It seems that Douglas Jackson has a very poor understanding of Bitcoin.
He's made the assumption that a currency must have an issuer. He also assumes that the difference between "real" and "virtual" money is in the attitude of the issuer towards the financial liability of issuance.
Many here would argue that the difference between "real" and "virtual" money is in the existence of an issuer, where gold and bitcoin have a real value that derive from their properties, not an artificial one based on promises.
Topic: The Bitcoin Fallacy - page 2. (Read 3710 times)
The article is from 2012. I would like to know his opinion now.
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OK, now let’s contrast with an issuer of real money. The techie parts for moving the bits may be roughly similar. But these bits are recognized by their issuers as constituting the embodiment of liabilities, obligations against which they must hold an equal portfolio of suitable assets, set aside expressly for their redemption.
And yet these liabilities and obligations are highly volatile and often become worthless.A difference of opinion does not a fallacy make.
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the exchangers – possibly the only entities that have been holding value (in the form of trading balances of real money) to offset the whatevers
This is, admittedly, a decent explanation of how the value of Bitcoin can fluctuate wildly. Though it has more to do with the existence of exchanges, and close ties to the fiat money system, than with any inherent flaw in Bitcoin itself. But what it doesn't do, is even come close to proving that Bitcoin can ever go to zero, unlike oh, say, e-gold.
From an Interview with Doug Jackson, founder of e-gold. Interviewed by Mark Herpel.
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This is simply a typical argument against fiat on this forum, only flipped on its head. The same willful blindness to own conflicts and inherent weakneses, the same convenient, overbroad strokes making opponent seem absurd, the contrived pseudo-playful verbiage ("so-called 'virtual currency,'" "Jazzy bits," "fallacy" --rly, dood?).
TL;DR: Yeah, money is ridiculous when you don't get it. Both fiat & bitcoin.
So at some point, everyone is supposed to sell Bitcoin for whatever they can get in sovereign currency, regardless of what they originally paid for it in the first place.
Sorry, markets don't behave that way, and especially in markets that have appreciated several thousand percent in regard to the US Dollar and other currencies.
We have a massive cost-basis advantage that doesn't just "go away". In fact, as they continue to debase currencies around the world via central-bank chicanery, they only cause people to transfer their devaluing currency into "whatevers" because they're worth more than the paper-token money sloshing around the world.
The whole idea that the bitcoin ecosystem is "fragile" because prices could get "too low" versus other currencies is a bunch of unvarnished bullshit. If that was the case, then we would have all jumped ship when it got down to $2 bucks after hitting the highs near $31.
Sorry, markets don't behave that way, and especially in markets that have appreciated several thousand percent in regard to the US Dollar and other currencies.
We have a massive cost-basis advantage that doesn't just "go away". In fact, as they continue to debase currencies around the world via central-bank chicanery, they only cause people to transfer their devaluing currency into "whatevers" because they're worth more than the paper-token money sloshing around the world.
The whole idea that the bitcoin ecosystem is "fragile" because prices could get "too low" versus other currencies is a bunch of unvarnished bullshit. If that was the case, then we would have all jumped ship when it got down to $2 bucks after hitting the highs near $31.
From an Interview with Doug Jackson, founder of e-gold. Interviewed by Mark Herpel.
http://themonetaryfuture.blogspot.com/2012/01/final-days-of-e-gold-interview-with.html
(Q) A new open source decentralized digital currency called Bitcion has become very popular. (http://www.bitcoin.org) Do you know about Bitcoin and what is your opinion on this new project?
(A) Bitcoin, like several other so-called “virtual currencies”, embodies a familiar fallacy, the idea of “numbers that are money” where the liability nature of an issued medium is overlooked. Let’s suppose the cool kids issue some jazzy bits and a system to convey quantities of these “whatevers” from payers to recipients. To the promoters and other monetary logic-challenged people (press, general public) the cleverness of the technology supporting the bits and their transmission makes it self-evident that the system constitutes a monetary advance, the currency of the future. With regard to value, it is asserted that by arbitrarily limiting the number of these whatevers spent into circulation – abstaining from “over issue” – that inflation” and loss of purchasing power are prevented.
