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Change bitcoin to US dollars. "If you owned all of the dollars in the world and you offered it to me for $25, I would not take it..." The same argument applies

by thesz 4y ago

Change bitcoin to US dollars. "If you owned all of the dollars in the world and you offered it to me for $25, I would not take it..." The same argument applies.

2devnull 4y ago
So you’re a gold bug?
hcknwscommenter 4y ago
No it does not. See my previous comment.
- thesz 4y ago
  Yes it does, see my answer to some previous comment.
  - hcknwscommenter 4y ago
    Hmm. something wierd going on. Both of us don't seem to have a previous comment. Perhaps it got deleted or my memory is going poor. Anyway, my earlier point was that US dollars have an intrinsic value in that they keep you in good standing with the US federal and local Govs. You can pay your taxes in US dollars and nothing else. If someone had all the US dollars in the world, then everyone else would need to trade very value things to that person to get those dollars. The value of those dollars would go up a lot in terms of a basket of tradeable assets Bitcoin is the opposite I think. If someone had all of the bitcoins, then I would expect bitcoin to be worth nothing.
jerf 4y ago
Not quite. With US Dollars, you could pay the US government to not send the MenWithGuns to your house because you failed to pay income tax on "all the dollars in the world" coming in to your possession. It is a crucial difference. If you want to say, this isn't really that solid a foundation to build a money system on... hey, I'm right there myself, honestly. The US dollar really is based on "the full faith and credit of the US government", and specifically its ability to project power in order to harass people failing to pay its taxes. Looking out into the world, I'm seeing a negative first derivative on that, and possibly a negative second derivative too. But that is still a cut above the nothing standing behind cryptocurrency. At the present time, based on its behavior, cryptocurrency is a derivative of the US dollar and is dependent on it and the prior low interest rates it had, not a separate entity with its own trust base.
- aww_dang 4y ago
  On a long enough time horizon all governments and empires fall. All paper money ultimately becomes worth only the paper it is printed on. This is where I disagree with the maximalists of specific cryptocurrencies. If utility means anything, better payment networks will emerge as tech advances. Of course gold solves for both of these issues. Agree with your other points to a degree. Cryptocurrency is derivative in that it discounts the heavily regulated financial markets. The easy money policies can be viewed as part of that. Part of the value proposition in users choosing voluntary means rather than collaborating with coercive money. Even for a simple use case like online shopping there is regulatory overhead. Chargebacks, merchant agreements and AML considerations all come into play. Try billing users $1 or 25 cents with PayPal as an example. Most shops won't allow you to buy a pack of chewing gum with a card.
- _blz2 4y ago
  why would they collect taxes on a currency they have no control over anymore? Might as well start a new currency.
  - jerf 4y ago
    Of course the hypothetical is intrinsically a bit silly, but the "US" in "US Dollar" is not extraneous. Even if you did somehow have All The US Dollars In The World, the "US" still would retain control over the currency, inasmuch as the currency that is the "US Dollar" is defined as being the currency they have control over. Even if you had all of them, they would retain the ability to print them, retain the ability to insist that you pay your income taxes to them, etc. There have been many fiat currencies in history to look at. It doesn't take long to see that pure fiat currencies really are based on the full faith and credit of the issuing authority. These issuing authorities don't have to be governments; the only thing stopping private parties from issuing currencies is just that governments tend to see that as muscling in on their turf, but it's not otherwise impossible or even particularly difficult. (Getting everyone to accept your currency is what is difficult.) The US dollar is a derivative of the US government. Something that is not a derivative of the US government is something other than a "US Dollar". The US government really couldn't start a new currency because the base case of the currency, what it really is under layers and layers of finances and financial structures and loans and everything else, is "what the US government accepts". Again, the hypothetical is impossible anyhow, which kind of skews how you think about it, but at its core, at the deepest level, what the US Dollar is is what the US government accepts as payment, and below that, the fact that it is the US Government that will come after you if they are not satisfied with your payment. Anything else that they would accept for the same reason is basically the same thing as a US dollar as a result, and if the US government tried to create "multiple currencies", the financial system would swiftly come to an exchange rate based on precisely how much of the US Government threat can be avoided with each one. That is the base case upon which all the further recursion is based. And again, I'm not making any more claims beyond "that is what it is"; I'm not saying that's obviously good, or that's obviously stable, or that anyone who questions it is an idiot... this post is simply about understanding what is. How you feel about what is, and what further conclusions you come to about what is, are up to you.
chadash 4y ago
I'm sure he meant this tongue in cheek, but dollars are ultimately backed and propped up by the US government. Sure, no currency is worth anything if it's literally controlled entirely by one person. There are plenty of cryptocurrencies that are pretty much identical to bitcoin but that didn't take off. The only thing that bitcoin has going for it is a shared belief that it's worth something. On the other hand, the US Dollar is a worth something because of a shared belief that the US government is going to do whatever it takes to make sure it's worth something. Even if I thought that the US government is gonna get overthrown next year, I still need to pay this year's taxes in US dollars, so it derives at least some of its value from there. To be fair to Buffett, he doesn't care about owning dollars either. Or even gold, which has a damn good track record of being valuable. His assets are pretty much entirely in some form of equity. He likes owning shares of companies that sell some product. Sure, he needs dollars to transact, but it's not like he's holding tons of dollars either.

by thesz 4y ago

Change bitcoin to US dollars. "If you owned all of the dollars in the world and you offered it to me for $25, I would not take it..." The same argument applies.

