US Dollars are backed by the US government who requires that taxes be paid in them, and pays them out to employees.
That's a lot of trade outside of US which is done in USD and not in local currencies. Are you going to argue that USD is not used as medium of exchange outside of US because you cannot pay taxes with them?
No, that's not his argument at all. You can't pay taxes in Bitcoins in any industrialized economy in the world. Nobody is arguing that the Euro has no value, just that Bitcoin won't.
Bitcoins may have value for the anonymization, the lack of fees, and the ease of micropayments. It's not essential that a fiat currency is backed by a government, it's just the easiest way to create a fiat currency. Bitcoin right now is essentially backed by those merchants who accept it in exchange for goods and conventional currency. Bitcoins have value RIGHT NOW due to this backing, at least partially. Their long-term value is less clear, of course.
Efficient transactions schemes are not necessarily good stores of value, as Cowen points out; more importantly, if that's primarily where Bitcoin's value is derived from, Bitcoin will be worth zero when a better transaction scheme arrives.
Efficient transactions schemes are not necessarily good stores of value
Yes, but universally accepted scarce tokens are good stores of values. And currently dollars and euro, and almost every other currency are just that. Universally accepted scarce tokens.
And bitcoins are both an efficient transaction scheme and a scarce tokens. And, by design, a lot more scarce. Of course, it has not yet bootstrapped itself, but I see that as a possibility. And damn convenient possibility, too.
Dollars are backed by the full faith and credit of the United States Government, which is why they are universally accepted, and which is why US Treasuries establish the risk-free rate.
Bitcoins are accepted by online gamblers in much the same fashion as casino chips, by ideologues offering marginal services as political statements, and (allegedly) by criminal enterprises.
If bitcoins are mostly interesting to you as a way of reasoning through how economies would work in a world without established governments and economies, that's fine, but could you just say that? Because it's hard to pick out which of your arguments are pie-eyed what-if's.
You can't pay taxes in Bitcoins in any industrialized economy in the world.
Taxes is not what a money makes. Colonials, Greebacks, French Assignats. They all were used to pay taxes. On the other side the Somali shilling is (still) used as money. The russian (tsarist) ruble was used as money during 1918-1920 Civil war. Hell, shells were used as used as money.
As for taxes in bitcoins, it can be just of matter of time. You know the tune: Cheaper to tax than to fight
Your argument then is that despite the fact that the participants of the largest economy on Earth are effectively forced at gunpoint to use US dollars, dollars aren't necessarily any more valuable than cryptographically random numbers, because other currencies have in the past stopped circulating.
Yes, and no. Yes, because, the taxes are not the magic wand that your paint them to be. No, because, I will not recommend anyone to put all their savings in bitcoins.
Also, define valuable, and we'll talk. I can easily foresee situations (even now) when bitcoins are valuable to me than dollars.
Comments
US Dollars are backed by the US government who requires that taxes be paid in them, and pays them out to employees.
This is what makes dollars valuable. Their scarcity is far less relevant.
Bitcoin needs to be backed by some kind of utility to have value. Scarcity alone is not enough.
US Dollars are backed by the US government who requires that taxes be paid in them, and pays them out to employees.
That's a lot of trade outside of US which is done in USD and not in local currencies. Are you going to argue that USD is not used as medium of exchange outside of US because you cannot pay taxes with them?
No, that's not his argument at all. You can't pay taxes in Bitcoins in any industrialized economy in the world. Nobody is arguing that the Euro has no value, just that Bitcoin won't.
Bitcoins may have value for the anonymization, the lack of fees, and the ease of micropayments. It's not essential that a fiat currency is backed by a government, it's just the easiest way to create a fiat currency. Bitcoin right now is essentially backed by those merchants who accept it in exchange for goods and conventional currency. Bitcoins have value RIGHT NOW due to this backing, at least partially. Their long-term value is less clear, of course.
Efficient transactions schemes are not necessarily good stores of value, as Cowen points out; more importantly, if that's primarily where Bitcoin's value is derived from, Bitcoin will be worth zero when a better transaction scheme arrives.
Efficient transactions schemes are not necessarily good stores of value
Yes, but universally accepted scarce tokens are good stores of values. And currently dollars and euro, and almost every other currency are just that. Universally accepted scarce tokens.
And bitcoins are both an efficient transaction scheme and a scarce tokens. And, by design, a lot more scarce. Of course, it has not yet bootstrapped itself, but I see that as a possibility. And damn convenient possibility, too.
Dollars are backed by the full faith and credit of the United States Government, which is why they are universally accepted, and which is why US Treasuries establish the risk-free rate.
Bitcoins are accepted by online gamblers in much the same fashion as casino chips, by ideologues offering marginal services as political statements, and (allegedly) by criminal enterprises.
If bitcoins are mostly interesting to you as a way of reasoning through how economies would work in a world without established governments and economies, that's fine, but could you just say that? Because it's hard to pick out which of your arguments are pie-eyed what-if's.
You can't pay taxes in Bitcoins in any industrialized economy in the world.
Taxes is not what a money makes. Colonials, Greebacks, French Assignats. They all were used to pay taxes. On the other side the Somali shilling is (still) used as money. The russian (tsarist) ruble was used as money during 1918-1920 Civil war. Hell, shells were used as used as money.
As for taxes in bitcoins, it can be just of matter of time. You know the tune: Cheaper to tax than to fight
Your argument then is that despite the fact that the participants of the largest economy on Earth are effectively forced at gunpoint to use US dollars, dollars aren't necessarily any more valuable than cryptographically random numbers, because other currencies have in the past stopped circulating.
Yes, and no. Yes, because, the taxes are not the magic wand that your paint them to be. No, because, I will not recommend anyone to put all their savings in bitcoins.
Also, define valuable, and we'll talk. I can easily foresee situations (even now) when bitcoins are valuable to me than dollars.