Anyone buy Bitcoins 7 years ago?

[oldtimer]

Just now, Jeff Matthews said:

Right.  If I understand correctly, Wal-Mart, Amazon, et al. won't take it.  This brings into question whether it is a currency.  It was intended to be a currency, but it seems it turned out to be a commodity.

Interesting statement, since currencies are in a sense, commodities.  Relative strength is determined by supply and demand versus supply and demand for other currencies.  Many think of only the supply and forget about demand.  Tying a currency to another commodity, such as precious metals, does nothing to break the concept that it is already a commodity.

[Jeff Matthews]

1 minute ago, oldtimer said:

Interesting statement, since currencies are in a sense, commodities.  Relative strength is determined by supply and demand versus supply and demand for other currencies.  Many think of only the supply and forget about demand.  Tying a currency to another commodity, such as precious metals, does nothing to break the concept that it is already a commodity.

I changed my post from "commodity" to "collector's item" after I looked up the definition, which said commodities are products of the earth, such as agricultural products, minerals, etc.  

 

Anyway, the main point is that bitcoin, whatever it is, does not appear to be currency.  It is not widely accepted.

[Jeff Matthews]

And so some guy comes up with an idea to make a limited number of X, and they take off.  This has been done again and again and again.  They have collector coins, stamps, comic books, etc.  But the one that takes off makes everybody look back and wonder how they could have predicted it.

[oldtimer]

Deneen was fascinated by them.   I wonder if he put any of his money where his mouth was?

[Jeff Matthews]

Just now, oldtimer said:

Deneen was fascinated by them.   I wonder if he put any of his money where his mouth was?

... and then gave it all to charity.

 

I read that there are going to be a good number of copy-cats of bitcoin coming out soon.  (or maybe they are out now)  Interestingly, it seems they'd be the functional equivalent - basically an accounting supported by blockchain technology.  How will bitcoin owners differentiate their bitcoin?  Maybe a massive crash is going to come.

[Marvel]

They are on the currency markets...

 

http://www.xe.com/currencyconverter/convert/?Amount=100&From=XBT&To=USD

 

Some European businesses allow transactions in Bitcoins, but, since they were meant to be somewhat anonymous, getting a receipt can be tricky.

 

Bruce

[Endo]

23 hours ago, oldtimer said:

Tying a currency to another commodity, such as precious metals, does nothing to break the concept that it is already a commodity.

 

Ok, this is all very interesting. We're just talking here, right? No need to leave friendly discourse?

 

The terms "Money" and "Currency" are not interchangeable; and often confused. Money has both intrinsic and inherent value; whereas currency has only intrinsic value (In a Venn diagram, money is the subset). This distinction is important: Due to its inherent value, "money" cannot be inflated. Currency, on the other hand, can be inflated; and fiat currency--especially so.

 

Immediately following the Revolutionary War--the economy of the United States was reeling from inflation, bordering on hyper (47%). The single, greatest contributing factor was the nearly worthless "Continental" currency which had been printed to exhaustion when the government was penniless and up-to-their eyeballs in war debt. As the framers of our Constitution set about their work (still reeling), Article One, Section Ten was worded so as to reduce future inflationary risk of our new nation to zero.

 

Obviously, we do not observe this clause; and have not for a long time.

 

So, my point is: Treating something as if it were a commodity, may give it de facto status; but, to describe fiat currency as a commodity is both inaccurate and misleading.

 

The more important discussion may be: When inflation occurs, who are the winners and who are the losers?

 

[As an aside: If the currency base of the U.S. Dollar is "X", at a time when the DOW is at 1,000; and the the currency base quadruples to 4X, wouldn't the DOW have to reach 4,000 simply to maintain par? In other words, if the currency base goes up 400% and the DOW 180%, then hasn't the DOW lost over 50% of its value?]

 

[oldtimer]

I would suggest a close look at the quantity theory of money to answer your aside, and for anyone to learn for that matter.  In it, one will find that there are more variables than price and supply.  Everyone agrees that too much inflation is bad.  Not many truly understand how it works, or even the role of currency as a medium of exchange.  The fact is currencies are traded on global markets and follow the same patterns of supply and demand as commodities.  More wheat for example, equals a lower price per unit if demand remains the same.  I strongly urge anyone who is interested enough to take a course or three on economics, instead of trying to pry information from the lounge.

[Endo]

I agree, the Lounge may not be the best venue for this topic (I confess to scratching an itch without conscious effort). I'll try to be more disciplined. On the other hand, constructive disagreement is a good thing; a kind of friction needed to move forward. Thanks for the 'conversation'.

