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Steve Forbes: Bitcoin Not Money

Posted by Unknown on from the ron-paul-says-eat-gold dept.

MouseTheLuckyDog writes "A brief editorial by Steve Forbes, one of our moneymeisters, on why bitcoins are not money.. Hint: For those who are too lazy to read the opinion,. Bitcoins are too volatile to be money." From the article: "Money is most optimal when it is fixed in value just as commerce is facilitated when we have fixed weights and measures. When you buy a pound of hamburger you expect to get 16 ounces of meat. An hour has 60 minutes. A mile has 5280 feet. These measurements don’t 'float.' So too money best lubricates commerce when it has a fixed value."

25 of 692 comments (clear)

  1. Fiat Currency by jasonlfunk · · Score: 5, Insightful

    What what exactly is the value of the US dollar?

    1. Re:Fiat Currency by Anonymous Coward · · Score: 3, Insightful

      that tautology works just as well with bitcoin, though.

    2. Re:Fiat Currency by Chris+Mattern · · Score: 5, Insightful

      Money still fluctuates in value when you're on the gold standard. It just fluctuates in lockstep with the fluctuations in the value of gold. This means that it's unlikely to steadily decrease in value, but it doesn't mean it stops fluctuating.

    3. Re:Fiat Currency by chill · · Score: 3, Insightful

      Only because Gold was defined in terms of U.S. Dollars. Specifically, the major nations of the world got together and said "1 ounce of pure gold is $21 U.S. Dollars".

      A gold standard isn't magic, nor does is prevent inflation or deflation.

      --
      Learning HOW to think is more important than learning WHAT to think.
    4. Re:Fiat Currency by Richard_at_work · · Score: 5, Insightful

      I think its useful to say that the value of a currency is really in how stable it is within an economy - once hyperinflation takes over, it doesn't matter how established the currency is, its value as money disappears (see Germany in the 1920's, Russia in the 1990's and Zimbabwe in the past decade) and people move to alternative means of payment.

      $1 today will buy me a loaf of bread. That loaf of bread might cost $1.01 tomorrow, or even $0.99, but while that's an inconvenience its not disastrous. If that loaf of bread goes from $1 one day to $5 the next, and $20 the next, then its value as actual money is gone - theres no way to establish a stable economy on such a basis because there's no way to plan for the future.

    5. Re:Fiat Currency by alen · · Score: 2, Insightful

      gold be definition is deflationary
      there is a set amount of gold on earth. as the population increases there is less gold per person available. hence as population increases you will have deflation because there will be less and less money available per person.

    6. Re:Fiat Currency by DrEldarion · · Score: 3, Insightful

      The backing of the US government, and the ability to trade it for something everywhere in the US and many places outside of it. A currency is ONLY good as a currency if you can actually buy things with it.

      Now, what exactly is the value of a bitcoin which has no backing whatsoever and nearly no ways to trade it for anything?

      I find it very amusing that many of the same people who advocate for a return to a gold-backed currency are the same ones who push this pseudo-currency which has no backing at all.

    7. Re: Fiat Currency by dugancent · · Score: 3, Insightful

      Go look up the definiton of gold in a dictionary. If the word deflationary doesn't appear, it's not "by definition".

      --
      SJWs are the new boogeyman. -Me
    8. Re:Fiat Currency by ShieldW0lf · · Score: 3, Insightful

      gold be definition is deflationary
      there is a set amount of gold on earth. as the population increases there is less gold per person available. hence as population increases you will have deflation because there will be less and less money available per person.

      The population does not increase by definition.

      --
      -1 Uncomfortable Truth
    9. Re:Fiat Currency by Mystakaphoros · · Score: 3, Insightful

      there is a set amount of gold on earth.

      True, but it's not all in humanity's possession, hence the interest in mining it (like you can do with BitCoin). And true, someday we will hit the limit (like we will do with BitCoin) and those who have it already will have power over those who desire it (ditto).

    10. Re:Fiat Currency by FatSean · · Score: 3, Insightful

      So instead of "printing money" they'll just revalue gold.

      --
      Blar.
    11. Re:Fiat Currency by Anonymous Coward · · Score: 5, Insightful

      Yep, that's why keeping the gold standard was so asinine. It didn't do anything but obligate the U.S. government to hoard gold.

    12. Re:Fiat Currency by Pi1grim · · Score: 3, Insightful

      Actually, you can.
      Look up shops selling for bitcoins.
      Government isn't forcing people to take bitcoins, the qualities of bitcoins (security, anonymity, lack of centralized control) is what forces people to use them.

    13. Re:Fiat Currency by Anonymous Coward · · Score: 1, Insightful

      Or is it the value of currency fluctuating making the price of gold fluctuate? One could ponder whether gold's value is increasing or whether the fiat currencies are all getting devalued. At the end of the day, a small group of people are making vast fortunes off these "fluctuations" and it isn't you or I. Steve Forbes is scared because Bitcoin takes the control away from existing institutions of wealth.

    14. Re:Fiat Currency by Anonymous Coward · · Score: 2, Insightful

      Not true. Many european nations underwent massive inflation durring the medieval times when they were coining gold & silver faster than the economy could support the increase in available gold.

      Gold in the ground is not currency.

      Also, inflation is nothing more than supply and demand as applied to a currency. If we started trading in loaves of bread, and some baker messes up and accidentaly bakes a trillion loaves, you just "inflated" bread.

      If china really did own the US (work with me here,) and had 3 times our currency in reserve than we had in circulation, but they just kept it in their "Fort Knix" then it wouldn't matter because that 3x us money wasn't in use. When they decide to use all the money to buy US goods, money dumps into circulation, and the money supply has been inflated 300%, all without 1 printing press making a single additional dollar.

