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Steve Forbes: Bitcoin Not Money

Unknown Lamer posted 1 year,6 days | from the ron-paul-says-eat-gold dept.

The Almighty Buck 692

MouseTheLuckyDog writes "A brief editorial by Steve Forbes, one of our moneymeisters, on why bitcoins are not money.. Hint: For those who are too lazy to read the opinion,. Bitcoins are too volatile to be money." From the article: "Money is most optimal when it is fixed in value just as commerce is facilitated when we have fixed weights and measures. When you buy a pound of hamburger you expect to get 16 ounces of meat. An hour has 60 minutes. A mile has 5280 feet. These measurements don’t 'float.' So too money best lubricates commerce when it has a fixed value."

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692 comments

Fiat Currency (5, Insightful)

jasonlfunk (1410035) | 1 year,6 days | (#43471603)

What what exactly is the value of the US dollar?

Re:Fiat Currency (5, Funny)

KillaGouge (973562) | 1 year,6 days | (#43471617)

The value of one U.S. dollar is exactaly one U.S. dollar. The value doesn't change, how much you can buy with it however, does change.

Re:Fiat Currency (2, Informative)

marcovje (205102) | 1 year,6 days | (#43471643)

It was that way, when it was still linked to the gold standard. It isn't anymore.

Re:Fiat Currency (5, Insightful)

Chris Mattern (191822) | 1 year,6 days | (#43471705)

Money still fluctuates in value when you're on the gold standard. It just fluctuates in lockstep with the fluctuations in the value of gold. This means that it's unlikely to steadily decrease in value, but it doesn't mean it stops fluctuating.

Re:Fiat Currency (3, Insightful)

chill (34294) | 1 year,6 days | (#43471723)

Only because Gold was defined in terms of U.S. Dollars. Specifically, the major nations of the world got together and said "1 ounce of pure gold is $21 U.S. Dollars".

A gold standard isn't magic, nor does is prevent inflation or deflation.

Re:Fiat Currency (2, Insightful)

alen (225700) | 1 year,6 days | (#43471801)

gold be definition is deflationary
there is a set amount of gold on earth. as the population increases there is less gold per person available. hence as population increases you will have deflation because there will be less and less money available per person.

Re: Fiat Currency (3, Insightful)

dugancent (2616577) | 1 year,6 days | (#43471871)

Go look up the definiton of gold in a dictionary. If the word deflationary doesn't appear, it's not "by definition".

Re:Fiat Currency (3, Insightful)

ShieldW0lf (601553) | 1 year,6 days | (#43471885)

gold be definition is deflationary
there is a set amount of gold on earth. as the population increases there is less gold per person available. hence as population increases you will have deflation because there will be less and less money available per person.

The population does not increase by definition.

Re:Fiat Currency (4, Interesting)

chill (34294) | 1 year,6 days | (#43471897)

Gold is, but a gold *standard* isn't. Or, rather, it doesn't have to be.

You just adjust the value assigned to the gold. Since there is no significant commerce valued in "ounces of pure gold", you adjust the value given to your medium of exchange.

See 1971, when Richard Nixon revalued gold from $21 to $35 per ounce, but only for non-American exchangers.

Re:Fiat Currency (3, Insightful)

Mystakaphoros (2664209) | 1 year,6 days | (#43471925)

there is a set amount of gold on earth.

True, but it's not all in humanity's possession, hence the interest in mining it (like you can do with BitCoin). And true, someday we will hit the limit (like we will do with BitCoin) and those who have it already will have power over those who desire it (ditto).

Re:Fiat Currency (0)

Shoten (260439) | 1 year,6 days | (#43471941)

gold be definition is deflationary
there is a set amount of gold on earth. as the population increases there is less gold per person available. hence as population increases you will have deflation because there will be less and less money available per person.

Um...you have it backwards. When total value of a monetary supply remains static but the monetary supply itself increases, that's inflation, not deflation. And even then, you have it wrong because even though the total amount of gold on earth is static, the amount used to back money (as opposed to undiscovered/unmined/located in the grills of hip-hop artists) can change, as can the value of a single ounce of gold.

Re:Fiat Currency (3, Insightful)

Anonymous Coward | 1 year,6 days | (#43471699)

that tautology works just as well with bitcoin, though.

Re:Fiat Currency (3, Interesting)

hedwards (940851) | 1 year,6 days | (#43471919)

No, it doesn't. It's sort of like if I were paid in Euros and had all my expenses to be paid in USD, CAD or RMB, except that the relationship between the currencies were fluctuating by up to 50% on any given day with little or no predictability.

