The Future of Money and Historical Perspective

[Xmac]

I follow Andreas Antonopolous regularly because I haven't found any more knowledge and inspiring speakers.

https://www.youtube.com/watch?v=3mUcpsbnhGE

[LDAHL]

I see Bitcoin distinguished itself as the worst-performing currency of 2014.

http://www.bloombergview.com/article...ncy-wasbitcoin

[Xmac]

I see Bitcoin distinguished itself as the worst-performing currency of 2014.

http://www.bloombergview.com/article...ncy-wasbitcoin

Yes, treating Bitcoin, the currency, as an investment, because its market cap, is like investing a penny stock: volatile. But that doesn't mean much. Mostly, people don't carry a currency like the U.S. dollar to make a profit, they use it because its accepted and they can get goods and services with them. That is, one doesn't want dollars because one thinks it will outperform the Euro next year. The price of Bitcoin is a distraction because it is in its infancy.

Venture capitalist investing in the underlying block chain technology however is increasing dramatically which demonstrates the value of the technology as the future of money:

V.C. investment 2012: 2.10 million
2013: 93.84 million
2014: 314.73 million YTD

http://www.coindesk.com/bitcoin-venture-capital/

Infrastructure is being created all over the world at a dizzying rate. Job creation in the field is growing at a similar clip comparable to the capital investment rate. Dell, Amazon, CVS, Paypal, Subway, Overstock.com, Target, Ebay are just some of the big names now accepting it.

[LDAHL]

The price of Bitcoin is a distraction because it is in its infancy.

I agree that losing 56% of the value of your account in a year would be very distracting.

Apart from a few currency specialists, people carry the dollar and instruments denominated in dollars because they believe the dollar will hold its value better than the alternatives until they’re ready to spend it. Bitcoin performed miserably in that respect.

As far as the future of money goes, I see three issues. The technology itself could prove more vulnerable to interference than the evangelists are proclaiming. The level of Bitcoin-related fraud seems higher than a reasonable trader would want to risk. Finally, if it were to become an annoyance to national governments, they could simply abrogate contracts denominated in bitcoins the way the U.S. abrogated contracts denominated in gold back in the thirties.

[Yossarian]

Mostly, people don't carry a currency like the U.S. dollar to make a profit, they use it because its accepted and they can get goods and services with them. That is, one doesn't want dollars because one thinks it will outperform the Euro next year.

The dollar is my functional currency. For me to use a currency other than the dollar I need to have a motivation- access to goods or services not available in dollars, gain/hedge, etc.

Is there a reason to consider using bitcoins other than novelty? I don't see a motivation other than speculation.

[Xmac]

That emoticon above did not come from me.
No idea how it got in there. ???

I agree that losing 56% of the value of your account in a year would be very distracting.

Just like stocks, you only lost if you realized losses by selling.

Apart from a few currency specialists, people carry the dollar and instruments denominated in dollars because they believe the dollar will hold its value better than the alternatives until they’re ready to spend it.

Yes, it's reasonable in the immediate future and those in the Weimar Republic, Argentina and most recently in Cypress had similar beliefs, among them being, 'my money is safe (or best)'. How many know that the dollar has lost almost one percent spending power per year over the last hundred years?

Bitcoin performed miserably in that respect.

Market gyrations in price are not its value, otherwise V.C.s wouldn't be pouring hundreds of millions of dollars into it. But, if one is a speculative stock investor, one understands that there are wide swings in price and they invest for the long term as part of a diversified portfolio. This technique is very lucrative and high risk given a one year time horizon. Most responsible advocates of Bitcoin don't recommend it. Notice that the title of my post is the FUTURE of money. I'm not espousing that amateur investors make larges purchases of Bitcoin for short term gains...its a red herring argument that distracts from the real innovation.

As far as the future of money goes, I see three issues. The technology itself could prove more vulnerable to interference than the evangelists are proclaiming.

.

How safe is your credit card number? How about the value of your dollars as BRICS aggressively moves from it and the Fed expands money supply with QE? Think bail-ins can't happen here? Besides, anyone can say such and such is possible, but is it likely is the real question. If you're saying it is probable what is that based on?

The level of Bitcoin-related fraud seems higher than a reasonable trader would want to risk.