[geoff.]

What an incredibly stimulating conversation! Real estate is done for now (or is it?)

 

Just to clear things up...

 

So is a bitcoin worth its weight in gold?

 

When bitcoins start to slide is it time to buy gold again?

 

How many bitcoins does a pair of Jubilee's cost?

 

 

[JJkizak]

Why does the FED require 2% inflation? Why do we need growth?

JJK

[Jeff Matthews]

49 minutes ago, JJkizak said:

Why does the FED require 2% inflation? Why do we need growth?

JJK

Inflation means prices tomorrow will be higher than today's prices.  It forces people to engage in commerce now, rather than wait.  When people engage in commerce, lots of good things happen.  For starters, it creates more taxable events, based on our income tax laws.  It also redistributes wealth (not in a perfect way, but still, redistribution is very important to social mobility).  Finally, imagine a society that starts out with Adam and Eve and $100 worth of gold.  Imagine that same society 10,000 years later, with 6 billion people and still, only $100 worth of gold.  That's a society without inflation.

[juniper]

Last I heard there are over 100000 places that accept bitcoin, and in CA they even have some form of ATMs.

[ClaudeJ1]

On 5/22/2017 at 8:22 PM, Endo said:

I invite you to do the math.

Also, inflation causes an AUTOMATIC "bracket creep" in taxation in a non-linear system. IOW, it automatically moves many working people into the next higher tax bracket, therefore, paying a higher percentage of taxes. Pretty slick, eh?

[ClaudeJ1]

1 hour ago, Jeff Matthews said:

 That's a society without inflation.

I bet to differ. That would be a society without gold diggers.

[Jeff Matthews]

2 minutes ago, ClaudeJ1 said:

Also, inflation causes an AUTOMATIC "bracket creep" in taxation in a non-linear system. IOW, it automatically moves many working people into the next higher tax bracket, therefore, paying a higher percentage of taxes. Pretty slick, eh?

That's actually the way the Alternative Minimum Tax works.  Alt-Min affected very few people in the 1980's.  Now, there are a whole lot more people affected.

[Endo]

2 hours ago, Jeff Matthews said:

Imagine that same society 10,000 years later, with 6 billion people and still, only $100 worth of gold.  That's a society without inflation.

To be fair, as people do work, they bring value to a market. For instance, over the course of his life, if a sheep farmer brings a total $1 million in wool to the market--then that market has grown in size by $1 million (the money base grows in direct proportion to the wealth produced). This is not inflation, but simply a growing economy. Inflation is not a growing economy; but, rather, is when a currency grows faster than the wealth it represents--then the currency becomes worth less and less, per unit of measure.

 

So, as Adam and Eve become 6 million people--the ever increasing productivity would very naturally cause the money base to grow along with it. In a "hard currency" or "money" based system--the relationship is always 1 to 1. When the the system is no longer tied to the wealth being produced (Wool, lumber, carrots,... or high-efficiency, low distortion speakers) then potential for inflation exists (this is fiat currency). In this condition, if those responsible for the issue of our currency start to "print" money faster than the rate of "wealth" being produced... then the currency becomes diluted (worth less and less).

 

Think of it this way: You are one of four people playing the board game Monopoly. Every player (including the Banker) starts the game with the same amount of "cash". However, for the purpose of this illustration, we allow the Banker to "print" as much money as he wants (Quantitative Easing, v4), whenever he wants (The Banker, and no one else). How does the game end?

[anarchist]

I am confused about this Adam and Eve thing.  If a system is money based and the wealth produced is carrots, what do you have at the end of the day? Poop.  Where is the wealth?

[codewritinfool]

You could say this about any investment.  Nobody would be sitting on 72 million because the first time it spiked they would have sold it - for FAR less.  Probably would have been happy to get 3X out of it.

[RT FAN]

 I cannot understand the premise of the Bitcoin. There is a limited amount of them, they can be "mined" and the underlying value is the "Blockchain" technology that is the basis of the Bitcoin. You cannot take physical possession, it exists only in the digital realm, you can lose your bitcoins in a computer crash and there will shortly be several rival digital currencies backed by international banking entities.

 My question is where does the Bitcoin derive it's intrinsic worth? Besided the point that two people are willing to buy & sell it at a particular dolar value? ( The maxim "all trades clear at a price".) A nation's currency is backed by gold holdings or the ability to levy taxes to pay off a nation's creditors. ( I am not looking to delve into if Fort Knox has gold or the Feds QE machinations.) Many people have made fortunes trading Bitcoins, but what makes them worth anything in actual terms? Are we just trading tulips at this point?