Bottom line is that the people who throw out fiat currency in relationship to the USD are being disingenuous when they suggest that USD is subject to the same level of instability. Sure it is slightly unstable, but we're not talking about hyperinflation or hyperdeflation, which is something that could definitely happen with BTC. And the amount of money you make tends to rise with inflation in general, assuming some sort of sane monetary policy.

What's more, since nobody is forced to take BTC for anything, you can very easily wind up in a situation where the BTC economy grinds to a halt because people think their money is going to be worth more the next day or in a month.

Re:Fiat Currency (0, Flamebait)

tmosley (996283) | 1 year,6 days | (#43471711)

Yet the price of a dollar (to those that produce them) is about 4 cents. When price is much lower than value, you can bet that value will fall until the two meet.

Also note that the price is the same for ALL denominations of US currency. Not looking forward to hundred dollar bills being worth 4 cents.

Historically, no fiat currency has lasted more than 60 years. We are currently in year 42 of our fiat regime.

Re:Fiat Currency (0)

Anonymous Coward | 1 year,6 days | (#43471863)

When price is much lower than value, you can bet that value will fall until the two meet.

Dude, seriously? That's only true if there's competition. There are actually laws in place to prevent people competing with the government mints at printing money.

How long has the fiat regime of diamonds lasted, again?

Re:Fiat Currency (1)

Anonymous Coward | 1 year,6 days | (#43471729)

And the value of one Bitcoin is exactly one Bitcoin... What is the difference?

Wait for it.... (2, Insightful)

Anonymous Coward | 1 year,6 days | (#43471737)

...here it comes. Legions of teenage and college Slashdotters, who think they are MBAs, Accountants and public policy experts, engaging in Fan Boy, Face Painting, Homer rants about how bitcoins are really money...really!

Re:Fiat Currency (2)

superwiz (655733) | 1 year,6 days | (#43471755)

The value doesn't change, how much you can buy with it however, does change.

How much you can exchange it for is what determines its value. The number written on it is its notional value (aka face value).

Re:Fiat Currency (5, Insightful)

Richard_at_work (517087) | 1 year,6 days | (#43471757)

I think its useful to say that the value of a currency is really in how stable it is within an economy - once hyperinflation takes over, it doesn't matter how established the currency is, its value as money disappears (see Germany in the 1920's, Russia in the 1990's and Zimbabwe in the past decade) and people move to alternative means of payment.

$1 today will buy me a loaf of bread. That loaf of bread might cost $1.01 tomorrow, or even $0.99, but while that's an inconvenience its not disastrous. If that loaf of bread goes from $1 one day to $5 the next, and $20 the next, then its value as actual money is gone - theres no way to establish a stable economy on such a basis because there's no way to plan for the future.

Re:Fiat Currency (0)

Anonymous Coward | 1 year,6 days | (#43471765)

"The value doesn't change, how much you can buy with it however"

This is no different from bitcoin. You can think of bitcoin and products fluctuating in value. If the amount of products you can buy for a certain amount of money changes that means the value of the money you have *has in fact changed* it's just masked by product prices.

Re:Fiat Currency (0)

Anonymous Coward | 1 year,6 days | (#43471769)

Correction: how much you can buy with it changes slowly over time with respect to domestic trade. The dollar store doesn't change it's prices every other day. Yes, it was once the dime store, but that was 50 years ago.

Re:Fiat Currency (1, Funny)

definate (876684) | 1 year,6 days | (#43471889)

The value of one bitcoin is exactly one bitcoin. The value doesn't change, how much you can buy with it however, does change.

Re:Fiat Currency (1)

Anonymous Coward | 1 year,6 days | (#43471907)

The point is not that the dollar's value doesn't fluctuate and the bitcoin's does. The point is that the volatility (the change of the value per day) of bitcoins is way higher than any current currency.

If you agree today to pay 100 dollars for $GOODS next week, you can be pretty sure that the value of those 100 dollars will be very close to their value today. On other currencies, the value deprecates a lot; but it's still kinda predictable ("today a bag or rice is worth 100, so next month it will be 150, give or take"). Those are bad currencies, but they're not 100% useless. You don't know what will be its value, but you can make a very informed prediction, for best-case, worst-case and expected scenarios.

If you agree today to pay 100 bitcoins for $GOOD next week, you have no idea of what will be the value of those 100 bitcoins when the exchange is actually finished. This is why Forbes says it's useless. You can't make any reasonable prediction of its future value for any point in the future. The fact that it tripled its price in a month, then went to half its peak in about a week, shows how unreliable it is.

