5 ms·

I like the part about bitcoin 'not having amy fundamentals to fall back to'. As if fiat currencies are any different.

Nursie 14y ago
Well, fiat currencies have economies running in them where bitcoin mostly has speculation, so yeah, there's a difference.
- cinquemb 14y ago
  And they used to be running on bartering, gold and silver. Things change. I wonder how "running" cyprus is now :P I'd say the fundamentals could be found looking in the weaknesses in government/central bank fiat and the controls put in place on how freely people can obtain and receive goods/services. But yeah, this is a bubble, but if you look at the fundamentals that governments/central banks are running on now, it just takes one country with a overly bloated private banking sector and dieselboom to apply his templates… :P
  - nikcub 14y ago
    cyprus doesn't have its own currency, which is why they had to resort to doing what they did they could have otherwise printed a bunch of money and deflated their debt, which is what the US gov does
Thrymr 14y ago
The USD has the US government behind it. Whatever you think of that, it's not nothing.
- willurd 14y ago
  "The USD has the US government behind it" What does that even mean? Also, the US government doesn't really have anything to do with the USD; the USD is managed solely by the Federal Reserve, and the Federal Reserve is not a branch of the US government (it's a privately held bank; look it up). "it's not nothing" It's worse than nothing. The Federal Reserve can and does change the value of the dollar at will (it's called inflation). That's why you can buy a loaf of bread with your 5 bucks now, but in 10 years your 5 bucks probably won't even buy a candy bar. Contrast that with gold. In 1913 (the year the Federal Reserve was created), you could buy a house with 100 ounces of gold. 100 1913 dollars is worth roughly 2 2013 dollars, but 100 1913 ounces of gold is worth exactly 100 2013 ounces of gold, and you can still buy a house with it (100 ounces of gold is $156,740 USD; no, this won't buy you a house in New York, but it will in most other parts of the country). That's what it means for a currency to be backed by something of value. Value doesn't change.
  - fr0sty 14y ago
    Just to pick some other dates: 100 ounces of gold in 2000 was worth ~$28k which wouldn't buy much house anywhere. Also, comparing gold @ ~$20/oz in 1913 to a dollar stuffed under a mattress in the same year is a bit of a false comparison. The Compounding the same $20 in 10year Tbonds (a decent 'risk free rate' starting in 1928 (the first year I could find data) would yield ~$679 in 2000 (outperforming gold by over 2x) and ~$1385 in 2012 (underperforming slightly, but with almost no volatility).
    - willurd 14y ago
      You can't compare gold just sitting there with USD gaining interest in an investment for 90 years. Well you can, but then you'd be making a ridiculous comparison.
      - fr0sty 14y ago
        What is ridiculous about that? Tbonds are pretty much the definition of the "risk free rate of return" for USD. Is there an alternate (non-zero) "risk free rate" for gold that you would like use instead to make comparisons?
        willurd 14y ago
        Because you're comparing the value of one thing over time against the rate at which you would gain value in a different investment over time. I can see an argument for why you might say tbonds have been a better investment than gold, per se, but that's not what I'm talking about. I'm talking about the necessary volatility of fiat money because it's not backed by anything of real, unchanging value. I'm talking about the purchasing power of the same amount of gold and USD over time.
        fr0sty 14y ago
        > it's not backed by anything of real, unchanging value. Are you actually arguing that gold's value does not change? Also, what are you using to measure the "volatility" you claim fiat money has so much of?
herge 14y ago
Most 'fiat currencies' can be gotten in exchange for services rendered to their respective governments, and also used to pay taxes.
niggler 14y ago
USD used to be backed by silver (and it was explicitly stated -- see http://www.ebay.com/itm/1957-1-Dollar-Bill-Payable-in-Silver-Historic-Item-Circulated-/400428359257 http://www.ebay.com/itm/1957-1-Dollar-Bill-Payable-in-Silver... for an example) Nowadays the power of the US government backs the dollar.
- willurd 14y ago
  "the power of the US government backs the dollar" How exactly is it doing that?
pmelendez 14y ago
They are somehow different. Governments back currencies up with debt (it used to be gold) and/or natural resources. Bitcoin is decentralized by definition, and that's a huge difference because only rely in market value (not saying is bad per se). This might change if governments start regulating and supporting the currency.

