Medium of Exchange vs Store of Value - and effect on BTC worth - page 4.

Ibian

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Quote from: natd on December 07, 2013, 09:42:17 AM

Quote from: Ibian on December 07, 2013, 09:10:45 AM

Quote from: natd on December 07, 2013, 08:46:58 AM

Quote from: Ibian on December 07, 2013, 07:58:26 AM

Quote from: natd on December 07, 2013, 07:46:43 AM

BTC is no store of value,

Explain.

Bitcoin is not backed by anything. Fiat money derives it's value by a government declaring it to be legal tender. BTC does not have legal tender status in any jurisdiction.

Been over this countless times just in the short while I have been on the board. Bitcoin is backed by the strength and security of the network as well as the safety compared to fiat. Ultimately it all comes down to trust, even with government "backed" (in that it is not actually backed by anything physical) paper money.

Quote from: Misesian on December 07, 2013, 09:02:51 AM

But I believe there is a core group of bitcoin owners who recognise the economic problems currently facing many governments and they have lost faith in the currency issued by these governments

Hi!

Ok, in that case (BTC is "backed by the strength and security of the network as well as the safety"), where is the download link where I can redeem my BTCs for that in order to store some safety in my own home, or use it in my laptop once in a while?
See? It's not backed by anything of value. You cannot trade subjective stuff as strenght, security or safety. My 2 bit cents Wink

Define value and explain how governments that confiscate peoples bank holdings provide it.

natd

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Quote from: Ibian on December 07, 2013, 09:10:45 AM

Quote from: natd on December 07, 2013, 08:46:58 AM

Quote from: Ibian on December 07, 2013, 07:58:26 AM

Quote from: natd on December 07, 2013, 07:46:43 AM

BTC is no store of value,

Explain.

Bitcoin is not backed by anything. Fiat money derives it's value by a government declaring it to be legal tender. BTC does not have legal tender status in any jurisdiction.

Been over this countless times just in the short while I have been on the board. Bitcoin is backed by the strength and security of the network as well as the safety compared to fiat. Ultimately it all comes down to trust, even with government "backed" (in that it is not actually backed by anything physical) paper money.

Quote from: Misesian on December 07, 2013, 09:02:51 AM

But I believe there is a core group of bitcoin owners who recognise the economic problems currently facing many governments and they have lost faith in the currency issued by these governments

Hi!

Ok, in that case (BTC is "backed by the strength and security of the network as well as the safety"), where is the download link where I can redeem my BTCs for that in order to store some safety in my own home, or use it in my laptop once in a while?
See? It's not backed by anything of value. You cannot trade subjective stuff as strenght, security or safety. My 2 bit cents Wink

Misesian

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Activity: 94

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Quote from: deisik on December 07, 2013, 09:15:40 AM

Quote from: Misesian on December 07, 2013, 09:02:51 AM

Quote from: deisik on December 07, 2013, 08:02:35 AM

And so what? This (and what you wrote after the emboldened text) doesn't change a thing about the fact - it's Bitcoin's volatility, not of the fiat currency you exchange it for. I have already written in my post that volatility (and stability for that matter) of a currency is predetermined by the size of the economy, i.e. the overall volume of goods and services that you can buy or have rendered to you. The money supply being constantly expanding doesn't affect the volatility of the currency (just in case that was your point)...

Of course expansion of the money supply affects the volatility of a currency, look at the exchange value of USD for oil or food it's constantly changing (or getting worse), money is just a means of exchange so increasing the amount in circulation reduces the exchange value for other goods and currencies. If you look at the price of oil in gold you can see it's barely changed, what can we infer from this? Expansion of the money supply increases the volatility of a currency.

At first you say that money supply is constantly expanding, then you tell me to look at the exchange value of USD for oil... Did you look at the dynamics of oil prices yourself before writing this nonsense? It cost somewhere above 140 dollars in 2008 (or was it in 2007?), now it is at 110 dollars for barrel and fell to 30 dollars somewhere in between. How can this ever be possible? To say that just increasing the amount of money in circulation reduces the exchange value for other goods and currencies is meaningless unless you account for other factors, which could make your assumption flat-out wrong in most cases. If the economy is expanding at a faster pace then the money supply, the currency could actually appreciate meaning that prices and axchange rates go down...

