Bitcoin debacle: 850,000 bitcoins gone or half a billions dollars

tomBitonti · Mar 3, 2014

See, "fiat money" (which I've read more as "fiat currency"):

http://en.wikipedia.org/wiki/Fiat_money

And "representative money":

http://en.wikipedia.org/wiki/Representative_money

While folks are wedded, so it would seem, to the idea that money is, or should be, representative, the fact of the matter is that modern economies work on fiat money, and have done so for quite some time.

A key feature of fiat money is the process by which new money is created. For example, debt is treated as an asset, and is involved in money creation:

http://en.wikipedia.org/wiki/Money_creation

What this all means is that money is rather a different thing than many people realize or understand. Common notions of value are, as it seems, often are quite faulty, in particular, as relates to issues of valuation, and quite especially, as relates to the notion of intrinsic value.

While, removing control of money creation from the caprices of government officials, who may be corrupted, is an ideal, in practice, while the effect of corruption may be lessened, it is still there. The boat on which rode the question whether to use Fiat money has long sailed.

Thx!

TomB

tomBitonti · Mar 3, 2014

Note that gold does have an intrinsic value: It's shiny, more or less indestructible, and quite rare. Those properties are what makes it nice to use as a basis for representative money. Although, it is true that you can't really do much with gold (for corrosion resistant parts; as a conductor), that is, relative to how much it is valued.

My (limited) understanding of why it fails is that there just isn't enough of it. You end up using a fractional representation, and then back into a fiat case by allowing the fractional rate to be changed. (This is what I've pieced together as a possible explanation, but am rather sketchy on the details. This seems to be a core problem. Can anyone detail this with better information?)

Also, a representative money cannot be manipulated, which is perhaps just as as strong, or a stronger reason to have fiat money.

Thx!

TomB

Kramodlog · Mar 3, 2014

Umbran said:
Well, money is like the velveteen rabbit. It has to be loved enough before it can be real.

Bitcoin, I think, hasn't reached that stage yet. Too may (meaning, most of the planet) still question its validity, and won't accept it.

Plus, Bitcoin's target was to have a single bitcoin be worth tens of thousands of dollars. This makes it an unreasonable choice as a currency for everyday use by individuals.

You can fracture bitcoins, so you can own one tenth of a BC that is worth... one tenth of a BC. This is done so you can use it in your everyday purchases. At least in theory.

Canadian Tire dollars are a real currency by all standards even if limited in scope and recognition. All something needs to be a currency is to be a medium of exchange. If two people use it as such it has enough love to be a currency. The love will only determine how much it is used. In the Apalachia, soda cases are used as currency cause you can't buy cigarette or booze with food stamps, but you can buy soda cases. So people use the cases to get cigs and booze.

Kramodlog · Mar 3, 2014

tomBitonti said:
Can anyone detail this with better information?

Why the gold standard isn't used anymore? Because it lacks flexibility when dealing with the economy.

Printing money has its use and isn't necessarely the nightmare some think it is. hat happend to Greece recently is a good example. They could have printed money to pay their debts and lower the value of their money (cause there is more in circulation) to help them export more good (cause now it is cheap to buy them cause their money isn't worth a lot). The Europea Union didn't want to do that with the Euro, so it had to find a way to deal with Greece's debts in other ways.

Adopting the gold standard, that is backing your currency with gold reserves, has the same problems. You can't print more money unless you increase you gold reserves.

Derren · Mar 3, 2014

goldomark said:
Why the gold standard isn't used anymore? Because it lacks flexibility when dealing with the economy.

Also deflation becomes a real threat.
What do you do when you simply have not enough gold in circulation for your economy to function?

Umbran · Mar 3, 2014

tomBitonti said:
While, removing control of money creation from the caprices of government officials, who may be corrupted, is an ideal, in practice, while the effect of corruption may be lessened, it is still there.

May be lessened? Why? Somehow those who aren't government officials are somehow less prone to the draw of wealth? That putting them in a space that's a degree of separation more distant from public oversight is somehow going to make it less likely? Who thought this was an ideal?

goldomark said:
You can fracture bitcoins, so you can own one tenth of a BC that is worth... one tenth of a BC.

Yes, but if a bitcoin is $10,000, that means the typical working amount are on the order of ten-thousanths or thousanths of a bitcoin. That's just awkward. You want to balance your checkbook down in the fourth and fifth decimal places?

Kramodlog · Mar 3, 2014

Derren said:
Also deflation becomes a real threat.
What do you do when you simply have not enough gold in circulation for your economy to function?

Alchemy!

Kramodlog · Mar 3, 2014

Umbran said:
Yes, but if a bitcoin is $10,000, that means the typical working amount are on the order of ten-thousanths or thousanths of a bitcoin. That's just awkward. You want to balance your checkbook down in the fourth and fifth decimal places?

Escaping fees, guberment taxes, supervision, and the constant threat of hyperinflation because of gubermental fiat is worth the time for some people. I guess.

But not something to difficult to do with a smart phone anyway.

Zombie_Babies · Mar 3, 2014

goldomark said:
Escaping fees, guberment taxes, supervision, and the constant threat of hyperinflation because of gubermental fiat is worth the time for some people. I guess.

But not something to difficult to do with a smart phone anyway.

Not to mention that it's no different at all from a standard bank account - hell, all you're doing is moving the decimal point. What's the real difference between taking $1 away from $10,000 and ... and taking $1 away from $10,000.

Umbran · Mar 3, 2014

goldomark said:
Escaping fees, guberment taxes, supervision, and the constant threat of hyperinflation because of gubermental fiat is worth the time for some people. I guess.

Okay, the guberment is baddy-bad-bad. Got it.

And devaluation and losing a half-billion dollars of investor's cash, well, that's just an acceptable thing to avoid a few bucks in taxes and "supervision".

Maybe want to question whether that lack of supervision is all that great.

And that's where I stop, 'cause politics.

Bitcoin debacle: 850,000 bitcoins gone or half a billions dollars

tomBitonti

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