Re:Fiat Currency (1)

Joce640k (829181) | 1 year,6 days | (#43471953)

The value of one U.S. dollar is exactaly one U.S. dollar. The value doesn't change, how much you can buy with it however, does change.

Sure, but it doesn't change by 20% in one day.

(Then 'correct' itself the next day...etc.)

Re:Fiat Currency (1)

Anonymous Coward | 1 year,6 days | (#43471671)

1 item of the dollar menu. All other weights and measures are meaningless.

Re:Fiat Currency (0)

Anonymous Coward | 1 year,6 days | (#43471677)

What what exactly is the value of the US dollar?

6 ounces of ground beef?

Re:Fiat Currency (5, Funny)

Mystakaphoros (2664209) | 1 year,6 days | (#43471783)

I like to visualize value in relation to ground beef. Like, I get paid about 6 1/2 lbs of ground beef an hour (before beef tax). I filled up my car with 14 pounds of ground beef. (One gallon of gas is running around the price of one pound of ground beef-- at least the good stuff.) I currently have about two tons of ground beef in student loans.

Re:Fiat Currency (1)

SJHillman (1966756) | 1 year,6 days | (#43471909)

I like doing stuff like this to put things in terms for other people to understand. However, I buy ground beef by the cow, so for me a gallon of gas is about two pounds of ground beef. My car costs 28 pounds of ground beef to fill the tank and I get paid 8.75 pounds of ground beef per hour (gross). My take-home pay is about one ton of ground beef each month. I just sent Sallie Mae my last student loan payment, roughly 250 pounds of ground beef (down from six tons of ground beef two years ago). However, I still owe almost four tons of ground beef on my car, but it's KBB value is close to six tons of ground beef so that's good.

Re:Fiat Currency (1)

Anonymous Coward | 1 year,6 days | (#43471681)

Whatever someone will give you for it. It just so happens that what you can get for a dollar is pretty consistent on a day-to-day basis, unlike Bitcoins.

Re:Fiat Currency (0)

Anonymous Coward | 1 year,6 days | (#43471695)

0.0009 percent of the annual salary of a US-based programmer

Re:Fiat Currency (0)

Anonymous Coward | 1 year,6 days | (#43471713)

At this point in California, its 1/4 a gallon of gasoline

Re:Fiat Currency (0)

Anonymous Coward | 1 year,6 days | (#43471721)

it's called 'Faith'

Re:Fiat Currency (1, Informative)

benzapp (464105) | 1 year,6 days | (#43471791)

The important answer is: whatever the government says it is worth.

Steve Forbes is an idiot, and he simply does not understand how money functions in an advanced economy. His idealized vision has NEVER existed.

Money is the primary projection of sovereign power. When a country collapses, so too does its currency. A sovereign is only as powerful as his ability to force people to use state currency, which is usually done through taxes. This is why tax collection was so important in ancient times - it literally was the only way cohesion of large empires was maintained.

Within a generation of the Roman Empire collapsing, and hence the tax man no longer being a problem, people stopped using currency and reverted to barter. In the 19th century, the British engaged in all sorts of social engineering to get Africans to work for money. It's really a counterintuitive thing that exists only due to outside coercion.

There is zero evidence that the Economics lie of efficiency every occurred.

Re:Fiat Currency (1)

JWW (79176) | 1 year,6 days | (#43471853)

There is zero evidence that the Economics lie of efficiency every occurred.

Seriously??

There is no way Western Civilization would be where it is today if we only had barter as a means of trade. Currencies were essential.

However, Forbes is still wrong. Bitcoin is a currency. There's nothing about currencies that says they have to not be volatile.

Re:Fiat Currency (1)

squiggleslash (241428) | 1 year,6 days | (#43471793)

Does it matter? The dollar is accepted for payment of taxes, ergo every adult American, even a paranoid goldbug, is going to accept dollars as payment, however reluctantly.

His issue is with bitcoin's volatitilty (5, Insightful)

Shivetya (243324) | 1 year,6 days | (#43471797)

not that their value changes, but that the changes are to volatile to make it a worthwhile currency. Its more like a commodity than anything else.

Re:Fiat Currency (1)

Anonymous Coward | 1 year,6 days | (#43471811)

What what exactly is the value of the US dollar?

B0.013354 as of this morning Eastern DST. [bitcoinwatch.com]

Next question.

