6 ms·

Greenspan Says Bitcoin a Bubble Without Intrinsic Currency Value

26 points by diogenescynic 13y ago

ep103 13y ago
1.1) A alternative to Paypal 1.2) An alternative to Square / Venmo 1.3) An alternative to Level Up 1.4) A method of cheaply moving money between currencies without going through a financial institution. 1.5) An alternative to buying Gold 1.6) A way for libertarians / alternative currency advocates / people who are angry at wall street / The Fed to opt out of fiat currency, and lets remember, these are large movements with very little other outlets for popular expression. 1.7) Provide non-reversible transactions 1.8) Provide transactions that do not require trust on the part of either individual. 1.9) Provide transactions that do not require any financial institutions.
- thetruthhurts 13y ago
  That's the ideology of Bitcoin, the reality is that the majority of people are NOT using it for any of those things. It's still just a pyramid scheme after all these years because of the friction and time it takes to exchange USD for Bitcoins and back. The price changes so often you'd have to update your prices constantly, and with the constantly rising price of bitcoin, people earn money by keeping the currency and NOT using it. Bitcoin encourages people to KEEP their bitcoins. Why use them to buy something when next month they're going to increase in value.
  - dragonwriter 13y ago
    > Bitcoin encourages people to KEEP their bitcoins. Particularly, so long as it is preceived to be likely to increase rapidly in value, it encourages them to use bitcoin as an investment vehicle rather than investing bitcoins in other things. Obviously, if you want to consume things, you need to liquidate some assets to consume them, and if you've tied up your assets in bitcoin, you'll spend them for consumption.
  - ye 13y ago
    It can be all - a method of transferring money, a method of payment for products and services, and a convenient way to invest while it's going up. There's not that much friction to exchange it for currencies. I just transferred a five-figure USD amount to an exchange, sold it for BTC, sent them to another exchanged, sold BTC for Euro, withdrew it on the other side of the world. All of that through two exchanges based in countries I've never visited. I saved enormous amount of money compared to just wiring USD -> Euro through my bank. For every bad story your read online there are hundreds of transactions that went perfectly fine, but people rarely bother to write about their positive experiences.
- o2sd98 13y ago
  2.0) Is inflated by algorithm, not at the whim of the central bank. 2.1) Cannot be used to pursue mercantilist trade policy. 2.2) Cannot be created from nothing as credit. On the down side, it is not clear that the market for coins is liquid, and it is currently not widely accepted as tender, and may never be in the US/Japan (whose Central Banks/Governments have the most to lose with loss of control of money supply). But in spite of this, or maybe because of it, I think the future for Bitcoin is bright. When we see hedge funds becoming market makers in Bitcoins I think it's time has arrived.
ye 13y ago
Whenever somebody brings up the intrinsic value of bitcoin vs something else, like gold, I ask them - what's the intrinsic value of gold, give me a dollar figure. It's like seeing deer in the headlights, they never thought of that, they just keep repeating that talking point. Bitcoin's value is not in its growing price (it's nice, I admit), but in the fact that it solves many monetary problems - nearly free nearly instant transfers, extremely secure, global acceptance, non-reversible, not centralized. I admit it has its issues, but many will go away as it gains more popularity and stabilizes.
- letstryagain 13y ago
  I'm pretty sure the intrinsic value of gold is less than 10% of the market value. If the world suddenly stopped seeing gold as 'money' or a 'store of value' or whatever it would lose 90% or more of its value. Bitcoin would lose 100%. The difference is not that big.
  - mburns 13y ago
    Falling by 90% versus 100% is quite big. One is now 0. There other is still above 0.
  - ye 13y ago
    I disagree, bitcoin will always be useful as the best mode of transferring money, regardless of its value. And that alone gives it value. There's a reason people pay something like 5-8% to Western Union. It's a valuable service. Well, was. Reminder to myself: short Western Union and MoneyGram stocks.
    - TylerE 13y ago
      Bitcoin is worth $0.00. How is it useable for tranferring money? (Hint: It's not)
      - ye 13y ago
        It won't be. Have you ever seen a stock drop to zero? It's always something like 0.0000123.
adamnemecek 13y ago
Partial reactionary says something partial and reactionary, more news at 11.
- waqf 13y ago
  Funny, my reaction was more along the lines of "Stephen Hawking says sky is blue".
  - adamnemecek 13y ago
    Depends on how you look at it since he actually says two things a.) Bitcoin has no intrinsic value b.) there's a Bitcoin bubble. I'm not saying that there isn't a Bitcoin bubble (since I don't know), but I don't think that Greenspan knows either.
  - dnautics 13y ago
    I have limited respect for Stephen Hawking; Greenspan is no Stephen Hawking.
    - waqf 13y ago
      Right, but nobody has heard of the physicists who command only as much respect as Greenspan.
clarkevans 13y ago
Who is Greenspan? Oh right, the fella who advocated for 1999 banking deregulation [1] and 2001/2003 tax cuts that encouraged a historic boom (and subsequent bust) -- cleverly calling the direct consequences of his own policies "Irrational Exuberance". [1] http://www.federalreserve.gov/boarddocs/speeches/1999/19991115.htm http://www.federalreserve.gov/boarddocs/speeches/1999/199911...
- tptacek 13y ago
