"I agree with your conclusion, but not your reasoning. "Over monetized fiat-based economy" has nothing to do with Bitcoin value (not sure what you mean by "over-monetised", but my guess is "too much paper money"? What would "the right amount" be?)"
I couldn't say what the "right" amount would be in terms of a value because there is so much theoretical fiat money in existence that only a systems-analysis perspective could even approach the question. In general terms the "right" amount of money would maintain price stability and the value of the money (in my opinion) and would see the price of most goods and commodities being set through the equilibration of supply and demand. That is not the case.
In other words, your ideal economy is one with exactly 0% inflation? Money should be printed in times when economy is booming, and torched when it tanks? I realize this is a cheap shot, but what, exactly, would the mechanics be for maintaining this 0%?
Prices of government bonds (above all), equities, gold, bitcoin, housing (in many places including the UK) are all going up, even though the underlying economy is wretched, as the wealthy and corporations desperately search from somewhere to stash their mountains of fiat cash. This is a demand, of sorts, but only one of speculation rather than valuing the underlying asset.
I'm not sure if i'm reading you correctly, but it seems that you're mistakenly lumping currencies together with investment tools. Money is not an investment tool. It was never intended for hoarding -- that's one of the reasons deflationary economy is considered a "bad thing." I hope i'm preaching to the chorus when i say that "saving" is *the opposite* of investing. Investing is *spending*. "Use it or lose it," that's how money is meant to work. Not "use it or put it under your mattress."
Of all these bubbles John Quiglin said of bitcoin: "Bitcoin is perhaps the finest example of a pure bubble". The over-monetized fiat economy has everything to do with the bitcoin bubble: people are driven into exotic investments by inflation and low interest rates. If inflation is higher than the bank interest rate then what to you do? Invest. Accept risk. You might as well accept risk, even if you are naturally risk averse, because inflation will destroy the value of your savings anyway. That's why I got into bitcoin. So the over-monetized fiat economy has everything to do with it.
Let me get this out of the way first: i hope everything works out for you, and i hope you've considered conventional investment strategies & rejected them. I doubt i'd be telling you anything new by mentioning that Bitcoin is one of the riskiest investments out there. I'd say government bonds, which you listed beside Bitcoin as a booming investment, are substantially less nerve wracking.
"For your interpretation to be valid, Bitcoin value would have to be (# of dollars in circulation) / (# of coins in circulation) * (fudge factor). This is obviously not, and has never been, the case."
No it wouldn't. My point actually concerns the effect that ultra-loose monetary policy, and the accumulation of vast concentrations of wealth in a few hands, has on peoples investment decisions. Look at any broadsheet newspaper in the UK. They are always going on about the next big alternative investment. Wine, stamps, antiques, you name it. Why?
Human greed? Love for easy money? Slow news days? Take your pick.
You can't get decent bank interest. You have to take risks just to preserve your purchasing power. In this climate it is no surprise that a bubble has formed around bitcoin. There is an insatiable demand for novel investments and thats why the Winklevoss twins are getting into it. The American rich will likely take a close look at bitcoin.
Assuming that things are as bad as you say (i agree, to an extent), unstable times have always spawned "novel" stuff -- from scams to pseudo-spirituality to more social unrest to you name it. Bitcoin was created as a currency -- a tall order in itself. Now it got a sex change and became an investment. I hope things work out.
The idea of buying bitcoins right now isn't because its better, its because there might be some "good" to doing so. This is a trickly one. In a market based society one tends to make decision based on which way the material incentives flow. As a result one's moral sense can wither somewhat. You see this in relation to illegal file sharing. I once saw someone argue that you "should" choose to pay for a certain product. Another person reacted angrily, saying that to do so when you could get it for free is insane. The idea of doing something for reasons other than immediate personal gain seemed to him to be irrational. However the idea in occasionally spending the occasional bitcoin is to help the fledgeling economy, perhaps because you believe in bitcoin as something other than investment.
I'm not preaching its just something to consider. I couldn't say that benevolence is my greatest virtue.
Ignoring "the good of Bitcoin" for the moment, i'm simply pointing out that (some) people misconstrue what the Bitcoin economy is. They think it's SR & SD & buying ASICs -- i say it's traders trading in bitcoin.
