Ron Paul discusses gold and bitcoin

[sailingaway]

http://www.rawstory.com/rs/wp-content/uploads/2013/04/Ron-Paul-via-screencap-615x345.png


In an interview with Bloomberg TV, former U.S. Rep. Ron Paul (R-TX) said that he is concerned about the “erraticness” of the dollar, that Bitcoin is too complicated and that gold is still the standard by which the value of our currency should be measured.

Erik Schatzker and Sara Eisen, hosts of the show “Inside Track” asked Paul whether he’s concerned about about the recent drop in the price of gold after a ten year boom.

“I am concerned about the erraticness of the dollar,” Paul said. “The dollar is up, the dollar is down. We print a lot of dollars. The dollar gets devalued. That is really the concern. If people think the gold price up and down is a reflection of something wrong with gold, no, I say it is something wrong with the dollar.”

...

The conversation ranged over the Consumer Price Index as an indicator of national economic health, as well as whether or not the country is currently facing a high or low level of inflation. With regards to the collapse of the Internet currency venture Bitcoin, Paul said he wasn’t interested.

“To tell you the truth, it’s little bit too complicated,” he said. “If I can’t put it in my pocket, I have some reservations about that. But it has been designed in the free market. If it is a means of exchange, it would not ever be illegal. You shouldn’t regulate it in the free market, but I do not think it fits the definition of money, which has been around for 6,000 years.”

Which returned him to the topic of gold.



More: http://www.rawstory.com/rs/2013/04/23/ron-paul-slams-stability-of-u-s-dollar-and-bitcoin-in-pro-gold-rant/

[Petar]

I don't blame Ron for not being interested in bitcoin. I just think that it might be a little over his head, since he's not really part of the digital generation or anything. I hope that the people on Ron Paul forums stay open-minded about it though. Bitcoin actually works very well with libertarianism, so I hope that people judge it fairly.

[brandon]

I agree with him that it's too complicated as it is now. Currently you practically have to be an engineer to use it. I think over time though abstraction levels will be created by 3rd parties that will make it possible to use bitcoin without knowing what a "block" is or ever seeing a 256 bit hex address. I disagree with him about it not being money. If people use it as a medium of exchange, then it is money.

[TheGrinch]

I don't blame Ron for not being interested in bitcoin. I just think that it might be a little over his head, since he's not really part of the digital generation or anything. I hope that the people on Ron Paul forums stay open-minded about it though. Bitcoin actually works very well with libertarianism, so I hope that people judge it fairly.

I don't think it's over his head. There are characterisitics of sound stable money (such as tangiblity, scarcity, durability, maleability, usefulness, etc.), that bitcoin simply doesn't have (well, okay, scarcity, but that scarcity is not natural, it is arbitrary)

Aside from not being subject to massive inflation, it is not all that different than the dollar is now, where it's not backed by anything tangible besides confidence in the issuer (which as we're seeing with the dollar can be trouble when confidence wanes and it doesn't have any other merits to stand on).

[thoughtomator]

I just think that it might be a little over his head, since he's not really part of the digital generation or anything.

He's only the first man to raise a million dollars in a single day on the Internet. I guess that makes him pretty old-fashioned.

RP is very tech savvy. He is right on the money when he says bitcoin can serve as a means of exchange, but it is not money.

[sailingaway]

I don't blame Ron for not being interested in bitcoin. I just think that it might be a little over his head, since he's not really part of the digital generation or anything. I hope that the people on Ron Paul forums stay open-minded about it though. Bitcoin actually works very well with libertarianism, so I hope that people judge it fairly.

I think Ron thinks gold in his pocket has value apart from money, because people have always valued it. Just look at the divergence recently between the prices of physical silver and paper silver. What isn't in your pocket isn't secure, in a sense, but also, there isn't the feeling born of thousands of years of record that humans will find gold valuable even if a government or monetary system were to fall.

So people who want to use bitcoin should, but I'm not interested for that reason. I feel pretty sure some will make a ton on it, but I feel like what Buffet said about derivatives, and what Ron just said here: I don't understand why it would be valuable, so I don't personally want it.

but I know I am not the kind of person who 'times the markets' and I'm sure some will make money.

