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His argument (that articles priced in bitcoin change their priced based on the value of a fiat currency such as USD) is valid as a qualitative judgement of bitc

His argument (that articles priced in bitcoin change their priced based on the value of a fiat currency such as USD) is valid as a qualitative judgement of bitcoin's utility as a currency, but isn't really a valid test of what is or isn't a currency. Case in point: The Zimbabwean dollar remained a currency through its hyperinflation period, and is still considered a currency (however useless) even though it is no longer the official currency of Zimbabwe. Now that Zimbabwe officially accepts relatively stable foreign currencies, prices of goods have stabilised in that country.

JumpCrisscross 13y ago
The analogy with the Zimbabwean dollar seems appropriate. Most of its value, too, accrues to miners and FX traders.
JonSkeptic 13y ago
The Zimbabwean dollar analogy is appropriate. Throughout its wild swings and hyperinflation, it was backed by a government. Bitcoin is backed by nothing at all. One is a currency, the other is a commodity.
- gaius 13y ago
  How do you establish a new currency? Well it is easy, you take control over some area of land, by military force or by treaty with the present occupiers of it, then you declare that the people living there need to pay you taxes, then you decide what to accept those taxes in. And that's what it means for a government to "back" a currency.
  - Touche 13y ago
    Considering all of the uproar caused by the Newsweek article, if people knowing you have bitcoins puts you in danger, then I'd say it's not a currency I want anything to do with.
    - mnw21cam 13y ago
      Yeah, if everyone knew I had £1,000,000,000.00 hidden under my mattress (and some mattress that would be), then I imagine my life might be under a little more threat than otherwise too.
    - eleitl 13y ago
      Let's say you have 400 MUSD, or a ton of gold, and it becomes widely known.
      - Touche 13y ago
        Err, it is widely known, google "world's richest people". The difference is, as your sibling post pointed out, those people don't have it hidden under a mattress.
    - deleted 13y ago
      [deleted]
- nly 13y ago
  Fiat is only "backed by government" in the sense that you're forced to obtain it to pay debts and taxes. Other than that, the Fed can print more to prevent deflation and the Government can act politically to try and stem inflation. There are limits to that control.
  - deleted 13y ago
    [deleted]
mnw21cam 13y ago
Bitcoin isn't legal tender anywhere. One could argue that a currency is something which is legal tender somewhere in the world.
- Tloewald 13y ago
  Yes but the argument at hand is that BTC is not a sensible unit of exchange. How much for a hotel room .... now, oh wait now, no no no I mean now?
- dllthomas 13y ago
  So is the Somali Shilling no longer a currency? People use it to engage in commerce and settle debts, but the government that issued it doesn't exist anymore.
- nly 13y ago
  If I had 30 million British pennies it wouldn't be legal tender, because nobody is required to accept that volume by law. Does that mean my 30 million pennies aren't currency?
  - jljljl 13y ago
    That is not what legal tender means. Legal tender means that the form of payment is a legally accepted option for extinguishing a debt. If you owed someone a debt of 30,000 British pounds, you could repay that debt with the pennies, and they would have to accept it. So pennies are both a legal tender and a currency in that case.
    - JetSetWilly 13y ago
      You are incorrect: http://www.royalmint.com/aboutus/policies-and-guidelines/legal-tender-guidelines http://www.royalmint.com/aboutus/policies-and-guidelines/leg... Pennies are only legal tender for amounts not exceeding 20p edit: Also, as the link makes clear, you don't have to accept them even below 20p. All that legal tender means is: > that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender. It does not mean that any ordinary transaction has to take place in legal tender or only within the amount denominated by the legislation
tfinniga 13y ago
Whether it's a currency is a separate discussion from whether it has value. Currencies have value based on the stability of the government, how many goods are priced in that currency, the GDP and trade balance of the country, etc. I'd guess that Buffet is confident in his ability to measure the value of a currency. Bitcoin is not a currency. I'd bet that Buffet doesn't feel confident about measuring the value of bitcoin.
- chii 13y ago
  I think you may have gotten it the other way around - Buffet doesn't feel confident about measuring/guestimating the value of bitcoins, and so he doesn't consider it a currency. A while ago, i read that Buffet's investment strategy is to find companies/stock that is undervalued, and buy it. That means his mindset is that any investment must be made by first making value judgements. In the case of bitcoins, he must be judging the volatility of bitcoins is way too high, and that investing in it isn't a good return on investment.
  - tfinniga 13y ago
    I think we mostly agree. Bitcoin is not bullion. Bitcoin is not bank notes. Bitcoin is not fiat currency. Bitcoin is something new. In this case, when Buffett said that bitcoin is not currency, I think he specifically meant that bitcoin is not fiat currency, or any other type of currency where the method of measuring value is well understood. The main idea behind value investing, as far as I can tell, is to buy things that are being sold for much less than their intrinsic value. If you can't determine the intrinsic value, then on what basis would you invest? Not that bitcoin doesn't have value - it's just that for someone that practices value investing like Buffett, there's not enough information to decide to invest.
jwheeler79 13y ago
you guys want to argue with warren buffett about money? stop while youre ahead genius.
aninhumer 13y ago
At this point I'm reasonably sure there is not enough consensus on the interpretation of the word "currency" to make any meaningful statements about what is or is not one. And the same goes for many other words that get thrown around in these kinds of discussions. I'm sure there are lots of people who feel that they know the "correct" definition, many with a compelling justification for its validity, but without consensus the word is little more than a rhetorical value judgement. If people want to have meaningful discussions about new topics which fall outside the established semantic shorthands of past discussion, it generally better to avoid those words entirely. There are lots of unambiguous claims one can make about Bitcoin, and I really wish people would talk in terms of those, instead of endlessly arguing about what names we're allowed to call it.
Tyrannosaurs 13y ago
Does Bitcoin meeting a dictionary definition of a currency (that is being a medium of exchange) really matter given his actual point (which you've clearly understood)? Also, if your defence of Bitcoin as a currency is to compare it to the Zimbabwean Dollar (a currency ridiculed and later abandoned) then is it OK if I ever need a lawyer that I pass on you and go to the next guy? ;-)
- kordless 13y ago
  His primary point of view is making money. If I can't figure out how to make money on something, I will dismiss it. This is likely what he is doing ATM, but not a good assumption moving forward.
  - Tyrannosaurs 13y ago
    I don't think he's dismissing it for all time, he's just raising a valid point about it as it stands right now. I don't read what he's saying as anti-Bitcoin per se, he's just saying that right now the massive variability around it means that it's not really a functional currency. That's a valid view and not one he's alone in holding - most economists, hell most people, whether they're pro or anti-Bitcoin will accept that the current fluctuations are problematic when it comes to day to day use.