What fraud is that? I've bought it, used it, held it. I control the security. If I let someone else do it, like Mt.Gox for example, then I'm at risk because I gave my private keys to a third party like people do with banks.

Finally, if it were to become an annoyance to national governments, they could simply abrogate contracts denominated in bitcoins the way the U.S. abrogated contracts denominated in gold back in the thirties.

It doesn't sound like you watched the video.

By the time banks with government names (Federal Reserve) figure out what to do about cryptocurrencies, it will be too late because this is a global (not just U.S.) electronic currency as content type and stopping information from propagating on the internet is about as plausible as it was stopping shortwave radio code propagation during WWII.

[Xmac]

The dollar is my functional currency. For me to use a currency other than the dollar I need to have a motivation- access to goods or services not available in dollars, gain/hedge, etc.

Is there a reason to consider using bitcoins other than novelty? I don't see a motivation other than speculation.

In the West, we have the least need to use Bitcoin at the moment, unless you're a foreigner sending money home by remittance which is costly. There are, however, billions of people in underdeveloped countries who have no access to banking who could use it and are starting.

I gave my son twenty-five bucks worth and told him to hold on to it for a while and maybe add to it here and there, maybe five bucks once in a while. If he finds out Subway takes it, it may not last though.

If one has money they know they won't need for at least three years, I'd invest one to five percent of my disposable income in it. Why, because it has become increasingly stable and the long term outlook is favorable for growth. People have already bought expensive homes, businesses, cars, etc., with this currency. There is a Bitcoin ATM in the halls of Congress! It's not going anywhere if people keep using it, no matter what "authorities" and hackers do. They'll only make it more resilient. You can't undo an idea that is spreading like wildfire.

[ApatheticNoMore]

Will this currency lead to: fairly valuing natural capital and natural resources, the soils ability to regenerate, the value of the oceans ecosystem, the value of a stable climate, the undiscounted value of the future etc.. Will it lead to: valuing durability, efficiency, rather than the wastefulness that is gdp, valuing that which increases human well being, not which is made necessary by detracting from it? Will it lead to valuing: all the unmonetized social capital that makes up life, all the unpaid labor that makes everything else possible? Will it lead to valuing individuals for thier own sake as more than just economic machinery? Valuing human potential where it is wasted? Valuing peace over war? Valuing cooperation?

Utopian? Well yes if one expects it out of whole cloth and for the world to be entirely perfect. That's not the point. The point is: so much of what is destructive these days is driven by money. And people have done a lot of thinking on currency and human values (Thomas Greco, Bernard Lietaer) and how currency could be used to value and encourage all that is valuable, and I think that's the desirable direction to head in.

[kib]

There are a number of independent local currencies that basically head in that direction, ANM, individual human time, goods and services represented by an exchangeable certificate. I think when things get too global, what was a fair means of exchange becomes too nebulous and open to speculation, which ... basically negates any honest valuation of what a unit of the currency represents. It's a conundrum; local money will probably remain honest but it's impractical, global money becomes a casino currency favoring the lucky, the amoral and the rich.

[Yossarian]

And people have done a lot of thinking on currency and human values (Thomas Greco, Bernard Lietaer) and how currency could be used to value and encourage all that is valuable, and I think that's the desirable direction to head in.

There are a number of independent local currencies that basically head in that direction, ANM, individual human time, goods and services represented by an exchangeable certificate. I think when things get too global, what was a fair means of exchange becomes too nebulous and open to speculation, which ... basically negates any honest valuation of what a unit of the currency represents. It's a conundrum; local money will probably remain honest but it's impractical, global money becomes a casino currency favoring the lucky, the amoral and the rich.

I am sure this is well intended but I find it hard to see the point of it all. Currency is just an exchange medium. It doesn't matter if it is dollars or cattle or seashells or gold or whatever, all that matters is that people agree to use it. It is necessarily amoral and exponentially more useful the more people agree to use the same medium, which is contrary to creating illiquid local substitutes. What's the point of measuring "individual human time, goods and services represented by an exchangeable certificate" when you can do the exact same thing with dollars or Euros, only better? Currency is just a tool that solves the problems of scale and transferability in barter. No conundrums at all.

Now how you manage it to provide a secure store of value is also important, but that's a different kettle of fish.