On May 29, 2013, at 5:30 PM, "Jessie A. Morris" <[email protected]>
wrote:
> On Wednesday, May 29, 2013 16:56:31 Michael Torrie wrote:
>> Speaking of economics, I know that a few pluggers are diehard
>> libertarians. What do libertarian-mind people think of bitcoin? In
>> some respects it's more like a gold standard in that there is a finite
>> amount of bitcoins that can ever exist. On the other hand it is just as
>> fictional as fiat currency.
>
> The difference is that the Government doesn't have a monopoly on Bitcoins.
> The
> fact that there isn't a controlling body that regulates how many Bitcoins are
> in circulation helps keep it out of the fiat currency camp.
>
> And why is the gold standard not a fiat currency? It's only worth what people
> think it's worth. Gold has little intrinsic value other than gold plated
> connectors and looking pretty. It just happens to be something that people
> value.
Fiat currency is specifically a kind of currency that is by definition not
pegged in value to any commodity. Gold-backed currency does not meet that
definition, and thus it is not fiat currency.
Actually, fiat currency is a good thing. Pegging the value of your currency to
a commodity or someone else's currency is asking for trouble. About the most
important thing a government can do is regulate its economy by keeping its
currency stable. Pegging the value of the currency to some arbitrary thing just
makes it harder for the government to do its job. There is a reason no one is
on a gold standard anymore.
Clearly I am not a libertarian, but it's only because libertarians insist on
believing all sorts of wrongheaded things. ;)
> It reminds me a little of Bottlecaps in video game Fallout. Because people
> value them and use them as a medium for exchanging goods they're as real as
> any other currency. Look at cigarettes in Germany/Russia after WW2. They were
> in limited supply, people valued them, and they used them to exchange goods.
>
> In my opinion, it's not what the currency is backed up by, but who controls
> the currency. Being able to print millions, billions, or trillions of dollars
> on a whim is what makes the USD or most other modern currencies fiat
> currencies.
The point is that you can't create new currency "ex nihilo" if it is backed by
something other than the word of the government. You have to get an equivalent
amount of the backing commodity or currency first, or some fraction thereof if
you function on a fractional reserve system.
You may be conflating the idea of fiat currency with the idea of legal tender,
though. In the US, bills and coins issued by the US Mint are declared by the
government to be legal tender, meaning they are considered valid payment on a
legal debt, including tax liability. This gives the official currency a legal
legitimacy that unofficial currencies do not have. No one is obliged to accept
bitcoins as payment for a debt, but they must accept dollar bills! Of course,
if you are not yet in debt, someone may refuse to enter into a transaction with
you if you intend to pay with cash, but if that's not made clear up front they
are obligated to accept cash to discharge your debt.
Anyway, dollar bills were legal tender even when we were on the gold standard,
so although dollar bills were privileged currency, they were not fiat money.
--Levi
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