Topic: Why do people trust fiat money? - page 8. (Read 7473 times)

Probably because you can pay your bills with legal tendee. Also your $10 idnt suddenly going to devalue by 10% EVERY DAY! :-P

The only reason the price of a notebook computer goes down year over year is because of advances in industrial production - be it efficiency or merely economy of scale.  Also, there is a tremendous amount of competition in technology, which means that the company able to manufacture a quality component for the lowest cost is going to be preferred.  So basically, the reason the cost of a notebook keeps going down is a direct benefit of a competitive free market situation.

That said, the purchasing power of the USD overall is going DOWN year over year, DESPITE increases in efficiency and industrial capacity.  This is because the dollar is not backed by anything of tangible value, and thus can be printed out of nothing.  There is absolutely no security in the value of the USD, but because it is associated with a country (and thus to the pride, nationalism and civic pride that goes along with it) people believe that the USD couldn't fail unless the US itself could fail (which of course it can't, so they believe). 

So in short, there are two sides to the price question when it comes to economics: the first is the cost to produce a given product.  The second is the value of money used to purchase that product.  Since cost is stable (at any moment in time, the same amount of wealth is needed to purchase the same thing) the variable here is the value of money.  Do you need $500 or 5BTC?  Next year it will likely be $400 or 2BTC, based upon the fundamentals of the currency.  But the truth remains - the purchasing power of the USD is very stable, and is decreasing at a very stable rate.  The purchasing power of the BTC is much less stable, but is constantly increasing overall.

Hope that helps.

Because when you have $500 in cash, you know, that you can buy in one year a better notebook with that money than today. With 5BTC you don't know. People want to plan. They want stability.

No. Most people don't know, how the internet works. Do they have to know to use it? When you want to use USD or EUR, you just need to know, who wants them (everyone) and what can you buy with this money in the future. Nothing else matters. Even if in reality some midgets creates the dollars. It doesn't matter!

I'm a big fan of Bitcoin. I am on a university, I do not really have much money. But I bought 6BTC 1,5 month ago. I thought, I just have to risk something. I would shot me, if the price rises to many hundrets of EUR, and I did not buy some of them, when they were under 100 EUR.
I bought them for 70EUR/BTC. I sold them yesterday for 62. This is nearly a new notebook for me, when I have euros. When I have Bitcoins? Who knows what they worth in one year. 10REUR? 1000EUR?

Price is fallen since weeks. When the price just rises again for 10EUR or something, I will buy again.

Utility is not necessary the trust, if you bring a gold bar or silver ingot into a supermarket you could not buy anything with it, even on internet it does not work

Yes.  Right now it works.  As soon as people start having problems with fiat, or they risk losing it, then they no longer trust it.  Until they suffer first hand they will have no reason to look for other options.

I think the main reason for this is you can do a lot more with it. There is a very limited choice in buying property/land with Bitcoin. In fact no stores around me accept Bitcoin. Plus, the other issue is trust. The modern world is known for having trust issues. Where it's very hard to trade Bitcoin in person because most people are wary about identity it's very hard to exchange Bitcoin into goods/services. Most of the business done with Bitcoin is done behind you're computer screen with nothing to secure you're money.

Most major websites which most people trust do not accept Bitcoin. The ones that normally accept Bitcoin are small businesses which have just opened and have no reputation. Which raises a few red flags. Normally sites try to offer a escrow service, but I HAVE seen websites selling their own product with escrow enabled, but it's their own escrow which is very bad.

So I think the main problem with Bitcoin is the lack of goods/services to purchase. Even though to this day I have not exchanged ANY Bitcoin into USD/GBP etc.

Because you can go to grocery store right now and buy food with it.

Because ripple is BETA?

This is a very interesting quesion since when people sell bitcoin for USD, it means they trust USD more than bitcoin

So why do people trust in fiat money, which is created out of nothing by the central banks?

Is it because they have no knowledge about money creation, or because their ignorance about the financial, or their respect/fear about the government enforcement?

One accept fiat money is because all the other merchant also accept fiat money as a payment medium, once this tradition established, it seldom changes

But this is only one reason, another reason might be that they regard fiat money as a safenet, backed by the government. Look at the FDIC rules, it just want to calm people from withdrawing their savings from banks and it worked very well

I think some kind of insurance should be built around bitcoin, to give people more confidence to handle the bitcoin. Saying this is backed by mathematics and network just scared most of them