago
Having dollars does prevent Uncle Sam from destroying you and assuming no one wants to be destroyed, everyone wants them. This makes the dollar a pretty good medium of exchange (a short term store of value) but not very good as a long term store of value. Gold is still valuable as a medium of exchange largely due to historical reasons but the problems of moving gold, storing gold and using gold for very small transactions outweigh its benefits for anything other than a store of value, gold is simply too crippled to be used as a currency. Bitcoin aims to fill that gap by having similar properties to other successful stores of value, (durability, reasonable finiteness) along with medium of exchange properties like fungibility, but at the same time being digital and thus adding properties like near instant transfers (on a global scale) and near infinite divisibility. Its not certain if Bitcoin will be successful, something better might turn up to replace it, but IMO a purely digital currency definitely has a future.