[Petar]

I don't think it's over his head. There are characterisitics of sound stable money (such as tangiblity, scarcity, durability, maleability, usefulness, etc.), that bitcoin simply doesn't have.

Aside from not being subject to massive inflation, it is not all that different than the dollar is now, where it's not backed by anything tangible besides confidence in the issuer (which as we're seeing with the dollar can be trouble when confidence wanes and it doesn't have any other merits to stand on).

Bitcoin is scarce.

It may not exist in the same tangible way that gold does, but the open-source, peer to peer nature of bitcoin is the thing that gives it integrity in that sense.

And I don't blame Ron for not really being able to immediately understand this concept, it just isn't from his era.

Can you anonymously wire a chunk of gold across the planet?

Does gold make itself transparent to everyone in the whole world, so that non-allocated, leveraged bitcoin markets of price-manipulation and exploitation cannot occur?

No, and that is exactly why gold as money has historically devolved into fractional-lending, and eventually the centrally controlled fiat paper money type banking systems that we have today.

Honestly, bitcoin is better than gold for resisting those types of tendencies.

In any event, the market is going to have the final say for what bitcoin is worth, and if people decide to use it as money, then that is exactly what it is.

[TheGrinch]

Bitcoin is scarce.

It may not exist in the same tangible way that gold does, but the open-source, peer to peer nature of bitcoin is the thing that gives it integrity in that sense, and I don't blame Ron for not really being able to immediately understand this concept, it just isn't from his era.

And can you anonymously wire a chunk of gold across the planet?

Does gold make itself transparent to everyone in the whole world, so that non-allocated, leveraged bitcoin markets of price-manipulation and exploitation cannot occur?

No, and that is exactly why gold as money has historically devolved into fractional-lending, and eventually the centrally controlled fiat paper money type banking systems that we have today.

Honestly, bitcoin is better than gold for resisting those types of tendencies.

In any event, the market is going to have the final say for what bitcoin is worth, and if people decide to use it as money, then that is exactly what it is.

I did edit to clarify: "(well, okay, scarcity, but that scarcity is not natural, it is arbitrary)"

I understand that there are some features of bitcoin that could be applied to make money more sound, but this is exactly what concerns me: "if people decide to use it as money, then that is exactly what it is."

And when people decide not to use it as money, it will be valueless, think myspace vs facebook. You cannot say the same for a tangible intrinsically valuable commodity to back a currency with. Even though gold is no longer money, it is still recognized nearly world-wide as valuable, and has been for thousands of years.

[sailingaway]

Bitcoin is scarce.

It may not exist in the same tangible way that gold does, but the open-source, peer to peer nature of bitcoin is the thing that gives it integrity in that sense.

And I don't blame Ron for not really being able to immediately understand this concept, it just isn't from his era.

Can you anonymously wire a chunk of gold across the planet?

Does gold make itself transparent to everyone in the whole world, so that non-allocated, leveraged bitcoin markets of price-manipulation and exploitation cannot occur?

No, and that is exactly why gold as money has historically devolved into fractional-lending, and eventually the centrally controlled fiat paper money type banking systems that we have today.

Honestly, bitcoin is better than gold for resisting those types of tendencies.

In any event, the market is going to have the final say for what bitcoin is worth, and if people decide to use it as money, then that is exactly what it is.

Well, except not in Ron's definition of money, and he was the one being interviewed. In the sense that FRNs are money, sure, but FRNs themselves are a medium of exchange

[Petar]

I think Ron thinks gold in his pocket has value apart from money, because people have always valued it. Just look at the divergence recently between the prices of physical silver and paper silver. What isn't in your pocket isn't secure, in a sense, but also, there isn't the feeling born of thousands of years of record that humans will find gold valuable even if a government or monetary system were to fall.