  On the one hand, your snarky dismissal. On the other, the second-longest-serving former chairman of the Federal Reserve, appointed and reappointed by 4 different Presidents. Best part: your dismissal dings him for not calling earlier bubbles, in a story where he calls a bubble. Also, for what it's worth, "Irrational exuberance" wasn't a Greenspan policy; it was itself an allusion to stock market activity being bubble-like.
  - baddox 13y ago
    Instead of appealing directly to the authority of Greenspan, you deferred to an appeal to the authority of 4 Presidents. Why should US Presidents be considered authorities on economic matters like this?
  - panarky 13y ago
    Greenspan's policies consisted of easy money, dismantling regulation, and trusting big banks to regulate themselves. Those policies failed miserably. Greenspan cleverly called the consequences of his policies 'irrational exuberance', and then failed to take action to rein in these consequences. The crisis that resulted from Greenspan's incorrect analysis and bad judgement rivaled the Great Depression in its severity and longevity. Greenspan's credibility is nil, so why should we listen to what he says about Bitcoin?
    - tptacek 13y ago
      I might even agree with you that Greenspan's credibility as a shepherd of the entire US economy is nil. But the inadequacy of that conclusion to the actual argument at hand is obvious. Short answer: because he knows much more about economics than we do.
D9u 13y ago
I'd say that the US Dollar also has "no intrinsic value." Should the military might which props up the USD suddenly be mitigated, and the world then decided to abandon trading in USD, then the true "intrinsic value" of that US Dollar will be realized.
bachback 13y ago
The guy who was wrong about EVERYTHING makes another prediction. what else is new?
- rhizome 13y ago
  Or he did it on purpose and is now lying about being mistaken.
- dnautics 13y ago
  I'm thinking, time to buy mBTC.
hosh 13y ago
What is "intrinsic value"? Do our current, non-digital currency have such "intrinsic value?" Seems to me, all value for all currencies are extrinsic.
icegreentea 13y ago
The reactions always jerk too far to either side. Currency clearly derives it value from a variety of sources, all stemming from beliefs held by people. Bitcoin as it stands right now derives the majority of its value from people holding that belief that its value will continue to rise - that is it is driven heavily by speculation. Most countries will jealously guard their currencies in foreign exchange markets specifically to reduce the effect of speculation on the value of their currency because they want their currency not to act as a method for people to get rich, but to facilitate economic activity within their own country. You can obviously see why speculation driven volatility (or this freakish deflation that Bitcoin has right now) can be bad for actually using the currency as a medium of exchange. This is especially true since most services that accept Bitcoin right now still interface heavily with other currency to deal with their suppliers and such. It's obviously knee-jerk to say that Bitcoin has no intrinsic value. Currencies do not require intrinsic value beyond people being fairly certain that other people will accept the currency as payment. This is why American dollars, gold, copper, bullets, alcohol, and seashells can all be used as effective currency given the right situation. The flip side is that it should also be obvious that the current value of Bitcoin is pretty much divorced from its value as a medium of exchange as its clearly fueled by speculation right now. When people stop believing that they can buy 1 BTC now and sell a few days later for 20% increase of US dollars, and start believing that they can buy 1 BTC now and that they can hang on to it for a few days or a few years and that it'll be roughly equally useful over that time-frame, that will be when the "value" of Bitcoin is set.
- tptacek 13y ago
  I didn't see him dismiss Bitcoin's utility as a currency (though for what it's worth, I don't see that either). I saw him refer to its current valuation as a bubble.
- TheRubyist 13y ago
  In the long term, can bitcoin be able to survive if it doesn't have property of having anti-speculation system in it's design ?
- deftnerd 13y ago
  The belief that the value will rise is only a minor part of my interest and investment in Bitcoin. My primary reason is a belief in the increase of its abilities and usefulness. Having programmable money opens a whole bunch of possible opportunities that haven't even been conceived yet. At the very least, it offers opportunities to disrupt the business practices of a lot of notaries, title companies, gambling operators, wire transfer companies, transparent systems for non-profit finances, etc. The concept of an open distributed ledger that doesn't require you to trust the parties you are dealing with is exciting. Simply put, I think its the future of monetary transfer. Perhaps not a good system to replace daily transactions, but certainly a good system for bulk transactions and to build a whole new generation of finance.
nbody 13y ago
Decentralized digital trust is pretty valuable, that is one of the ways to see bitcoin and its use as such is starting to become apparent even if we haven't really scratched the surface yet.
chj 13y ago
The value in Bitcoin is the network and the people joining in. Try to start another bitcoin-like network, you will know it is not easy to set up an alternative. I do think Bitcoin has a deflation problem that coin holders has no incentive to spend. And if the transaction volume goes up in future, the rewards for those new nodes may not be able to justify the cost unless you have a way to "rob" those early holders, or to force them spend before they die.
powertower 13y ago
> There is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it's a government or an individual. I wonder how many people skip right over this in the article thinking that's just another pointless or no-substance sentence. It pretty much sums up everything that makes Bitcoin unsutable for any type of real world (at scale) transactions and trade.

