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Author Topic: Walter Block Comments On Bitcoin  (Read 13525 times)
David Giessel
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« Reply #15 on: April 01, 2011, 09:05:17 PM »

Randall, this will give you a condensed version of the idea of utility vs price.
http://en.wikipedia.org/wiki/Paradox_of_value

The marginal revolution was really the birth of Austrian Economics proper (tho the Austrian ideas go back to the School of Salamencia).

Bitcoins in my mind fail in one specific area: durability.

Gold is extremely resistant to oxidation, as are the other precious metals. It is also extremely resistant to corrosion.

Also, gold's use is not predicated on any higher order infrastructure. Bitcoins require electric and data transmission infrastructure to be useful. They can "disappear" if these technologies go away, or in areas where these technologies don't exist.

On the other hand, gold is dependent on physical storage infrastructure whereas bitcoins can be scuttled around the world in milliseconds. Bitcoin confiscation would pose a much larger obstacle to governments than gold confiscation. Also, it'd be a lot easier to take bitcoins overseas when traveling (or send them overseas to where you will be traveling to) than transporting gold coins through customs.

This would indeed be an interesting topic to look at in greater depth as there are a lot of angles to it. Hayek has a short essay that discusses what a free market monetary system might look like. He was not convinced that precious metals would necessarily emerge.
http://mises.org/books/monetarysystem.pdf

Rothbard on the other hand often discussed the unlikelihood that if he made "Rothbards" that were backed by nothing, people would choose these over a metal backed currency. The idea behind Bitcoins is very different to the concept of any fiat money that has existed previously however.

« Last Edit: April 02, 2011, 09:50:43 PM by David Giessel » Logged

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Seth King
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« Reply #16 on: April 01, 2011, 10:12:55 PM »

To me, money is just resources that we trade as an efficient medium of exchange. It can be gold or silver, but it can also be warehouse receipts in whiskey or even common stock. Hell, it can even be lottery tickets.

Yes, I understand that value is imputed. But I see no reason for me to impute any value on something that I can't actually do anything with, like Bitcoins.
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« Reply #17 on: April 06, 2011, 10:41:46 PM »

I'm going to have to agree with Dr. Block on this one.
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JustSayNoToStatism
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« Reply #18 on: April 07, 2011, 01:00:47 PM »

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Seth, no that wouldn't be inflation, although I do understand it might seem counter-intuitive. Prices in bitcoin1s are completely independent of how many bitcoin2s or bitcoin3s or whatever other currency there is and how much there is of it. Products would simply be priced differently in bitcoin1s, bitcoin2s, etc.
Here's my way of rehashing the idea I believe daprovic was conveying: Consider that people use dollars and gold as a way of storing wealth.
Now the reason you hold the gold is because it’s resistant to the inflation of the dollar. So the creation of dollars doesn’t harm your gold. In an analogous situation, if bitcoin2 competes with bitcoin 1, you have nothing to worry about, because the supply of competing bitcoins doesn’t really matter. In sum, just think about whether, as a current gold owner and dollar holder, you feel an inflation threat from bitcoin1. Of course not.

However, Seth's concern, which daprovic noted:"Products would simply be priced differently" is a valid one, it's just not called inflation. The value of your currency of choice does depend on the demand for it, which depends on its popularity. So if you hold bitcoins, and bitcoin2 takes the world by storm, you could get stuck with a bunch of bitcoins worth nothing. Of course, the price of gold falls when the dollar surges as well, so no matter what you hold, there is a risk....but with gold the risk is less, and this ties into the rest of the discussion
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Gold and Silver and other commodities and resources can be used for productive purposes. A Bitcoin is nothing.
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The purpose of money is to facilitate exchange.. not to use it for industrial purposes. The only reason you'd want it to have another use, is if people lost confidence in it as a facilitator of exchange (money), then it would still keep some value as it can be used in production
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But I see no reason for me to impute any value on something that I can't actually do anything with, like Bitcoins.
The fact that gold and silver have uses is what gives people the INITIAL confidence to get rolling and remain a facilitator of exchange. Bitcoins could work, industrial value is not a necessity for its function, but Bitcoin’s lack of industrial value is a serious impediment to its adoption….the truth is that gold's industrial value doesn't account for much of the price it sells at. The demand for gold comes mostly from people wanting to hold it, for the sake of holding it. If everyone adopted bitcoins, your gold wouldn't be worthless (as bitcoins would be in the reverse situation), but it would be worth LESS...a LOT less
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Bitcoins in my mind fail in one specific area: durability.
Kinda. I think they are more durable than most people would suspect though. And to be fair gold fails because it has to be physically transported, while bitcoins don’t.
…as to the discussion on labor theory of value, I think Giessel covered it. Value is whatever I decide it is, and does not inherently have anything to do with labor. It may “tend” to overlap with and have some correlative relationship with the amount of labor that goes into it, but this is not where value comes from.
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« Reply #19 on: April 08, 2011, 02:06:12 AM »

I confess that I really don't know anything about these bitcoins. But I have read Mises' Theory of Money and Credit. Mises makes the case that the market chose gold or silver as money. They were deemed valuable by the market before they became money. No one said, "Hey, this stuff is durable yet easily divisible. Let's make it a universal exchange medium". This Bitcoin idea sounds suspiciously like fiat.
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