Oh, and look at the exchange values .... Bitcoins are anywhere from $75 to $93 - depending on exchange.

You would NEVER see variations like that with the US Dollar - even when we were attacked on 9/11 I don't think it did that.

Forbes does have a point.

Re:Fiat Currency (3, Insightful)

DrEldarion (114072) | 1 year,6 days | (#43471855)

The backing of the US government, and the ability to trade it for something everywhere in the US and many places outside of it. A currency is ONLY good as a currency if you can actually buy things with it.

Now, what exactly is the value of a bitcoin which has no backing whatsoever and nearly no ways to trade it for anything?

I find it very amusing that many of the same people who advocate for a return to a gold-backed currency are the same ones who push this pseudo-currency which has no backing at all.

so the government doest increase the money supply? (0)

Anonymous Coward | 1 year,6 days | (#43471609)

I guess his never heard of factional banking and money printing press call the federal reserve?

Floating money (2)

Therad (2493316) | 1 year,6 days | (#43471611)

So... he doesn't use any money i guess?

Re:Floating money (0)

Anonymous Coward | 1 year,6 days | (#43471921)

Not all money floats (relative to the dollar).

For example, historically the Chinese have fixed their currency exchange to the Dollar:
https://www.google.com/finance?q=USDCNY

A good discussion of how this works is on Khan academy:
https://www.khanacademy.org/science/core-finance/money-and-banking/currency-tutorial/v/currency-exchange-introduction

Doesn't he know... (0)

Anonymous Coward | 1 year,6 days | (#43471613)

...that the value of money changes all the time?

So Steve... (1)

Anonymous Coward | 1 year,6 days | (#43471615)

What fixed value does the dollar have?....
oh that's right it doesn't

Now go tell US Dollar and Euro they are not money, (1)

Anonymous Coward | 1 year,6 days | (#43471619)

too. For exactly the same reason.

Re:Now go tell US Dollar and Euro they are not mon (0)

Anonymous Coward | 1 year,6 days | (#43471927)

http://www.oanda.com/lang/fr/currency/historical-rates/
http://bitcoin.clarkmoody.com

One of these changes more over the same time period than the other.

What? (1)

Anonymous Coward | 1 year,6 days | (#43471623)

How is the value of currency fixed? You can't buy hamburger for the exact same price, year after year, not even day-to-day.

There is no spoon (0)

Anonymous Coward | 1 year,6 days | (#43471629)

These measurements don’t 'float.'

then there is no money. it all floats.

But it doesn't, dumbass (0)

Anonymous Coward | 1 year,6 days | (#43471645)

What exactly is it fixed against?

Re:But it doesn't, dumbass (0)

Anonymous Coward | 1 year,6 days | (#43471749)

itself?

Judo (5, Interesting)

superwiz (655733) | 1 year,6 days | (#43471647)

The main premise in Judo is to use opponent's strength against them. Forbes knows he sounds snooty. Which is why he takes on a position contrary to the one he actually wants to advocate. Let's say he loaded up on Bitcoins and he wants them to go up. His choices are (1) stay silent; (2) promote it; (3) oppose it. Staying silent obviously will not help him cause. Promoting it will not help his cause because the kinds of people who would take him at his word are not the kinds of people to seek out an alternative currency (he is all about orthodoxy). But he can use the fact that anyone seeking to oppose orthodoxy would do the opposite of what he'd recommend (this is Judo). Oh, and if he really didn't think much of Bitcoin, he would simply not comment.

Re:Judo (4, Funny)

Anonymous Coward | 1 year,6 days | (#43471835)

I'm all for martial arts metaphors when possible, but this is fucking ridiculous.

Re:Judo (1)

kestasjk (933987) | 1 year,6 days | (#43471845)

And I'm sure if Forbes wrote "Bitcoin is a fantastic idea, I fully support it" you would be saying "oh he is just taking the contrary position because he knows reverse psychology blah blah blah" ?

Maybe (just.. maybe) he says he doesn't think Bitcoin is money because he doesn't think Bitcoin is money?

Re:Judo (0)

Anonymous Coward | 1 year,6 days | (#43471861)

No need to seek for conspiracy.

The definition of money (usually) includes storage of value (http://en.wikipedia.org/wiki/Money). (Too) high volatility precludes that purpose. Therefore by definition Bitcoins are not money.