26 points by diogenescynic 13y ago

ep103 13y ago

1.1) A alternative to Paypal 1.2) An alternative to Square / Venmo 1.3) An alternative to Level Up 1.4) A method of cheaply moving money between currencies without going through a financial institution. 1.5) An alternative to buying Gold 1.6) A way for libertarians / alternative currency advocates / people who are angry at wall street / The Fed to opt out of fiat currency, and lets remember, these are large movements with very little other outlets for popular expression. 1.7) Provide non-reversible transactions 1.8) Provide transactions that do not require trust on the part of either individual. 1.9) Provide transactions that do not require any financial institutions.

thetruthhurts 13y ago
That's the ideology of Bitcoin, the reality is that the majority of people are NOT using it for any of those things. It's still just a pyramid scheme after all these years because of the friction and time it takes to exchange USD for Bitcoins and back. The price changes so often you'd have to update your prices constantly, and with the constantly rising price of bitcoin, people earn money by keeping the currency and NOT using it. Bitcoin encourages people to KEEP their bitcoins. Why use them to buy something when next month they're going to increase in value.
- dragonwriter 13y ago
  > Bitcoin encourages people to KEEP their bitcoins. Particularly, so long as it is preceived to be likely to increase rapidly in value, it encourages them to use bitcoin as an investment vehicle rather than investing bitcoins in other things. Obviously, if you want to consume things, you need to liquidate some assets to consume them, and if you've tied up your assets in bitcoin, you'll spend them for consumption.
- ye 13y ago
  It can be all - a method of transferring money, a method of payment for products and services, and a convenient way to invest while it's going up. There's not that much friction to exchange it for currencies. I just transferred a five-figure USD amount to an exchange, sold it for BTC, sent them to another exchanged, sold BTC for Euro, withdrew it on the other side of the world. All of that through two exchanges based in countries I've never visited. I saved enormous amount of money compared to just wiring USD -> Euro through my bank. For every bad story your read online there are hundreds of transactions that went perfectly fine, but people rarely bother to write about their positive experiences.
o2sd98 13y ago
2.0) Is inflated by algorithm, not at the whim of the central bank. 2.1) Cannot be used to pursue mercantilist trade policy. 2.2) Cannot be created from nothing as credit. On the down side, it is not clear that the market for coins is liquid, and it is currently not widely accepted as tender, and may never be in the US/Japan (whose Central Banks/Governments have the most to lose with loss of control of money supply). But in spite of this, or maybe because of it, I think the future for Bitcoin is bright. When we see hedge funds becoming market makers in Bitcoins I think it's time has arrived.