JumpCrisscross 13y ago

The analogy with the Zimbabwean dollar seems appropriate. Most of its value, too, accrues to miners and FX traders.

JonSkeptic 13y ago

The Zimbabwean dollar analogy is appropriate. Throughout its wild swings and hyperinflation, it was backed by a government. Bitcoin is backed by nothing at all. One is a currency, the other is a commodity.

gaius 13y ago
How do you establish a new currency? Well it is easy, you take control over some area of land, by military force or by treaty with the present occupiers of it, then you declare that the people living there need to pay you taxes, then you decide what to accept those taxes in. And that's what it means for a government to "back" a currency.
- Touche 13y ago
  Considering all of the uproar caused by the Newsweek article, if people knowing you have bitcoins puts you in danger, then I'd say it's not a currency I want anything to do with.
  - mnw21cam 13y ago
    Yeah, if everyone knew I had £1,000,000,000.00 hidden under my mattress (and some mattress that would be), then I imagine my life might be under a little more threat than otherwise too.
  - eleitl 13y ago
    Let's say you have 400 MUSD, or a ton of gold, and it becomes widely known.
    - Touche 13y ago
      Err, it is widely known, google "world's richest people". The difference is, as your sibling post pointed out, those people don't have it hidden under a mattress.
  - deleted 13y ago
    [deleted]
nly 13y ago
Fiat is only "backed by government" in the sense that you're forced to obtain it to pay debts and taxes. Other than that, the Fed can print more to prevent deflation and the Government can act politically to try and stem inflation. There are limits to that control.
- deleted 13y ago
  [deleted]

mnw21cam 13y ago

Bitcoin isn't legal tender anywhere. One could argue that a currency is something which is legal tender somewhere in the world.