Say what, Steve? (4, Insightful)

Chris Mattern (191822) | 1 year,6 days | (#43471653)

*All* money fluctuates in value. Yes, even if you run on the gold standard (which I know you favor). Money that fluctuates too much isn't very good for money's intended purpose (as a means of exchange and a store of value, particularly the latter), but you can't say that something isn't money because it fluctuates. Was the Deutschmark not money during the hyperinflation of the 1920s?

Re:Say what, Steve? (2)

Mystakaphoros (2664209) | 1 year,6 days | (#43471687)

Same thing with the Zimbabwean Dollar in the 2000s, before they... stopped using the Zimbabwean Dollar. Once you start issuing $100 trillion dollar notes, people get kind of leery.

Re:Say what, Steve? (0)

Anonymous Coward | 1 year,6 days | (#43471777)

And here I thought it was Toilet Paper during the 1920's. The more you know, I guess.

Re:Say what, Steve? (5, Insightful)

chill (34294) | 1 year,6 days | (#43471825)

Re-read the article. His point is that once a currency becomes *too* volatile it ceases being money. He doesn't say money *has* to be fixed to be useful, just that it is OPTIMAL when fixed. The *less* it fluctuates the more useful it is as a standard medium for exchange.

"Money is most optimal when it is fixed in value..." (Emphasis mine.)

Re:Say what, Steve? (0)

Anonymous Coward | 1 year,6 days | (#43471879)

Sure, everything fluctuates in value relative to other things. And hey, you can setup everything based on bartering if you like, some people do.

The crux of it is this -- large fluctuations relative to the value of something benefits insiders, day traders, that sort of thing. Small fluctuations relative to the value benefit its use as some sort of reference, something that ordinary people can use and rely on for buying bread, that sort of thing.

The USD may have a different value next year, but only by a few percentage points of what it is now. Euro as well. As a result, I'm not concerned at holding both, in respective bank accounts. If either may be 50% different tomorrow, then I would be concerned -- perhaps it goes up by that much, and that's great, but if it's fluctuating that much, I need to spend time worrying about that, and can't just take it and forget about it.

Economies are based on things that people can trust. There was the same amount of money before, during, and after the Great Depression, just people did different things with that money, based on what they could trust.

Re:Say what, Steve? (1)

Richard_at_work (517087) | 1 year,6 days | (#43471891)

Yes, all currency does fluctuate in value - however, if it fluctuates too much then it becomes less useful as a method of payment, as your payment for services today might not cover your dinner that night, or it might cover your dinner for the week.

Price Anarchy (5, Interesting)

eldavojohn (898314) | 1 year,6 days | (#43471669)

One of my childhood friends does internal auditing for a large bank. One time I asked him what his biggest fears were (having been able to look at all the books) and he told me at the time it was actually price anarchy. This was around the 2008 time frame and he was trying to describe a situation where nobody knows how much money to charge for something. I later heard a This American Life episode that details life in Brazil when something like this happens [thisamericanlife.org].

So my friend told me that his biggest fears are when you go into a market one day and eggs are 68 cents a dozen and you go in the next day and they're $5.92 a dozen ... and you can go to the store management and they're looking at some graphs at the beginning of each day to set their prices but they're doing guesswork because the money fluctuates so quickly. So my friend's real fear was that there's some point where that swings wildly out of control and -- similar to the bank runs that happened before regulation -- weird swings cause people to act erratically and irrationally. And those actions cause the swings to get even wilder and suddenly you have price anarchy where nobody knows what anything is worth at a given point in time. The funny part is that on some days he would watch the terminals and freak out and go withdraw as much money as he could from the ATM to hedge into some liquid assets since he kept everything in the bank. That amused me because by using inside information he was performing what were erratic behavioral patterns ... but I guess that's another discussion.

Anyway, yeah, back to Bitcoin ... if you want some entertainment, keep this tab open throughout the day [clarkmoody.com]. So many people are gaming Bitcoin right now that it makes for an excellent show! Behold, the completely unregulated market!

Re:Price Anarchy (1)

Xest (935314) | 1 year,6 days | (#43471917)

Yes, that's basically what happens when hyperinflation occurs as it did in for example, Zimbabwe under Mugabe's epic economic policies. The cost of things rises so fast you can't realistically determine what you should and shouldn't pay for something day by day to the point currency becomes meaningless and people start trading in cows and daughters or whatever instead.

I call BS on this one. (0)

Anonymous Coward | 1 year,6 days | (#43471673)

Ever hear of a thing called "inflation"?

How about "Exchange Rates"?

Both fluctuate daily, if not hourly - especially, exchange rates.