    15. Re:Fiat Currency by Teancum · · Score: 4, Insightful

      You can't buy anything with BTC without converting them between it and another currency.

      This isn't true. Bitcoins are a medium of exchange. It is commonly used as a currency converter (IMHO it does a very good job in Foreign Exchange markets), but that isn't its only role.

      It is possible to pay salaries in bitcoins and other currencies. Look up Ithaca Hours for an example of how alternate currencies can and have been used in the past to pay for labor. You can also purchase items and services directly in Bitcoins (some webhosting services are currently offered directly in Bitcoins) and it is commonly used for voluntary donations to many organizations as well.

      The one thing that is difficult to do with Bitcoins though is to pay taxes, and that unfortunately is something that needs to be in the "legal tender". Also, if you sue somebody in a courtroom those debts will be settled in whatever form of payment acceptable by the judges involved, and that will likely be something like a Euro or U.S. Dollar and Bitcoins will not be likely recognized. This isn't to say Bitcoins could not be used in this fashion, but it takes a deliberate government act to recognize Bitcoins as a valid legal tender.

    16. Re:Fiat Currency by LoyalOpposition · · Score: 3, Insightful

      A gold standard isn't magic, nor does is prevent inflation or deflation.

      Actually, it sort of is. Consider when inflation is high (that is: when the growth in the gold supply exceeds growth of the population), then gold isn't worth as much. That means that it isn't as valuable to people to mine and mint it. Marginal mines close down. CEOs decide not to produce minor veins. Workers move into other lines of business. The supply of gold falls. The inflation is reduced. Now consider when inflation is low. Gold becomes more valuable relative to the available goods and services. Wildcatters spring up. Chemists research more efficient ways to extract gold from tailings. People start using alternatives in electronic circuits. The supply of gold rises. The deflation is reduced.

      Now consider fiat money. Unless there are rigid controls on the creation of money, and who gets to spend it, then the guy who decides to make the money benefits from making it, and there is little limit to how fast he would want to.

      ~Loyal

      --
      I aim to misbehave.
    17. Re:Fiat Currency by Anonymous Coward · · Score: 1, Insightful

      Steve never made it to president, so that should tell you he's not quite as clever as he thinks.

      Or maybe the American public is not as clever as we think, or just doesn't like clever people as much as we think.

    18. Re: Fiat Currency by mcvos · · Score: 1, Insightful

      Why is the correct pedant modded down, and the incorrect guy modded up?

      "By definition" gets abused just as much as "literally".

  2. Say what, Steve? by Chris+Mattern · · Score: 4, Insightful

    *All* money fluctuates in value. Yes, even if you run on the gold standard (which I know you favor). Money that fluctuates too much isn't very good for money's intended purpose (as a means of exchange and a store of value, particularly the latter), but you can't say that something isn't money because it fluctuates. Was the Deutschmark not money during the hyperinflation of the 1920s?

    1. Re:Say what, Steve? by chill · · Score: 5, Insightful

      Re-read the article. His point is that once a currency becomes *too* volatile it ceases being money. He doesn't say money *has* to be fixed to be useful, just that it is OPTIMAL when fixed. The *less* it fluctuates the more useful it is as a standard medium for exchange.

      "Money is most optimal when it is fixed in value..." (Emphasis mine.)

      --
      Learning HOW to think is more important than learning WHAT to think.
  3. Wait for it.... by Anonymous Coward · · Score: 2, Insightful

    ...here it comes. Legions of teenage and college Slashdotters, who think they are MBAs, Accountants and public policy experts, engaging in Fan Boy, Face Painting, Homer rants about how bitcoins are really money...really!

  4. His issue is with bitcoin's volatitilty by Shivetya · · Score: 5, Insightful

    not that their value changes, but that the changes are to volatile to make it a worthwhile currency. Its more like a commodity than anything else.

    --
    * Winners compare their achievements to their goals, losers compare theirs to that of others.
  5. Bitcoins will be money... by yesterdaystomorrow · · Score: 3, Insightful

    ...when you can pay your taxes with them.

  6. "We don't really know how this coin is created" by Dogtanian · · Score: 4, Insightful

    Saying "we don't really know how this coin is created" displays the author's fundamental misunderstanding of the phenomenon. You don't need to know the exact technical details- and I don't either- to understand that the process of bitcoin production is clearly defined and entirely transparent (for those who *do* understand the technical details). (*)

    Of course, you *should* understand the principles of what has to be done, the nature of Bitcoin and the factors involved in it in general (such as the fact there will only ever be a finite number of Bitcoins). But saying that "we" (i.e. humanity) don't understand how it's created is nonsense; what he means is that *he* doesn't understand. "We" created the damn thing entirely ourselves along arbitrary lines!

    IMHO, the real question is the philosophical one of whether Bitcoin's creation is an arbitrary, Sisyphian task and whether this makes any sense.

    Also, the Bitcoin's value *is* fixed- a Bitcoin is worth 1 Bitcoin, just as a US Dollar is worth 1 US Dollar. Granted, in the real world the dollar is almost certainly a better measure of "absolute" value than the Bitcoin is at present. Still, this doesn't change the fact that in principle it has no more inherent value and stability than Bitcoin, only what it's worth against other currencies- and of course, the dollar is always going to be stable if you choose the dollar as your "stable" currency to measure it against.

    (*) I was going to post this on the Forbes site too, but I notice the *first* comment there already made *exactly* the same point.

    --
    "Slashdot - News and Chat Sites Deviant". (Click "homepage" link above for details).