ye 13y ago

Whenever somebody brings up the intrinsic value of bitcoin vs something else, like gold, I ask them - what's the intrinsic value of gold, give me a dollar figure. It's like seeing deer in the headlights, they never thought of that, they just keep repeating that talking point. Bitcoin's value is not in its growing price (it's nice, I admit), but in the fact that it solves many monetary problems - nearly free nearly instant transfers, extremely secure, global acceptance, non-reversible, not centralized. I admit it has its issues, but many will go away as it gains more popularity and stabilizes.

letstryagain 13y ago
I'm pretty sure the intrinsic value of gold is less than 10% of the market value. If the world suddenly stopped seeing gold as 'money' or a 'store of value' or whatever it would lose 90% or more of its value. Bitcoin would lose 100%. The difference is not that big.
- mburns 13y ago
  Falling by 90% versus 100% is quite big. One is now 0. There other is still above 0.
- ye 13y ago
  I disagree, bitcoin will always be useful as the best mode of transferring money, regardless of its value. And that alone gives it value. There's a reason people pay something like 5-8% to Western Union. It's a valuable service. Well, was. Reminder to myself: short Western Union and MoneyGram stocks.
  - TylerE 13y ago
    Bitcoin is worth $0.00. How is it useable for tranferring money? (Hint: It's not)
    - ye 13y ago
      It won't be. Have you ever seen a stock drop to zero? It's always something like 0.0000123.

adamnemecek 13y ago

Partial reactionary says something partial and reactionary, more news at 11.

waqf 13y ago
Funny, my reaction was more along the lines of "Stephen Hawking says sky is blue".
- adamnemecek 13y ago
  Depends on how you look at it since he actually says two things a.) Bitcoin has no intrinsic value b.) there's a Bitcoin bubble. I'm not saying that there isn't a Bitcoin bubble (since I don't know), but I don't think that Greenspan knows either.
- dnautics 13y ago
  I have limited respect for Stephen Hawking; Greenspan is no Stephen Hawking.
  - waqf 13y ago
    Right, but nobody has heard of the physicists who command only as much respect as Greenspan.

clarkevans 13y ago

Who is Greenspan? Oh right, the fella who advocated for 1999 banking deregulation [1] and 2001/2003 tax cuts that encouraged a historic boom (and subsequent bust) -- cleverly calling the direct consequences of his own policies "Irrational Exuberance". [1] http://www.federalreserve.gov/boarddocs/speeches/1999/19991115.htm http://www.federalreserve.gov/boarddocs/speeches/1999/199911...

tptacek 13y ago
On the one hand, your snarky dismissal. On the other, the second-longest-serving former chairman of the Federal Reserve, appointed and reappointed by 4 different Presidents. Best part: your dismissal dings him for not calling earlier bubbles, in a story where he calls a bubble. Also, for what it's worth, "Irrational exuberance" wasn't a Greenspan policy; it was itself an allusion to stock market activity being bubble-like.
- baddox 13y ago
  Instead of appealing directly to the authority of Greenspan, you deferred to an appeal to the authority of 4 Presidents. Why should US Presidents be considered authorities on economic matters like this?
- panarky 13y ago
  Greenspan's policies consisted of easy money, dismantling regulation, and trusting big banks to regulate themselves. Those policies failed miserably. Greenspan cleverly called the consequences of his policies 'irrational exuberance', and then failed to take action to rein in these consequences. The crisis that resulted from Greenspan's incorrect analysis and bad judgement rivaled the Great Depression in its severity and longevity. Greenspan's credibility is nil, so why should we listen to what he says about Bitcoin?
  - tptacek 13y ago
    I might even agree with you that Greenspan's credibility as a shepherd of the entire US economy is nil. But the inadequacy of that conclusion to the actual argument at hand is obvious. Short answer: because he knows much more about economics than we do.