Money in any form is an abstract concept. 16 ounces of beef is a physical measure. Abstract concepts vary by each user. A physical measure does not.

Why do you think gold has a constant real value, but a varying monetary value? Did the physical effort to mine the gold change? Nope. That is quite stable over time.

The only changes have been purely abstract "value" changes, and has no relationship to reality.

Odd thing to come from Forbes... (3, Interesting)

leonbev (111395) | 1 year,6 days | (#43471679)

Considering that one of their freelance journalists (Tim Lee) on forbes.com is one of the biggest supporters of Bitcoin.

Check out all of the articles he's written about how great Bitcoin is:

http://www.forbes.com/sites/timothylee/ [forbes.com]

I find it amusing that they let this one freelance writer attempt to pump up his personal Bitcoin stash on such a popular financial site.

Of course, this is Forbes... They'll post anything for page views and ad impressions. I still remember the crap they posted about the merits of SCO's pathetic Linux patent infringement case against IBM back in the day, mostly because they loved the negative attention from the Microsoft and Linux fanboys.

False (0)

Anonymous Coward | 1 year,6 days | (#43471683)

I have no love for bitcoins, as I believe the currency will suffer a huge collapse in value in the near future, but the whole "money must have a fixed value" bit is countered by example from every nation in the world. Sounds like a bunch of Ron Paul hocus-pocus.

Re:False (0)

Anonymous Coward | 1 year,6 days | (#43471901)

Libertarians downmodding the truth... meet the new party; same as the (grand) old party.

HAHAHAHA (1)

Anonymous Coward | 1 year,6 days | (#43471685)

I am LAUGHING MY HEAD OFF.

These measurements don’t 'float.' So too money best lubricates commerce when it has a fixed value.

Yeah, by fixed value, you mean diminishing value. Print off $50-$100B per MONTH and see what happens. You can call it dilution. You can call it inflation. This is only the money that we know about without a full audit which would tell us about what is really going on between the Federal Reserve and other states' central banks. The only reason that the dollar is still worth anything is that it has inertia. The US dollar was used for trade worldwide because the US imported AND exported great amounts of good. The US is fortunate that for the time being the petrodollar still exists. Once another currency or multiple currencies take its place, the dollar is doomed.

Car's are best when they drive (0)

Anonymous Coward | 1 year,6 days | (#43471691)

But my car is still a car.

No kidding? (1)

chill (34294) | 1 year,6 days | (#43471693)

This isn't news, unless you disengage your brain.

Right now BTC is, at best, an investment, and I use that term loosely.

Ah Um, WHAT?!? (0)

tiberus (258517) | 1 year,6 days | (#43471697)

So too money best lubricates commerce when it has a fixed value.

I had to blink, shake my head and read that a few times and it still doesn't make much sense. Is gold, the supposed basis for our money, money? It's value is fluid, changing several times a day, or is gold simply a commodity upon which the value of money is based?!? In either case isn't the value of money fluid?

What about inflation? I've heard it referred to as both the change in cost of an item or service and the decline in the value of money. We can also being loans into this and the idea of paying someone back in the future with money that is worth less than what we originally borrowed. Almost forgot currency exchanges...

Just thinking about how absurd Mr. Forbes statement sounds makes my head throb with contradiction.

Re:Ah Um, WHAT?!? (4, Interesting)

squiggleslash (241428) | 1 year,6 days | (#43471877)

Gold hasn't been the basis for our money in many, many, decades. And while there's some merit in having some common "thing" for currencies to be pegged to, gold has always seemed especially stupid. The US forced itself to do so from the 1950s until the early seventies, creating a situation where every country that was having financial problems could devalue its currency except the US itself, causing relatively substantial problems for the US itself.

(Why? Bizarrely, national pride. The 1950s-1970s version of the Gold Standard came because the major economies wanted a single currency to peg their currencies against. What they wanted was an independent currency called the "Bancor". The US vetoed this, as it felt it would diminish the importance of the dollar, and demanded they peg their currencies to the dollar instead, and in return would make sure the dollar was pegged to gold. More evidence, perhaps, that national pride can be a destructive, stupid, thing.)

Mister Forbes, see Econ 101 (0)

Anonymous Coward | 1 year,6 days | (#43471707)

Does Mister Forbes not know economics? All currencies can increase and decrease in value relative to one another. Within a country, a decrease in the value of money (and an increase in the price level) is called inflation.