So people who want to use bitcoin should, but I'm not interested for that reason. I feel pretty sure some will make a ton on it, but I feel like what Buffet said about derivatives, and what Ron just said here: I don't understand why it would be valuable, so I don't personally want it.

but I know I am not the kind of person who 'times the markets' and I'm sure some will make money.

But is the price of physical gold really diverged from the price of gold certificates, or has that non-allocated, leveraged market simply provided the vehicle to suppress the price of both in todays market?

I mean spot price is spot price, right?

Anyway, the interesting thing about bitcoin is that you can't create a "paper" bitcoin market that exists separate from "real" bitcoins.

Think about the implications!

Bankers have no way to monopolize the issuance of BTC, and no way to create non-allocated, leveraged bitcoin price-manipulation/exploitation markets.

The same cannot be said about gold!

[TheGrinch]

But is the price of physical gold really diverged from the price of gold certificates, or has that non-allocated, leveraged market simply provided the vehicle to suppress the price of both in todays market?

I mean spot price is spot price, right?

Anyway, the interesting thing about bitcoin is that you can't create a "paper" bitcoin market that exists separate from "real" bitcoins.

Think about the implications!

Bankers have no way to monopolize the issuance of BTC, and no way to create non-allocated, leveraged bitcoin price-manipulation/exploitation markets.

The same cannot be said about gold!

The same could be said about gold if you set up a system where it could not be exploited, similar to what you talk about. For one thing, if you eliminated fractional reserve banking and the ability to inflate, then there would be very little power in issuing money.

What you're saying is like me saying, freedom is not possible because it has always devolved into tyranny... Just because it has in the past, does not by any means mean that it is the necessary conclusion, just another hurdle in creating sound money that can't be manipulated.

[Petar]

He's only the first man to raise a million dollars in a single day on the Internet. I guess that makes him pretty old-fashioned.

RP is very tech savvy. He is right on the money when he says bitcoin can serve as a means of exchange, but it is not money.

I'm going to give Josh more of the tech credit for that one.

And there is absolutely no reason that bitcoin cannot be described as money, if it turns out to be successfully used as such.




I did edit to clarify: "(well, okay, scarcity, but that scarcity is not natural, it is arbitrary)"

I understand that there are some features of bitcoin that could be applied to make money more sound, but this is exactly what concerns me: "if people decide to use it as money, then that is exactly what it is."

And when people decide not to use it as money, it will be valueless, think myspace vs facebook. You cannot say the same for a tangible intrinsically valuable commodity to back a currency with. Even though gold is no longer money, it is still recognized nearly world-wide as valuable, and has been for thousands of years.

I realize that gold has quite the track record of being used as money, but the same rule applies.

Gold is money because people use it as money.

I'm not saying that people are going to stop using gold as money any time soon, but I am saying that bitcoin could turn out to be a more useful form of currency for the digital age that has just begun.

Can you imagine a technologically advanced civilization of future humans using gold on star-ships that they build to explore the galaxy.

Me neither.



Well, except not in Ron's definition of money, and he was the one being interviewed. In the sense that FRNs are money, sure, but FRNs themselves are a medium of exchange

Sure, it is Ron's definition of money, but it's not like he is the final authority for what words mean in the English dictionary.

A person can list the characteristics of gold that have contributed to it being used as a currency for as long as we have had civilization, but the truth remains the same.

Money is whatever people decide to use as money.

[TheGrinch]

Gold is money because people us it as money.


No, as I highlighted earlier gold is not money because people use it as money. It was money because it carries a number of valuable characteristics that made it an acceptable stable medium to bartering, characteristics that bitcoin does not possess (such as tangibility, durability, malleability, usefulness, etc.)

The fact that it still has great value despite no longer being used to back currency should show that it's value is not simply derived from arbitrary acceptance as is bitcoin.

As for this: "Can you imagine a technologically advanced civilization of future humans using gold on star-ships that they build to explore the galaxy."

Such is the case with anything, that it is only valuable as long as there is a use for it. Literally nothing is immune to this. Water is not valuable to you if you have ample well water. Food is not valuable to you if you have a sustainable farm. However that does not negate their inherent usefulness and other desirable characteristics besides mass-acceptance that is far more subject to change without needing some extreme circumstance like you're imagining.

