Can you exchange your bitcoins for gold or beans? Because right now, bitcoin purchasing power amounts to a hill of beans.
Gold is a commodity, not a currency. It is a scarce commodity that is highly demanded as a part of luxury goods. Thus, it commands a high price on the open market.
Beans are also commodities, but they are plentiful. Bean demand is easily met, so they're not priced very highly.
Bitcoins are not production inputs, so their only value is (ostensibly) as an alternative fiat money or value store. Unlike country-backed fiat money, you cannot exchange bitcoins for goods, so the only demand for bitcoins comes from people "investing" in them. If you want to play the bitcoin market, that's fine--in that case, you're generating wealth for yourself. Not value.
> Can you exchange your bitcoins for gold or beans?
At this point in time, you can. Next week, that might not be true. But the same could be said of the currency of Belarus, which was devalued 50% overnight last week (the USD in 1931 suffered the same fate after physical gold was confiscated). Which is all that is required to make it a currency.
> Gold is a commodity, not a currency. It is a scarce commodity that is highly demanded as a part of luxury goods. Thus, it commands a high price on the open market.
:) That's a game of semantics. Gold's current price has little to do with its luxury good status, and everything to do with its scarcity and historical claim to fame as a currency. That was historically gold's role in the last 3000 years or so, and it hasn't been dethroned yet.
> Unlike country-backed fiat money, you cannot exchange bitcoins for goods
But you can. And people around the world are not accepting USD as much as they used to 20 years ago - in the past, in most middle eastern and south american countries, you were able to pay with US dollars everywhere. That is no longer true. Does that make the fiat US dollar less of a currency?
You can play semantics all you want, but gold and to some extent silver are used as currencies.
First: I admit I wasn't aware that retailers accepted bitcoins when I posted that comment. I've discovered otherwise now, so the "hill of beans" comment is wrong. Sorry.
:) That's a game of semantics. Gold's current price has little to do with its luxury good status, and everything to do with its scarcity and historical claim to fame as a currency.
"Semantics" have nothing to do with it. Commodities [0] != currencies [1], whether you're familiar with the definitions or not. One exists as a medium of exchange, while the other is a good with no differentiation between sources. Currencies are differentiated by the trustworthiness of the governments that issue them (you'd probably accept a US dollar today before accepting a German papiermark [2] in 1924).
Also, gold's price is a function of the market's supply and demand for gold as either (a) an investment vehicle or (b) an input in the production of goods. Investors don't give a damn that the US dollar was pegged to gold 200+ years ago--they're simply investing in it to make money.
The idea that gold is "currency" is ridiculous. Name a first-world country where gold is widely accepted as currency. Some places in some parts of the world might accept gold, but it's not backed by a central body nor does it carry a relatively stable value (unlike fiat money).
> "Semantics" have nothing to do with it. Commodities [0] != currencies [1]
Semantics have everything to do with it, as I will demonstrate below.
> One exists as a medium of exchange, while the other is a good with no differentiation between sources.
Well, as long as the USD is not fake, you don't care what the source is :) Similarly, for non-fake gold.
> Currencies are differentiated by the trustworthiness of the governments that issue them.
Today, that is true. However, the Chumash people had a currency that -- like bitcoin -- was not centrally managed, and reflected work put into something, rather than any fiat or backing store of value. http://en.wikipedia.org/wiki/Chumash_people#Culture - I can't remember where I read a more detailed account. Basically, you could sit on the beach all day and make money -- and it took slightly longer than the equivalent exchange rate would get you in food (so you could hunt/gather food, or make money, with comparable time expenditure, and exchange them). The whole system broke down when European drills (as manufacturing tools) were introduced and made money making simple.
> First: I admit I wasn't aware that retailers accepted bitcoins when I posted that comment. I've discovered otherwise now, so the "hill of beans" comment is wrong. Sorry.
So - let's get back to semantics: do you agree bitcoin is currency? (exists as a medium of exchange), or commodity? (a good with no differentiation between sources) because it has both properties, thus showing that the definitions are not mutually exclusive. A USD is currency but not commodity; Beans are commodity but not currency. Gold, Chumash beads and bitcoin are both.
> Name a first-world country where gold is widely accepted as currency.
In NYC where I live, hundreds of stores will accept your gold in exchange for other merchandise (at a bad exchange rate for you...). You can identify them by the sign "We buy gold". You must have seen them in other places too.
> but it's not backed by a central body
True, but ....
> nor does it carry a relatively stable value (unlike fiat money)
Wrong, and if you truly believe that you might be beyond help. The US devalued the USD by 50% in 1931. Belarus did it to their fiat currency last week. Between 2002 and 2006, the EUR/USD exchange rate went from 0.8 to 1.5 (almost 100%) - "stable"?
In fact, up until 1971, the backing for the USD (and most other currencies) was gold - it only became a true fiat currency in 1971! Before that, it was a claim on some amount of gold in fort knox, and value was derived from that.
Gold is a commodity, not a currency. It is a scarce commodity that is highly demanded as a part of luxury goods. Thus, it commands a high price on the open market.
Beans are also commodities, but they are plentiful. Bean demand is easily met, so they're not priced very highly.
Bitcoins are not production inputs, so their only value is (ostensibly) as an alternative fiat money or value store. Unlike country-backed fiat money, you cannot exchange bitcoins for goods, so the only demand for bitcoins comes from people "investing" in them. If you want to play the bitcoin market, that's fine--in that case, you're generating wealth for yourself. Not value.