Sure oil prices have fell recently, but look at the 50 years graphs and tell me which currency is more volatile, I'm not sure about the dynamics of oil pricing so I cannot comment on recent changes but over the past 50 years oil priced in gold has remained steady wheareas priced in dollars it has increased substantially since 1998 (when the money printing really got going). How can oil prices fall 30 dollars despite rapid expansion in money supply? Perhaps efficiency gains in extracting oil or discovery of a new reserve, I honestly don't know but I never stated price rises always come about as a result of monetary inflation, it does however always leads to an upward pressure in prices that could be offset by other factors. You said "If the economy is expanding at a faster pace then the money supply, the currency could actually appreciate meaning that prices and axchange rates go down..." Yes this is true but the exchange value of money is lower than it could have been if monetary expansion never happened, you see what i'm getting at?

deisik

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Quote from: Misesian on December 07, 2013, 09:02:51 AM

Quote from: deisik on December 07, 2013, 08:02:35 AM

And so what? This (and what you wrote after the emboldened text) doesn't change a thing about the fact - it's Bitcoin's volatility, not of the fiat currency you exchange it for. I have already written in my post that volatility (and stability for that matter) of a currency is predetermined by the size of the economy, i.e. the overall volume of goods and services that you can buy or have rendered to you. The money supply being constantly expanding doesn't affect the volatility of the currency (just in case that was your point)...

Of course expansion of the money supply affects the volatility of a currency, look at the exchange value of USD for oil or food it's constantly changing (or getting worse), money is just a means of exchange so increasing the amount in circulation reduces the exchange value for other goods and currencies. If you look at the price of oil in gold you can see it's barely changed, what can we infer from this? Expansion of the money supply increases the volatility of a currency.

At first you say that money supply is constantly expanding, then you tell me to look at the exchange value of USD for oil... Did you look at the dynamics of oil prices yourself before writing this nonsense? It cost somewhere above 140 dollars in 2008 (or was it in 2007?), now it is at 110 dollars for barrel and fell to 30 dollars somewhere in between. How can this ever be possible? To say that just increasing the amount of money in circulation reduces the exchange value for other goods and currencies is meaningless unless you account for other factors, which could make your assumption flat-out wrong in most cases. If the economy is expanding at a faster pace then the money supply, the currency could actually appreciate meaning that prices and axchange rates go down...

Ibian

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Quote from: natd on December 07, 2013, 08:46:58 AM

Quote from: Ibian on December 07, 2013, 07:58:26 AM

Quote from: natd on December 07, 2013, 07:46:43 AM

BTC is no store of value,

Explain.

Bitcoin is not backed by anything. Fiat money derives it's value by a government declaring it to be legal tender. BTC does not have legal tender status in any jurisdiction.

Been over this countless times just in the short while I have been on the board. Bitcoin is backed by the strength and security of the network as well as the safety compared to fiat. Ultimately it all comes down to trust, even with government "backed" (in that it is not actually backed by anything physical) paper money.

Quote from: Misesian on December 07, 2013, 09:02:51 AM

But I believe there is a core group of bitcoin owners who recognise the economic problems currently facing many governments and they have lost faith in the currency issued by these governments

Hi!

natd

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Quote from: natd on December 07, 2013, 08:59:39 AM

Quote from: Ibian on December 07, 2013, 08:30:19 AM

Quote from: invisiblehand on December 07, 2013, 08:08:55 AM

Can't businesses accept BTC at "market price" like restaurants sell fish

I think that would be a viable solution

Nothing theoretically wrong with that, question is if it's legal.

In the US, according to FinCEN Final Rule, it's legal to use it "to purchase real or virtual goods or services" and doesn't require licenses. However, if I'm a store and accept your BTC, I suppose I cannot sell the BTC, I'd have to use it to buy something as well, as to sell a virtual currency requires a money transmitter license.

Caution note: I'm not a lawyer, just a law student. Please for real business use, you should consult your legal counselor.

Misesian

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Quote from: deisik on December 07, 2013, 08:02:35 AM

Quote from: Misesian on December 07, 2013, 07:52:07 AM

The volatility you're talking about is when you price bitcoins in fiat money in which the supply is constantly expanding (fiat), we are forced to use centrally controlled fiat money because that is what our masters demand we pay our taxes in, if we had a system of free banking who would use a currency that was centrally controlled by government? Everybody would be using things like gold, silver and bitcoins because they provide many more advantages as currency one of them being a reliable store of value.

And so what? This (and what you wrote after the emboldened text) doesn't change a thing about the fact - it's Bitcoin's volatility, not of the fiat currency you exchange it for. I have already written in my post that volatility (and stability for that matter) of a currency is predetermined by the size of the economy, i.e. the overall volume of goods and services that you can buy or have rendered to you. The money supply being constantly expanding doesn't affect the volatility of the currency (just in case that was your point)...

Of course expansion of the money supply affects the volatility of a currency, look at the exchange value of USD for oil or food it's constantly changing (or getting worse), money is just a means of exchange so increasing the amount in circulation reduces the exchange value for other goods and currencies. If you look at the price of oil in gold you can see it's barely changed, what can we infer from this? Expansion of the money supply increases the volatility of a currency.