Well, fiat currencies have economies running in them where bitcoin mostly has speculation, so yeah, there's a difference.

cinquemb 14y ago
And they used to be running on bartering, gold and silver. Things change. I wonder how "running" cyprus is now :P I'd say the fundamentals could be found looking in the weaknesses in government/central bank fiat and the controls put in place on how freely people can obtain and receive goods/services. But yeah, this is a bubble, but if you look at the fundamentals that governments/central banks are running on now, it just takes one country with a overly bloated private banking sector and dieselboom to apply his templates… :P
- nikcub 14y ago
  cyprus doesn't have its own currency, which is why they had to resort to doing what they did they could have otherwise printed a bunch of money and deflated their debt, which is what the US gov does

Thrymr 14y ago

The USD has the US government behind it. Whatever you think of that, it's not nothing.

willurd 14y ago
"The USD has the US government behind it" What does that even mean? Also, the US government doesn't really have anything to do with the USD; the USD is managed solely by the Federal Reserve, and the Federal Reserve is not a branch of the US government (it's a privately held bank; look it up). "it's not nothing" It's worse than nothing. The Federal Reserve can and does change the value of the dollar at will (it's called inflation). That's why you can buy a loaf of bread with your 5 bucks now, but in 10 years your 5 bucks probably won't even buy a candy bar. Contrast that with gold. In 1913 (the year the Federal Reserve was created), you could buy a house with 100 ounces of gold. 100 1913 dollars is worth roughly 2 2013 dollars, but 100 1913 ounces of gold is worth exactly 100 2013 ounces of gold, and you can still buy a house with it (100 ounces of gold is $156,740 USD; no, this won't buy you a house in New York, but it will in most other parts of the country). That's what it means for a currency to be backed by something of value. Value doesn't change.
- fr0sty 14y ago
  Just to pick some other dates: 100 ounces of gold in 2000 was worth ~$28k which wouldn't buy much house anywhere. Also, comparing gold @ ~$20/oz in 1913 to a dollar stuffed under a mattress in the same year is a bit of a false comparison. The Compounding the same $20 in 10year Tbonds (a decent 'risk free rate' starting in 1928 (the first year I could find data) would yield ~$679 in 2000 (outperforming gold by over 2x) and ~$1385 in 2012 (underperforming slightly, but with almost no volatility).
  - willurd 14y ago
    You can't compare gold just sitting there with USD gaining interest in an investment for 90 years. Well you can, but then you'd be making a ridiculous comparison.
    - fr0sty 14y ago
      What is ridiculous about that? Tbonds are pretty much the definition of the "risk free rate of return" for USD. Is there an alternate (non-zero) "risk free rate" for gold that you would like use instead to make comparisons?
      - willurd 14y ago
        Because you're comparing the value of one thing over time against the rate at which you would gain value in a different investment over time. I can see an argument for why you might say tbonds have been a better investment than gold, per se, but that's not what I'm talking about. I'm talking about the necessary volatility of fiat money because it's not backed by anything of real, unchanging value. I'm talking about the purchasing power of the same amount of gold and USD over time.
        fr0sty 14y ago
        > it's not backed by anything of real, unchanging value. Are you actually arguing that gold's value does not change? Also, what are you using to measure the "volatility" you claim fiat money has so much of?

herge 14y ago

Most 'fiat currencies' can be gotten in exchange for services rendered to their respective governments, and also used to pay taxes.

niggler 14y ago

USD used to be backed by silver (and it was explicitly stated -- see http://www.ebay.com/itm/1957-1-Dollar-Bill-Payable-in-Silver-Historic-Item-Circulated-/400428359257 http://www.ebay.com/itm/1957-1-Dollar-Bill-Payable-in-Silver... for an example) Nowadays the power of the US government backs the dollar.

willurd 14y ago
"the power of the US government backs the dollar" How exactly is it doing that?

pmelendez 14y ago

They are somehow different. Governments back currencies up with debt (it used to be gold) and/or natural resources. Bitcoin is decentralized by definition, and that's a huge difference because only rely in market value (not saying is bad per se). This might change if governments start regulating and supporting the currency.