Bitcoin is far more susceptible to mass-rejection, only deriving it's value from acceptance.

[Petar]

The same could be said about gold if you set up a system where it could not be exploited, similar to what you talk about. For one thing, if you eliminated fractional reserve banking and the ability to inflate, then there would be very little power in issuing money.

What you're saying is like me saying, freedom is not possible because it has always devolved into tyranny... Just because it has in the past, does not by any means mean that it is the necessary conclusion, just another hurdle in creating sound money that can't be manipulated.

Gold simply does not have the built-in resistance to keep it from devolving into a system of non-allocated, leveraged paper.

Is everyone gonna walk around with chunks of gold and use it for every little thing that they buy?

Even if they did, someone is going to start issuing paper or electronic gold, and then history is going to repeat itself.

Bitcoins, on the other hand, would be inconceivable to use in a "non-allocated" format (assuming that you take proper precautions against double spend hacks).

The system guarantees its own integrity as long as the users refuse to deleterious alter the makeup of the network.

And considering that this is our money, why wouldn't we?


No, as I highlighted earlier gold is not money because people use it as money. It was money because it carries a number of valuable characteristics that made it an acceptable stable medium to bartering, characteristics that bitcoin does not possess (such as tangibility, durability, malleability, usefulness, etc.)

The fact that it still has great value despite no longer being used to back currency should show that it's value is not simply derived from arbitrary acceptance as is bitcoin.

As for this: "Can you imagine a technologically advanced civilization of future humans using gold on star-ships that they build to explore the galaxy."

Such is the case with anything, that it is only valuable as long as there is a use for it. Literally nothing is immune to this. Water is not valuable to you if you have ample well water. Food is not valuable to you if you have a sustainable farm. However that does not negate their inherent usefulness and other desirable characteristics besides mass-acceptance that is far more subject to change without needing some extreme circumstance like you're imagining.

Bitcoin is far more susceptible to mass-rejection, only deriving it's value from acceptance.


You have it backwards.

Certain characteristics of gold lead to people using it as money. Once people use it as money, then it becomes money.

Everything ultimately has its value allocated by the market. Gold may not be commonly used for trade anymore, but it is used to settle accounts between central banks.

Bitcoin is starting to be used as money, and this is going to play a factor in whatever value the market eventually allocates for bitcoin.

And no, water and food are not particularly useful forms of money for an advanced civilization, or even a simple one for that matter.

Those are what you would call "basic necessities".

[TheGrinch]

Gold simply does not have the built-in resistance to keep it from devolving into a system of non-allocated, leveraged paper.

Is everyone gonna walk around with chunks of gold and use it for every little thing that they buy?

Even if they did, someone is going to start issuing paper or electronic gold, and then history is going to repeat itself.

Bitcoins, on the other hand, would be inconceivable to use in a "non-allocated" format (assuming that you take proper precautions against double spend hacks).

The system guarantees its own integrity long as the users refuse to alter its makeup.

And considering that this is our money, why wouldn't we?




You have it backwards. Certain characteristics of gold lead to people using it as money. Once people use it as money, then it becomes money.

Everything ultimately has its value allocated by the market. Gold may not be commonly used for trade anymore, but it is used to settle accounts between central banks.

Bitcoin is starting to be used as money, and this is going to play a factor in whatever value the market eventually allocates for bitcoin.

And no, water and food are not particularly useful forms of money for an advanced civilization, or even a simple one for that matter.

Those are what you would call "basic necessities".

Yes, no shit water and food aren't' acceptable mediums of exchange, that's missing the point entirely. That was in response to your contingency you invented where gold would be worthless. The point is that under the right conditions, anything can be worthless, but in most every instance where gold would be worthless, I can't imagine that bitcoin wouldn't be subject to the same or similar contingencies... The difference is that you don't need to hfigure out some unlikely contingency where gold is worthless for bitcoin to still fail.