Ironically, bitcoin production is similar to gold (it is "mined") and the quantity is fixed in the short term, similar to the gold standard, which Forbes thinks is a *great* idea. Steve Forbes thinks the "gold standard" is an okay model for currency but not bitcoin?

Finally, the spikes and volatility in the bitcoin values stems from:
* a lack of liquidity (it can be hard to trade bitcoins because trading sites are currently unreliable, subject to DoS attacks, etc.)
* the newness of bitcoins (as a relatively new currency, it doesn't have a track record)
* the lack of the perception that bitcoins have value (most people recognize precious metals as having value, but not an abstraction like a bitcoin).

If bitcoins became more widespread, and the market more liquid, it is quite possible the volatility would be reduced.

Mister Forbes should take an economics class before he talks about... economics.

Car analogy (1)

fibonacci8 (260615) | 1 year,6 days | (#43471727)

Bitcoins aren't money in the same way that gift cards aren't money. That prepaid card at the gas station isn't for X gallons of gas, it's for some artificial amount called dollars that can later be traded for gas.

Re:Car analogy (0)

Anonymous Coward | 1 year,6 days | (#43471847)

Bitcoins aren't money in the same way that gift cards aren't money. That prepaid card at the gas station isn't for X gallons of gas, it's for some artificial amount called dollars that can later be traded for gas.

The best I can say for your brand of economics is that it's at least as good as TechDirt's ("it so happens I have a university degree in economics!")

so... (1)

MickyTheIdiot (1032226) | 1 year,6 days | (#43471733)

Since Steve Forbes is against it, Bitcoin has its first ringing endorsement.

Forbes doesn't seem to be capable enough to run a hot dog stand. Of course I am just a plebeian.

Well then it's a shame. (1)

gallondr00nk (868673) | 1 year,6 days | (#43471735)

That inflation exists. Or did he miss out that vital piece of information during his little rant?

Unfortunately for Steve Forbes, the value of things are relative.

Re:Well then it's a shame. (1)

squiggleslash (241428) | 1 year,6 days | (#43471903)

Dollars have very little inflation, normally 2-3% per year. By comparison, Bitcoins are suffering hyperinflation and hyperdeflation on a regular basis. And they don't have a war, or mismanaged economy, or other usual cause of either, to blame this on.

It's safe to say that most of us, when we receive a dollar, don't expect it to change value by anything worth worrying about before we get to spend it.

So I think Forbe's central point is correct.

Ok. (1)

Georules (655379) | 1 year,6 days | (#43471747)

So it might not be your definition of 'money'. But, it's something that has value and can be used to trade for other currencies, goods, and services. What is it?

Forbes has 123 articles about Bitcoin (0)

Anonymous Coward | 1 year,6 days | (#43471751)

and not a one of them favorable. I wonder why.

Volatility caused by low volumes? (0)

Anonymous Coward | 1 year,6 days | (#43471771)

Not many people have bitcoins yet. So it is possible that as usage increases the volatility will come down. The values of all currencies change but because of the amount of currency in circulation, its value does not change much. The comparison with weights and measures is nonsense.

Not Money != Best Form Of Money (3, Interesting)

dotHectate (975458) | 1 year,6 days | (#43471773)

I'm sure the storm above this post has already pointed this out, but just because something is not the best form of it's kind does not automatically mean that it is not of that kind.

Gold, while extremely useful in many ways, is less useful for everyday transactions than our fiat dollar. That doesn't make it any less of a monetary base though for transactions. Bitcoin is no different.

Some people really can't get over the hump of intangible objects. You'd think with thousands of years of intangible religious experience behind humanity that virtual property wouldn't be that much harder either...

Bitcoins = tulip bulbs (2, Interesting)

Anonymous Coward | 1 year,6 days | (#43471775)

Relative stability in value is a necessary property of any real currency to remain effective. This is true whether you tie supply to amounts of a particular type of dirt extracted (varies with mining of said dirt - which will kill the bitcoin ultimately just as it killed the gold standard) or determined by human thinking. Bitcoin has none of the properties of a currency - it's just a classic market bubble in a worthless commodity.

Too volatile compared to what? (1)

OlivierB (709839) | 1 year,6 days | (#43471789)

When measured against USD, maybe it seems to be. The reality is that it isn't the denomination currency for many goods and services, yet.
Once a piece of bread starts being listed for 0.01 Bitcoin no matter the exchange rate, then where is the volatility you refer to?