2devnull 4y ago

So you’re a gold bug?

hcknwscommenter 4y ago

No it does not. See my previous comment.

thesz 4y ago
Yes it does, see my answer to some previous comment.
- hcknwscommenter 4y ago
  Hmm. something wierd going on. Both of us don't seem to have a previous comment. Perhaps it got deleted or my memory is going poor. Anyway, my earlier point was that US dollars have an intrinsic value in that they keep you in good standing with the US federal and local Govs. You can pay your taxes in US dollars and nothing else. If someone had all the US dollars in the world, then everyone else would need to trade very value things to that person to get those dollars. The value of those dollars would go up a lot in terms of a basket of tradeable assets Bitcoin is the opposite I think. If someone had all of the bitcoins, then I would expect bitcoin to be worth nothing.

jerf 4y ago

Not quite. With US Dollars, you could pay the US government to not send the MenWithGuns to your house because you failed to pay income tax on "all the dollars in the world" coming in to your possession. It is a crucial difference. If you want to say, this isn't really that solid a foundation to build a money system on... hey, I'm right there myself, honestly. The US dollar really is based on "the full faith and credit of the US government", and specifically its ability to project power in order to harass people failing to pay its taxes. Looking out into the world, I'm seeing a negative first derivative on that, and possibly a negative second derivative too. But that is still a cut above the nothing standing behind cryptocurrency. At the present time, based on its behavior, cryptocurrency is a derivative of the US dollar and is dependent on it and the prior low interest rates it had, not a separate entity with its own trust base.

aww_dang 4y ago
On a long enough time horizon all governments and empires fall. All paper money ultimately becomes worth only the paper it is printed on. This is where I disagree with the maximalists of specific cryptocurrencies. If utility means anything, better payment networks will emerge as tech advances. Of course gold solves for both of these issues. Agree with your other points to a degree. Cryptocurrency is derivative in that it discounts the heavily regulated financial markets. The easy money policies can be viewed as part of that. Part of the value proposition in users choosing voluntary means rather than collaborating with coercive money. Even for a simple use case like online shopping there is regulatory overhead. Chargebacks, merchant agreements and AML considerations all come into play. Try billing users $1 or 25 cents with PayPal as an example. Most shops won't allow you to buy a pack of chewing gum with a card.
_blz2 4y ago
why would they collect taxes on a currency they have no control over anymore? Might as well start a new currency.
- jerf 4y ago
  Of course the hypothetical is intrinsically a bit silly, but the "US" in "US Dollar" is not extraneous. Even if you did somehow have All The US Dollars In The World, the "US" still would retain control over the currency, inasmuch as the currency that is the "US Dollar" is defined as being the currency they have control over. Even if you had all of them, they would retain the ability to print them, retain the ability to insist that you pay your income taxes to them, etc. There have been many fiat currencies in history to look at. It doesn't take long to see that pure fiat currencies really are based on the full faith and credit of the issuing authority. These issuing authorities don't have to be governments; the only thing stopping private parties from issuing currencies is just that governments tend to see that as muscling in on their turf, but it's not otherwise impossible or even particularly difficult. (Getting everyone to accept your currency is what is difficult.) The US dollar is a derivative of the US government. Something that is not a derivative of the US government is something other than a "US Dollar". The US government really couldn't start a new currency because the base case of the currency, what it really is under layers and layers of finances and financial structures and loans and everything else, is "what the US government accepts". Again, the hypothetical is impossible anyhow, which kind of skews how you think about it, but at its core, at the deepest level, what the US Dollar is is what the US government accepts as payment, and below that, the fact that it is the US Government that will come after you if they are not satisfied with your payment. Anything else that they would accept for the same reason is basically the same thing as a US dollar as a result, and if the US government tried to create "multiple currencies", the financial system would swiftly come to an exchange rate based on precisely how much of the US Government threat can be avoided with each one. That is the base case upon which all the further recursion is based. And again, I'm not making any more claims beyond "that is what it is"; I'm not saying that's obviously good, or that's obviously stable, or that anyone who questions it is an idiot... this post is simply about understanding what is. How you feel about what is, and what further conclusions you come to about what is, are up to you.

chadash 4y ago

I'm sure he meant this tongue in cheek, but dollars are ultimately backed and propped up by the US government. Sure, no currency is worth anything if it's literally controlled entirely by one person. There are plenty of cryptocurrencies that are pretty much identical to bitcoin but that didn't take off. The only thing that bitcoin has going for it is a shared belief that it's worth something. On the other hand, the US Dollar is a worth something because of a shared belief that the US government is going to do whatever it takes to make sure it's worth something. Even if I thought that the US government is gonna get overthrown next year, I still need to pay this year's taxes in US dollars, so it derives at least some of its value from there. To be fair to Buffett, he doesn't care about owning dollars either. Or even gold, which has a damn good track record of being valuable. His assets are pretty much entirely in some form of equity. He likes owning shares of companies that sell some product. Sure, he needs dollars to transact, but it's not like he's holding tons of dollars either.