Kim Holburn wrote: > > > Would you take a two year loan in bitcoins, repayable in bitcoins? > > That's the same as a loan in any currency other than your own.
No it's not. Holding Bitcoin is essentially gambling. If you borrow capital for a business you are expecting to repay the loan from the profits from the business. If the currency value escalates 100% in a that two year period, you are going to need a wildly lucrative business, and would be way better off using an alternative source of finance. There is a ongoing major and often costly efforts by governments to keep their currencies stable because it is a basic component of economic stability and productivity. Bitcoin might be suitable for short term trading. Virtual currencies certainly have potential for low friction transfers. > As long as the total value of any kind of currency is small, it is going > to be volatile. This might be true in general but Bitcoin show classic bubble behaviour, not ordinary currency volatility. Humans are have a fashion-driven herd mentality and counteracting this is a key function of economic management. > We trust a particular kind of paper money because that government has > proved trustworthy so far? > Have you ever lived in a place with no government? I wouldn't recommend it both economically and in terms of personal safety. Trust is scarce. Distrusting the government is a minor secular religion in the West - and has certainly produced some significant positives - but this is not actually an evidence-based argument for eliminating government from anything. > (Unlike bitcoin's value which is basically an emotionalized > > fantasy.) > > Actually, it's based on mathematics. > The mathematics determines the computation requirements to produce a bitcoin, or in practice how much CO2 your bitcoin farm needs to pump in the atmosphere per bitcoin, but the value of a bitcoin, ie, what people will do for control of these funny numbers - is driven by emotions and mythologies. Government currencies also require mythologies but these are deeply bound into fundamental real world economic activities like paying taxes. There is a lot of hype, there is also something happening that no-one > thought possible. > Bubbles, the black economy and currency optimisation are actually standard economic subjects that don't surprise economists. Virtual currencies are here to stay but economics says the real ones are going to be government sponsored (and may not be blockchain based). Bitcoin is as likely to vanish in a decade as not. The major reasons to be involved with Bitcoin at all are libertarianesque coolness, and, to facilitate criminal activities like tax evasion or dealing in proscribed items. Bitcoin might survive as an enabler of these activities but it will be under increasing attack by governments because that it enables crime and avoids tax. Jim _______________________________________________ Link mailing list Link@mailman.anu.edu.au http://mailman.anu.edu.au/mailman/listinfo/link