What happens when people start getting paid for a set amount of work or services in Bitcoins? Would that seem volatile to you then?
Exchange rates have always existed and always will. People used to pay with grain in ancient times. What do you think happened to prices of grain when there was a storm or a bad crop? Do you think it was less volatile? Did that mean people didn't use it as currency anymore?

Mr Forbes, with all due respect, your argument is simplistic. Currencies have value and exist because people believe in them. for any national currency, you are basically running credit risk against the national bank that they could ultimately refuse to exchange your Local Currency against another currency. With Bitcoin there is no central agency against which you have exposure to, you are exposed to each single individual using Bitcoins and all the people that are willing to buy them. Your risk is basically that no-one will buy your Bitcoin in exchange for a service or another currency/asset.

Re:Too volatile compared to what? (0)

Anonymous Coward | 1 year,6 days | (#43471949)

This boils down to: it will be a currency when it is a currency. The problem with that argument is without a government or something pushing it over the hump it will never be a currency.

Gold goes up, gold goes down... (1)

tekrat (242117) | 1 year,6 days | (#43471795)

Therefore, Gold is too volatile to be money... Sorry all those gold speculators. (and for those of you who do want to get technical, Gold is a commodity, not money, but in almost every corner of the globe gold can be used to buy stuff, so therefore it can be used as money, although again, technically, that's barter.)

I mean yes, if you want to get very technical, "money" is a bartering system put in place by a government, who guarantees that these debt slips can be traded for goods and services. And since bitcoin isn't backed by a government, then yes, it's not money.

Pancakes... (1)

skeptikal (33781) | 1 year,6 days | (#43471799)

Remember way back he was advising his readers buying real estate, at the same time he was secretly dumping it?

Technical Ignorance (1)

kruhft (323362) | 1 year,6 days | (#43471859)

From the last paragraph of the article:

We donâ(TM)t really know how this coin is created. You canâ(TM)t have a functional money without a basic transparency.

We know exactly how this coin is created! At least those of us that know how to read the technical specs and source code of the implementations. It is a strictly designed mathematical implementation that will release a certain number of bitcoins at a certain rate over a set period of time. Maybe to a guy that is used to the money supply tap being turned on and off on a whim might not understand that concept though.

Maybe we should stick to the instruments that the people on *his* side designed so that *we* have absolutely no idea how they work in managing to bring the global economy to halt except at the very top.

He's not wrong... (2)

rogueippacket (1977626) | 1 year,6 days | (#43471875)

There have been enough "millionaires" minted by BitCoin to ensure it has a place for some time as a purely speculative market, and a speculative market can be just about anything - goods, services, money, pork chops, anything that people want. Regardless of whether the fanboys think it will become a real currency or not - usually by asking retarded and self-explanatory questions like "What is the exact value of a U.S. Dollar?" - BitCoin has now drawn the attention of every get-rich-quick schemer and arm-chair investor on the planet, and rightly so - there is likely still some good money to make if you don't mind extreme risk. Unfortunately, all of this just adds to the volatility, which will ultimately keep sane, stable, financially-minded people out of the BitCoin market.
Remember, kids, the markets tied to the real-world are based on investments - the idea of buying into something which will generate a return for you in the long run, usually a corporation beholden to the shareholders which must prove they have used your money to generate value every quarter. This stability draws more and more investors, which in turn builds confidence and ensures that you will have a buyer when you actually want to cash-out. You could have a million BTC today, but without a buyer, you don't have a penny - and judging from the news, the only way to attract buyers is by constantly screaming "Look at us! You're going to be rich!" over and over until you attract someone willing to accept greater risk than you by purchasing your BTC.
TL;DR - go ahead and play hot potato with your money if you want to, but the rest of us will play in markets that won't lose 50% of their value overnight.

Forbes fail (2)

zigfreed (1441541) | 1 year,6 days | (#43471931)

I was hoping to see why it isn't money in the article. He doesn't say. He also didn't read about bitcoin, because he concludes the article with,

"We don’t really know how this coin is created. You can’t have a functional money without a basic transparency."

I remember when journalists actually learned about what they wrote about.

The biggest problem I can see with bitcoin is its value is directly related to its popularity. Where dividend yielding stocks will give you a return in a currency the government will always use, bitcoin's value is always tied into what you can get cashing it out. If it wasn't for bitcoin's strengths (as difficult to exploit, steal, and sieze) and the resilience of the Internet, it wouldn't be as successful as government backed currency.

A mildly amusing conclusion I inferred about bitcoin's design: the same conditions required to break the network (having over 50% of the mining performance) are the same conditions required to devalue the currency (excessive mining and dumping).

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