Bitcoin is volatile however because it's hard to tell what the owners of bitcoin are thinking, how much faith do they have in the dollar? Are they simply just speculating? But I believe there is a core group of bitcoin owners who recognise the economic problems currently facing many governments and they have lost faith in the currency issued by these governments and the true value of bitcoin lies in how much faith people have left in the current system and whether any competitors can create a currency that functions better than bitcoin.

natd

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Quote from: Ibian on December 07, 2013, 08:30:19 AM

Quote from: invisiblehand on December 07, 2013, 08:08:55 AM

Can't businesses accept BTC at "market price" like restaurants sell fish

I think that would be a viable solution

Nothing theoretically wrong with that, question is if it's legal.

In the US, according to FinCEN Final Rule, it's legal to use it "to purchase real or virtual goods or services" and doesn't require licenses. However, if I'm a store and accept your BTC, I suppose I cannot sell the BTC, I'd have to use it to buy something as well, as to sell a virtual currency requires a money transmitter license.

natd

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Activity: 182

Merit: 102

Quote from: Ibian on December 07, 2013, 07:58:26 AM

Quote from: natd on December 07, 2013, 07:46:43 AM

BTC is no store of value,

Explain.

Bitcoin is not backed by anything. Fiat money derives it's value by a government declaring it to be legal tender. BTC does not have legal tender status in any jurisdiction.

Ibian

legendary

Activity: 2268

Merit: 1278

Quote from: invisiblehand on December 07, 2013, 08:08:55 AM

Can't businesses accept BTC at "market price" like restaurants sell fish

I think that would be a viable solution

Nothing theoretically wrong with that, question is if it's legal.

invisiblehand

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Can't businesses accept BTC at "market price" like restaurants sell fish

I think that would be a viable solution

deisik

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Quote from: natd on December 07, 2013, 08:03:11 AM

Quote from: Misesian on December 07, 2013, 07:52:07 AM

The volatility you're talking about is when you price bitcoins in fiat money in which the supply is constantly expanding (fiat), we are forced to use centrally controlled fiat money because that is what our masters demand we pay our taxes in, if we had a system of free banking who would use a currency that was centrally controlled by government? Everybody would be using things like gold, silver and bitcoins because they provide many more advantages as currency one of them being a reliable store of value.

What's the point, if a price in BTC of the same service or good change in a minute to minute rate? I could sell my house in the morning and not be able to buy the same house (or a similar one) in the afternoon of the same day.

The fact is the total majority of individuals and businesses wouldn't be selling for Bitcoins at any significant level, given this kind of volatility. Actually, why would they if they could just price their merchandise in dollars and forget about volatility? This has been proven so many times that it's not even worth discussing in serious...

natd

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Quote from: Misesian on December 07, 2013, 07:52:07 AM

Quote from: deisik on December 07, 2013, 07:33:17 AM

Quote from: Shneebly on December 06, 2013, 03:55:51 AM

I disagree with your premise. Bitcoin makes a fantastic medium of exchange (best in human history), and due to the predictability and certainty of mining new Bitcoins (at predetermined rates), and the lack of monetary inflation, it will also make a great store of value.

How could it possibly be "a fantastic medium of exchange" with that type of volatility? For a medium of exchange, it is of utmost importance beyond anything else that its exchange rate to a basket of other main currencies be as stable as ever possible. If you are curious, this stability is predetermined by the size of the economy a currency encompasses...

The volatility you're talking about is when you price bitcoins in fiat money in which the supply is constantly expanding (fiat), we are forced to use centrally controlled fiat money because that is what our masters demand we pay our taxes in, if we had a system of free banking who would use a currency that was centrally controlled by government? Everybody would be using things like gold, silver and bitcoins because they provide many more advantages as currency one of them being a reliable store of value.

What's the point, if the price in BTC of the same service or good changes in a minute to minute rate? I could sell my house in the morning and not be able to buy the same house (or a similar one) in the afternoon of the same day.

deisik

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Quote from: Misesian on December 07, 2013, 07:52:07 AM

The volatility you're talking about is when you price bitcoins in fiat money in which the supply is constantly expanding (fiat), we are forced to use centrally controlled fiat money because that is what our masters demand we pay our taxes in, if we had a system of free banking who would use a currency that was centrally controlled by government? Everybody would be using things like gold, silver and bitcoins because they provide many more advantages as currency one of them being a reliable store of value.