The very fact that gold has held value without being money, whereas bitcoin will fail without mass-acceptance as currency, should highlight the difference between the tangible commodity that has stood the test of time and virtual intangible money that derives it's value purely from acceptance.

I do not claim to be knowledgeable enough to know how you would set up gold-backed money that couldn't be manipulated, but with the technology these days, who's to say that it is impossible to do so? If you can have bitcoin set up this way, why could you not have a similar system that's backed by something tangible with similar safeguards against fraud.

The rpoblem is systematic, and this system is not such to where bitcoin can be an absolute safeguard against booms and busts. It's only mroe susceptble, when it's value is entirely arbitrary, rathrer than being based on it's intrinsic value (and by intrinsic value, I mean the value that gold has retained despite not being used as money, but rather it's uses)

[Petar]

Yes, no shit water and food aren't' acceptable mediums of exchange, that's missing the point entirely. That was in response to your contingency you invented where gold would be worthless. The point is that under the right conditions, anything can be worthless, but in most every instance where gold would be worthless, I can't imagine that bitcoin wouldn't be subject to the same or similar contingencies... The difference is that you don't need to hfigure out some unlikely contingency where gold is worthless for bitcoin to still fail.

The very fact that gold has held value without being money, whereas bitcoin will fail without mass-acceptance as currency, should highlight the difference between the tangible commodity that has stood the test of time and virtual intangible money that derives it's value purely from acceptance.

I do not claim to be knowledgeable enough to know how you would set up gold-backed money that couldn't be manipulated, but with the technology these days, who's to say that it is impossible to do so? If you can have bitcoin set up this way, why could you not have a similar system that's backed by something tangible with similar safeguards against fraud.

The rpoblem is systematic, and this system is not such to where bitcoin can be an absolute safeguard against booms and busts. It's only mroe susceptble, when it's value is entirely arbitrary, rathrer than being based on it's intrinsic value (and by intrinsic value, I mean the value that gold has retained despite not being used as money, but rather it's uses)

Are people moving away from drinking water or eating food?

No.

Are people moving away from lugging around chunks of metal that we trade for goods and services?

Clearly.

The far-out hypothetical of an advanced civilization that travels the galaxy and uses bitcoin as money is just as example to show you what kind of quantum-leap bitcoin represents.

I do admit though, if nuclear bombs go off all over the world and we end up going back to the dark-ages, then yes, I can see how bitcoin would become very useless very quickly.

I like to think that we as a society are aiming for something higher than that though.

And again, gold has never stopped being used as some form of "money", if you count the fact that central-banks still use it to settle accounts with one another.

And no, you can't take gold and turn it into something like bitcoin, unless you figure that the movie Tron was realistic somehow.

I'm not trying to be rude, but that's really just how it is.

And as far as being "susceptible to booms and busts", it really goes back to bitcoin having a built-in resistance to non-allocated, leveraged markets.

This is the thing that is going to give it the most stable and well-informed price in the market-place, over the long-run.

[sailingaway]

I'm going to give Josh more of the tech credit for that one.

And there is absolutely no reason that bitcoin cannot be described as money, if it turns out to be successfully used as such.





I realize that gold has quite the track record of being used as money, but the same rule applies.

Gold is money because people use it as money.

I'm not saying that people are going to stop using gold as money any time soon, but I am saying that bitcoin could turn out to be a more useful form of currency for the digital age that has just begun.

Can you imagine a technologically advanced civilization of future humans using gold on star-ships that they build to explore the galaxy.

Me neither.




Sure, it is Ron's definition of money, but it's not like he is the final authority for what words mean in the English dictionary.

A person can list the characteristics of gold that have contributed to it being used as a currency for as long as we have had civilization, but the truth remains the same.

Money is whatever people decide to use as money.
But bit coin depends on trust that it will retain or grow in value whereas gold has a track record of being recognized as a store of value apart from any government or monetary system. Of course you can define money however you can find a market to support, but while Ron is not the last word on definitions he has written a book, a minority report for the Gold Commission ( with others) and numerous papers on it and has put a lot of thought into it. I find his definition persuasive based on my subjective assessment of value. However as far as I'm concerned you should be able to use whatever the market will bear.

