Topic: Should money have intrisic value ? - page 4. (Read 10609 times)

Intrinsic value is required for money to arise in a barter economy.

Once we get beyond that, we can now bootstrap a currency like bitcoin.

Now we have information by which we can perform economic calculation.

Currency = small physical money tokens (coins & notes).
Money = more general concept of spendable stuff including currency and credit.
(My summary based on http://en.wikipedia.org/wiki/Currency and http://en.wikipedia.org/wiki/Money )


I'm not sure about that.  Which definition?

I thought money's main necessary properties were

• Mostly conserved.  Sure you might lose some if careless, but you can't duplicate it (double spend, shaving the edge off gold coins, counterfeits).
• Like currency, needs to be transferred around in useful-size easy-to-validate denominations without too much inconvenience (= cost).
• Scarce.  Hence, in part, the Hitchhiker's Guide joke about using leaves off trees as money?  I put it last, but I suspect it is of primary importance.

Various forms of money have problems,

• Consider diamonds & rubies as currency.  Now they can be made (some would say counterfeited) industrially it is very difficult to justify or enforce a high price for the ones coming out of mines.
• Consider the popular electronic fiat money forms - credit cards and paypal.  The inconvenience here seems to me to be running quite high (~5% per transfer).  How this compares with the old days of shipping gold coins on horseback, I don't know.
• Gold is nicely scarce.  Fiat money less so?  Of course some people have not enough to live, but others make (!!) oodles of it.

Actually I'm skeptical about "intrinsic value" of any object, it seems to be an oxymoron; but grondilu tweaked the question.

Does money need to be useful for something else?  I suspect not, but back when money was just currency the options were more limited.

As kiba said, gold is good for decoration & its physical properties.  If it wasn't useful, we wouldn't work so hard to dig it out; but if it's not hard work to get some more, the "scarce" property is absent.

Then I'm really confused, because money requires an intrinsic value by definition.  However, it might be lost in translation because based on this thread, many don't understand the word "intrinsic".  It's a tough one to explain, but gold has intrinsic value because it is valued outside of the context of an orginized intent to support it.  Fiat currencies have negligble intrinsic value because most of their value (as a medium of exchange) is directly related to the support of a third party institution, in this case a functioning government.  If said government's future existance is put into question, the fiat currency's value is also.  Likewise, a currency issued by a bank, whether backed or not, is tied to the public's trust in that bank.  Something has intrinsic value if it is generally valued regardless of the issuing institution; such as the case of gold coins minted by long dead governments.  Commodities have intrinsic value because they can be used to build, fuel or eat.  I wouldn't say that bitcoins have any intrinsic value, because they have no usefulness outside of the context of a medium of exchange, and fundamentally depend upon the trustworthiness of the blockchain for their base value.  Bitcoins are, therefore, not money and not a commodity.  Bitcoins are only a currency, but an intentionally designed "natural" currency because they are only accepted by choice and have no artificial support from legal tender or tax payment laws.

Okay. Are we sure there is not one person who enjoys a good bitcoin? Or prefers the feel of the USD to toilet paper? 

Also someone might think "I just need to get a lot of dollars to show people my huge bank statement" then later trade them away, but for a while he wanted them for their own sake. Or maybe he even dies still thinking this before trading.

But I'm just being picky now, I understand what you mean.
 

By "intrisic", I didn't mean beyond human judgment or anything.

It was rather as opposed to "conventionnal" or "arbitrary".

Value is the faculty for something to be desired by a human being.  Now, someone can desire something because he thinks someone else will desire it and thus it will be possible to trade it.

Therefore, I think we can say that something has intrisic value when there is at least one human being who can desire to possess it without ever giving it away to someone else.

Mass, temperature, color are some properties of objects that exist with or without humans. Value only exists contingent on the existence of humans who have certain preferences. Nothing has value to you once you die and nothing has value to "us" once we're all gone. Value is completely dependent on us. Nothing has value in and of itself.

Sure, but it's quite marginal.  I think we can, for the sake of the argumentation, consider it has no value.

Anyway I'm just realizing how futile is this debate, considering that fiat currencies ARE money with no intrisic value.


Somehow it's amazing people accuse gold of not having any value when they don't do the same to fiat money.

Well, unless I'm wrong about the difference between those concepts, I'm currently talking about money.

Gold is very useful. If it were more plentiful, people would use gold.

Gold have medicine, electronic, and decorative use.

Well, this is not characteristic to physical commodities.  It's the whole point of bitcoin.  It is hard to produce, though it has no intrisic value.

I know that I'm being anal here, but money and currency are not the same thing.

It helps in case of an economic collapse to have a currency with value beyond being an accepted unit of exchange.
Paper money is useless as soon as the central bank collapses or hyperinflation happens.
Gold/silver/etc will always have at least a base value due to its uses as a commodity.
Another advantage is that it is hard to produce, you cannot simply print it or update some database record. This limits inflation.

Disadvantage of using a commodity as money is that it is generally heavy, expensive to protect, and you need to continuously verify that a certain unit still matches a certain number of grams of commodity. For example, it used to be quite popular to scrape off a bit of each coin and sell the remaining gold once in a while.

So yeah... no approach is perfect.

The thread about "money as debt" from P. Grignon makes me think about this old debate concerning the intrisic value of money.

It's a debate I had many times with people having contempt for gold, describing it as a "useless soft metal" or a "barbarous relic".  I also think that gold is mainly useless, or more precisely, that its use is only based on the fact that it is ideal as a money, due to its remarquable properties.

However, I confess I'd have some difficulties explaining why money doesn't need intrisic value.  I have ideas about this but it's still quite confuse.

What do you think about that and can you elaborate ?