Let’s say they spend a million of these whatevers into circulation. Perhaps an exchange market even emerges. The public sends real money to the exchangers. As long as demand is such as to support growth in circulation the exchangers have incoming real money, some of which can be paid out to the occasional customers who want to sell their whatevers. At some point though aggregate demand for whatevers declines and the exchangers are deluged with whatevers from people wanting to exchange them for real money. Their trading balances are now chock full of whatevers but running low on real money. At some point the exchangers – possibly the only entities that
have been holding value (in the form of trading balances of real money) to offset the whatevers – repudiate pending exchanges [that had been locked/committed at now inconvenient-to-honor exchange rates] and everyone is shocked.
OK, now let’s contrast with an issuer of real money. The techie parts for moving the bits may be roughly similar. But these bits are recognized by their issuers as constituting the embodiment of liabilities, obligations against which they must hold an equal portfolio of suitable assets, set aside expressly for their redemption. The difference between “virtual” and real money becomes evident if and when demand for the real money declines. No problema. Issuers of real money, by virtue of these holdings of current assets, some or
all of which are highly liquid, stand ready at all times to buy back (if need be) every unit of their monetary liabilities they have spent into circulation.
The only floor on which the value of any currency rests is the balance sheet of its issuer. A virtual currency may have some market value based on its acceptance by its issuer (or affiliates) for desirable goods and services they themselves offer. That however is too flimsy a basis for any knowledgeable third party to regard their balance of a virtual currency as much of a store of value.
People who fall for the numbers-that-are-money fallacy tend to also say things “after all, the Fed creates money out of thin air” - which is simply incorrect. The Fed creates money by buying up (and holding) the ever-mounting debts of the US Treasury, and, these days, the mortgage backed and other securities that were recently regarded as so scary as to call into question the solvency of the banks that had been holding them.
http://themonetaryfuture.blogspot.com/2012/01/final-days-of-e-gold-interview-with.html
(Q) A new open source decentralized digital currency called Bitcion has become very popular. (http://www.bitcoin.org) Do you know about Bitcoin and what is your opinion on this new project?
(A) Bitcoin, like several other so-called “virtual currencies”, embodies a familiar fallacy, the idea of “numbers that are money” where the liability nature of an issued medium is overlooked. Let’s suppose the cool kids issue some jazzy bits and a system to convey quantities of these “whatevers” from payers to recipients. To the promoters and other monetary logic-challenged people (press, general public) the cleverness of the technology supporting the bits and their transmission makes it self-evident that the system constitutes a monetary advance, the currency of the future. With regard to value, it is asserted that by arbitrarily limiting the number of these whatevers spent into circulation – abstaining from “over issue” – that inflation” and loss of purchasing power are prevented.
Let’s say they spend a million of these whatevers into circulation. Perhaps an exchange market even emerges. The public sends real money to the exchangers. As long as demand is such as to support growth in circulation the exchangers have incoming real money, some of which can be paid out to the occasional customers who want to sell their whatevers. At some point though aggregate demand for whatevers declines and the exchangers are deluged with whatevers from people wanting to exchange them for real money. Their trading balances are now chock full of whatevers but running low on real money. At some point the exchangers – possibly the only entities that
have been holding value (in the form of trading balances of real money) to offset the whatevers – repudiate pending exchanges [that had been locked/committed at now inconvenient-to-honor exchange rates] and everyone is shocked.
OK, now let’s contrast with an issuer of real money. The techie parts for moving the bits may be roughly similar. But these bits are recognized by their issuers as constituting the embodiment of liabilities, obligations against which they must hold an equal portfolio of suitable assets, set aside expressly for their redemption. The difference between “virtual” and real money becomes evident if and when demand for the real money declines. No problema. Issuers of real money, by virtue of these holdings of current assets, some or
all of which are highly liquid, stand ready at all times to buy back (if need be) every unit of their monetary liabilities they have spent into circulation.
The only floor on which the value of any currency rests is the balance sheet of its issuer. A virtual currency may have some market value based on its acceptance by its issuer (or affiliates) for desirable goods and services they themselves offer. That however is too flimsy a basis for any knowledgeable third party to regard their balance of a virtual currency as much of a store of value.
People who fall for the numbers-that-are-money fallacy tend to also say things “after all, the Fed creates money out of thin air” - which is simply incorrect. The Fed creates money by buying up (and holding) the ever-mounting debts of the US Treasury, and, these days, the mortgage backed and other securities that were recently regarded as so scary as to call into question the solvency of the banks that had been holding them.
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