[Krzysztof Lesiak]

http://www.youtube.com/watch?v=4K5_Gl_9Hz8

[Jackie Moon]

“To tell you the truth, it’s little bit too complicated,” he said. “If I can’t put it in my pocket, I have some reservations about that. But it has been designed in the free market. If it is a means of exchange, it would not ever be illegal. You shouldn’t regulate it in the free market, but I do not think it fits the definition of money, which has been around for 6,000 years.”

Bitcoin is a pretty revolutionary idea and trying to understand the whole system is very complicated. I know that Ron is smart enough to understand it if he felt like doing the research, but I can't blame him for not being interested right now. And it's also very young so it's volatile and doesn't have the history of gold.

But I think it's awesome that instead of saying "that's stupid, don't use bitcoin", he takes the attitude that people should be free to use whatever they want.

To me that's exactly what I've heard him arguing for. If we were able to instantly end the Fed and return to a dollar backed by gold that would be great. But the argument he's made is to allow competing currencies and the free market will decide which is best. People should be free to create and use a currency backed by gold or goldfish crackers. If the two parties making the exchange agree that it has value that's all that matters.

[Petar]

But bit coin depends on trust that it will retain or grow in value whereas gold has a track record of being recognized as a store of value apart from any government or monetary system. Of course you can define money however you can find a market to support, but while Ron is not the last word on definitions he has written a book, a minority report for the Gold Commission ( with others) and numerous papers on it and has put a lot of thought into it. I find his definition persuasive based on my subjective assessment of value. However as far as I'm concerned you should be able to use whatever the market will bear.

Yes, bitcoin depends on confidence, but in the end, all currencies do.

Gold's advantage is that it has a very very very long track record of being considered valuable, whereas bitcoin is like a new born baby.

Who knows, maybe 20,000 years from now bitcoin style currency will be the only thing that civilization can conceive of using as money.

Yes, it sounds far fetched, but we are talking about human civilization here.

stone age > bronze age > iron age > agrarian revolution > industrial revolution > digital age

[TheTexan]

I don't think it's over his head. There are characterisitics of sound stable money (such as tangiblity, scarcity, durability, maleability, usefulness, etc.), that bitcoin simply doesn't have (well, okay, scarcity, but that scarcity is not natural, it is arbitrary)

I disagree. I believe the only characteristic that bitcoins is seriously deficient in right now is usefulness (or, more accurately, acceptance. meaning most merchants will not accept it). But that's just right now. It doesn't mean it won't be useful in the future.

I also disagree about "tangibility" being a characteristic of sound money. With gold for example, the Au itself may be tangible, but the faith in the promise of value that the Au represents is entirely intangible.

I do agree though that it is generally better for a currency to be tangible than not. It means it's more durable (which is a characteristic of sound money). So while gold does beat bitcoins in the durability department, bitcoins beat gold in the portability department.


Aside from not being subject to massive inflation, it is not all that different than the dollar is now, where it's not backed by anything tangible besides confidence in the issuer (which as we're seeing with the dollar can be trouble when confidence wanes and it doesn't have any other merits to stand on).

Basically I think you're saying that bitcoin's value isn't backed by anything. However, the same thing can be said about precious metals. Most of the value given to it is due to its history as a currency, and not for its usefulness. You can't eat it. You can't build a house with it. It does have a select tiny few industrial uses, but most people who buy gold do not plan to use it in that way.

Gold is used as a currency. It is valued as a currency. It's not generally inherently useful. It's value is only that which is given to it by others. Same with bitcoin.

[RickyJ]

But is the price of physical gold really diverged from the price of gold certificates, or has that non-allocated, leveraged market simply provided the vehicle to suppress the price of both in todays market?

I mean spot price is spot price, right?

Anyway, the interesting thing about bitcoin is that you can't create a "paper" bitcoin market that exists separate from "real" bitcoins.

Think about the implications!