And so what? This (and what you wrote after the emboldened text) doesn't change a thing about the fact - it's Bitcoin's volatility, not of the fiat currency you exchange it for. I have already written in my post that volatility (and stability for that matter) of a currency is predetermined by the size of the economy, i.e. the overall volume of goods and services that you can buy or have rendered to you. The money supply being constantly expanding doesn't affect the volatility of the currency (just in case that was your point)...

Ibian

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Quote from: natd on December 07, 2013, 07:46:43 AM

BTC is no store of value,

Explain.

Misesian

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Quote from: deisik on December 07, 2013, 07:33:17 AM

Quote from: Shneebly on December 06, 2013, 03:55:51 AM

I disagree with your premise. Bitcoin makes a fantastic medium of exchange (best in human history), and due to the predictability and certainty of mining new Bitcoins (at predetermined rates), and the lack of monetary inflation, it will also make a great store of value.

How could it possibly be "a fantastic medium of exchange" with that type of volatility? For a medium of exchange, it is of utmost importance beyond anything else that its exchange rate to a basket of other main currencies be as stable as ever possible. If you are curious, this stability is predetermined by the size of the economy a currency encompasses...

The volatility you're talking about is when you price bitcoins in fiat money in which the supply is constantly expanding (fiat), we are forced to use centrally controlled fiat money because that is what our masters demand we pay our taxes in, if we had a system of free banking who would use a currency that was centrally controlled by government? Everybody would be using things like gold, silver and bitcoins because they provide many more advantages as currency one of them being a reliable store of value.

deisik

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Quote from: invisiblehand on December 07, 2013, 07:38:53 AM

Quote from: deisik on December 07, 2013, 07:37:09 AM

Strictly speaking, it is not Gresham's Law, rather an extension to it taking into account a floating exchange rate between the currency pairs that I proposed somewhere in this forum...

Yeah I just read about that to clarify.

But it does not make sense to spend BTC if people accept (ostensibly inferior) USD--presuming the exchange rate is fair

If the exchange rate was fair and only that was counted in, then your assumption wouldn't be reasonable (in fact, it would be false just because of that alone). It is individuals expectations about future exchange rate that make Gresham's Law valid even for floating exchange rates. I edited my previous post giving the link to the discussion about it. So if you are interested you could go there and read my explanation (ant its critique) why Gresham's Law still holds...

natd

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Quote from: npl on November 30, 2013, 09:08:45 AM

Is Bitcoin primarily a medium of exchange or a store of value? No financial instrument can be both things equally well. Despite what some Bitcoin proponents believe, specialization in one direction is inevitable (many people who seem to think it can somehow be both are the same ones advocating 'buy and hold forever'...).

The BTC paradox is that when it was created, it was intended to become primarily a medium of exchange (so Satoshi claimed) but the manner in which the protocol was devised makes it far more suited to be a store of value.

If it does become a significant store of value what might it be worth? Obviously we still cannot say with any certainty, but to determine the upper limit assume Bitcoin somehow fully replaced gold. Then the price of 1 BTC would roughly equal $330,000 (5.6 billion ounces*1250/21,000,000). Of course that is the upper limit and not very realistic.

BTC is no store of value, it's a highly speculative volatile medium of exchange. And yes, gold coins can be both.

invisiblehand

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Quote from: deisik on December 07, 2013, 07:37:09 AM

Strictly speaking, it is not Gresham's Law, rather an extension to it taking into account a floating exchange rate between the currency pairs that I proposed somewhere in this forum...

Yeah I just read about that to clarify.

But it does not make sense to spend BTC if people accept (ostensibly inferior) USD--presuming the exchange rate is fair

deisik

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Quote from: invisiblehand on December 07, 2013, 07:26:42 AM

Quote from: npl on November 30, 2013, 09:08:45 AM

Is Bitcoin primarily a medium of exchange or a store of value? No financial instrument can be both things equally well. Despite what some Bitcoin proponents believe, specialization in one direction is inevitable (many people who seem to think it can somehow be both are the same ones advocating 'buy and hold forever'...).

The BTC paradox is that when it was created, it was intended to become primarily a medium of exchange (so Satoshi claimed) but the manner in which the protocol was devised makes it far more suited to be a store of value.

If it does become a significant store of value what might it be worth? Obviously we still cannot say with any certainty, but to determine the upper limit assume Bitcoin somehow fully replaced gold. Then the price of 1 BTC would roughly equal $330,000 (5.6 billion ounces*1250/21,000,000). Of course that is the upper limit and not very realistic.

I like it more as a store of value. I'll spend USD. Gresham's Law.

Strictly speaking, it is not Gresham's Law, rather an extension to it taking into account a floating exchange rate between the currency pairs that I proposed somewhere in this forum (actually in this thread)...

Topic: Medium of Exchange vs Store of Value - and effect on BTC worth - page 4. (Read 4812 times)