D9u 13y ago

I'd say that the US Dollar also has "no intrinsic value." Should the military might which props up the USD suddenly be mitigated, and the world then decided to abandon trading in USD, then the true "intrinsic value" of that US Dollar will be realized.

bachback 13y ago

The guy who was wrong about EVERYTHING makes another prediction. what else is new?

rhizome 13y ago
Or he did it on purpose and is now lying about being mistaken.
dnautics 13y ago
I'm thinking, time to buy mBTC.

hosh 13y ago

What is "intrinsic value"? Do our current, non-digital currency have such "intrinsic value?" Seems to me, all value for all currencies are extrinsic.

icegreentea 13y ago

The reactions always jerk too far to either side. Currency clearly derives it value from a variety of sources, all stemming from beliefs held by people. Bitcoin as it stands right now derives the majority of its value from people holding that belief that its value will continue to rise - that is it is driven heavily by speculation. Most countries will jealously guard their currencies in foreign exchange markets specifically to reduce the effect of speculation on the value of their currency because they want their currency not to act as a method for people to get rich, but to facilitate economic activity within their own country. You can obviously see why speculation driven volatility (or this freakish deflation that Bitcoin has right now) can be bad for actually using the currency as a medium of exchange. This is especially true since most services that accept Bitcoin right now still interface heavily with other currency to deal with their suppliers and such. It's obviously knee-jerk to say that Bitcoin has no intrinsic value. Currencies do not require intrinsic value beyond people being fairly certain that other people will accept the currency as payment. This is why American dollars, gold, copper, bullets, alcohol, and seashells can all be used as effective currency given the right situation. The flip side is that it should also be obvious that the current value of Bitcoin is pretty much divorced from its value as a medium of exchange as its clearly fueled by speculation right now. When people stop believing that they can buy 1 BTC now and sell a few days later for 20% increase of US dollars, and start believing that they can buy 1 BTC now and that they can hang on to it for a few days or a few years and that it'll be roughly equally useful over that time-frame, that will be when the "value" of Bitcoin is set.

tptacek 13y ago
I didn't see him dismiss Bitcoin's utility as a currency (though for what it's worth, I don't see that either). I saw him refer to its current valuation as a bubble.
TheRubyist 13y ago
In the long term, can bitcoin be able to survive if it doesn't have property of having anti-speculation system in it's design ?
deftnerd 13y ago
The belief that the value will rise is only a minor part of my interest and investment in Bitcoin. My primary reason is a belief in the increase of its abilities and usefulness. Having programmable money opens a whole bunch of possible opportunities that haven't even been conceived yet. At the very least, it offers opportunities to disrupt the business practices of a lot of notaries, title companies, gambling operators, wire transfer companies, transparent systems for non-profit finances, etc. The concept of an open distributed ledger that doesn't require you to trust the parties you are dealing with is exciting. Simply put, I think its the future of monetary transfer. Perhaps not a good system to replace daily transactions, but certainly a good system for bulk transactions and to build a whole new generation of finance.

nbody 13y ago

Decentralized digital trust is pretty valuable, that is one of the ways to see bitcoin and its use as such is starting to become apparent even if we haven't really scratched the surface yet.

chj 13y ago

The value in Bitcoin is the network and the people joining in. Try to start another bitcoin-like network, you will know it is not easy to set up an alternative. I do think Bitcoin has a deflation problem that coin holders has no incentive to spend. And if the transaction volume goes up in future, the rewards for those new nodes may not be able to justify the cost unless you have a way to "rob" those early holders, or to force them spend before they die.

powertower 13y ago

> There is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it's a government or an individual. I wonder how many people skip right over this in the article thinking that's just another pointless or no-substance sentence. It pretty much sums up everything that makes Bitcoin unsutable for any type of real world (at scale) transactions and trade.