Bankers have no way to monopolize the issuance of BTC, and no way to create non-allocated, leveraged bitcoin price-manipulation/exploitation markets.

The same cannot be said about gold!

Bankers can buy all bit coins and then never use them taking them out of circulation and killing the "currency." They can do this easily because there is no limit to the dollars they can print.

[TheTexan]

Bankers can buy all bit coins and then never use them taking them out of circulation and killing the "currency." They can do this easily because there is no limit to the dollars they can print.

They can't buy all bit coins... they could try, but the price would rise super exponentially as bitcoins started to run out.

What they can do, is manipulate the fuck out of the market to create instability. If bitcoin were to ever be as widespread as fiat currency is now, it would be much harder for them to do that.

[sailingaway]

I disagree. I believe the only characteristic that bitcoins is seriously deficient in right now is usefulness (or, more accurately, acceptance. meaning most merchants will not accept it). But that's just right now. It doesn't mean it won't be useful in the future.

I also disagree about "tangibility" being a characteristic of sound money. With gold for example, the Au itself may be tangible, but the faith in the promise of value that the Au represents is entirely intangible.

I do agree though that it is generally better for a currency to be tangible than not. It means it's more durable (which is a characteristic of sound money). So while gold does beat bitcoins in the durability department, bitcoins beat gold in the portability department.



Basically I think you're saying that bitcoin's value isn't backed by anything. However, the same thing can be said about precious metals. Most of the value given to it is due to its history as a currency, and not for its usefulness. You can't eat it. You can't build a house with it. It does have a select tiny few industrial uses, but most people who buy gold do not plan to use it in that way.

Gold is used as a currency. It is valued as a currency. It's not generally inherently useful. It's value is only that which is given to it by others. Same with bitcoin.

Ornamentation and prestige is a use and it has been used for that since before written history. It has an inherent value because people like it for itself.

[TheTexan]

Ornamentation and prestige is a use and it has been used for that since before written history. It has an inherent value because people like it for itself.

In the context of its use as a currency, I'm not so sure that its use as an ornamentation is relevant. I believe gold is used as ornamentation because of its rarity, not necessarily because of its color or shinyness. Other metals are shiny, too, you know.

If copper were rare, and gold was common... I believe ladies nowadays would be wearing copper jewelry.

In other words, it's valued for its use in ornamentation because it's valued for its use as a currency (or, phrased differently, as a status symbol). Not the other way around.

[sailingaway]

In the context of intrinsic value its use as an ornament and for prestige is part of what makes it valued and usable anywhere as money, if governments stay out of the issue. And scarcity is part of its value, of course.

[TheTexan]

In the context of intrinsic value its use as an ornament and for prestige is part of what makes it valued and usable anywhere as money, if governments stay out of the issue.

Part of its value yes. But it is not necessary to be able to wear a currency around your neck for it to be useful as a currency. (Dollars prove that fairly well I think)

I guess my point is that gold wouldn't be valued for ornamentation, if it wasnt also valued for its utility as a currency. (So it's use as ornamentation is not really an "inherent" value)

[sailingaway]

I know you don't need to be able to wear currency. but part of what makes gold instinctively 'solid' in a way paper or computer bits don't instinctively resonate is that people value it automatically, no one has to convince them it is a good thing.

[PierzStyx]

But is the price of physical gold really diverged from the price of gold certificates, or has that non-allocated, leveraged market simply provided the vehicle to suppress the price of both in todays market?

I mean spot price is spot price, right?

Anyway, the interesting thing about bitcoin is that you can't create a "paper" bitcoin market that exists separate from "real" bitcoins.

Think about the implications!

Bankers have no way to monopolize the issuance of BTC, and no way to create non-allocated, leveraged bitcoin price-manipulation/exploitation markets.

The same cannot be said about gold!

Uh, yes they can. CISPA and The Patriot Act. Destroy privacy on the internet, regulate who uses BTC and who doesn't. Tax users of BTC as you see fit. Or better yet, create your own government equivalent and declare anyone who uses BTC in violation of legal e-tender laws. Then arrest and/or fine accordingly.