Tloewald 13y ago
Yes but the argument at hand is that BTC is not a sensible unit of exchange. How much for a hotel room .... now, oh wait now, no no no I mean now?
dllthomas 13y ago
So is the Somali Shilling no longer a currency? People use it to engage in commerce and settle debts, but the government that issued it doesn't exist anymore.
nly 13y ago
If I had 30 million British pennies it wouldn't be legal tender, because nobody is required to accept that volume by law. Does that mean my 30 million pennies aren't currency?
- jljljl 13y ago
  That is not what legal tender means. Legal tender means that the form of payment is a legally accepted option for extinguishing a debt. If you owed someone a debt of 30,000 British pounds, you could repay that debt with the pennies, and they would have to accept it. So pennies are both a legal tender and a currency in that case.
  - JetSetWilly 13y ago
    You are incorrect: http://www.royalmint.com/aboutus/policies-and-guidelines/legal-tender-guidelines http://www.royalmint.com/aboutus/policies-and-guidelines/leg... Pennies are only legal tender for amounts not exceeding 20p edit: Also, as the link makes clear, you don't have to accept them even below 20p. All that legal tender means is: > that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender. It does not mean that any ordinary transaction has to take place in legal tender or only within the amount denominated by the legislation

tfinniga 13y ago

Whether it's a currency is a separate discussion from whether it has value. Currencies have value based on the stability of the government, how many goods are priced in that currency, the GDP and trade balance of the country, etc. I'd guess that Buffet is confident in his ability to measure the value of a currency. Bitcoin is not a currency. I'd bet that Buffet doesn't feel confident about measuring the value of bitcoin.

chii 13y ago
I think you may have gotten it the other way around - Buffet doesn't feel confident about measuring/guestimating the value of bitcoins, and so he doesn't consider it a currency. A while ago, i read that Buffet's investment strategy is to find companies/stock that is undervalued, and buy it. That means his mindset is that any investment must be made by first making value judgements. In the case of bitcoins, he must be judging the volatility of bitcoins is way too high, and that investing in it isn't a good return on investment.
- tfinniga 13y ago
  I think we mostly agree. Bitcoin is not bullion. Bitcoin is not bank notes. Bitcoin is not fiat currency. Bitcoin is something new. In this case, when Buffett said that bitcoin is not currency, I think he specifically meant that bitcoin is not fiat currency, or any other type of currency where the method of measuring value is well understood. The main idea behind value investing, as far as I can tell, is to buy things that are being sold for much less than their intrinsic value. If you can't determine the intrinsic value, then on what basis would you invest? Not that bitcoin doesn't have value - it's just that for someone that practices value investing like Buffett, there's not enough information to decide to invest.

jwheeler79 13y ago

you guys want to argue with warren buffett about money? stop while youre ahead genius.

aninhumer 13y ago

At this point I'm reasonably sure there is not enough consensus on the interpretation of the word "currency" to make any meaningful statements about what is or is not one. And the same goes for many other words that get thrown around in these kinds of discussions. I'm sure there are lots of people who feel that they know the "correct" definition, many with a compelling justification for its validity, but without consensus the word is little more than a rhetorical value judgement. If people want to have meaningful discussions about new topics which fall outside the established semantic shorthands of past discussion, it generally better to avoid those words entirely. There are lots of unambiguous claims one can make about Bitcoin, and I really wish people would talk in terms of those, instead of endlessly arguing about what names we're allowed to call it.

Tyrannosaurs 13y ago

Does Bitcoin meeting a dictionary definition of a currency (that is being a medium of exchange) really matter given his actual point (which you've clearly understood)? Also, if your defence of Bitcoin as a currency is to compare it to the Zimbabwean Dollar (a currency ridiculed and later abandoned) then is it OK if I ever need a lawyer that I pass on you and go to the next guy? ;-)

kordless 13y ago
His primary point of view is making money. If I can't figure out how to make money on something, I will dismiss it. This is likely what he is doing ATM, but not a good assumption moving forward.
- Tyrannosaurs 13y ago
  I don't think he's dismissing it for all time, he's just raising a valid point about it as it stands right now. I don't read what he's saying as anti-Bitcoin per se, he's just saying that right now the massive variability around it means that it's not really a functional currency. That's a valid view and not one he's alone in holding - most economists, hell most people, whether they're pro or anti-Bitcoin will accept that the current fluctuations are problematic when it comes to day to day use.