Bitcoin Forum

25) Felix Fms: When will I be able to fund/withdraw my GoldMoney Holding with Bitcoins?

JT: Probably never. BitCoins are the ultimate currency backed by nothing. It is not money in my view because money is a tangible asset, and BitCoins are not.

From time to time, new conventional “wisdoms” defying logic and historical precedent become fashionable and fixed in the mindset of the population, holding sway until the bubble brought about by this fallacious thinking pops. We saw this phenomenon during the internet bubble, when it was said that profits don’t matter – only market share does. We saw it again in the real estate bubble when it was said that home prices only go up. And we are seeing it now when people say the dollar is money. It is not money in the true meaning of that word. The dollar is only a money-substitute, as are all the national currencies of the world.

In recent decades, people have lost sight of the fundamental truth of economic activity that goods and services are paid for with other goods and services. One cannot consume the currency we accept in payment, which is used merely to facilitate the exchange of goods and services. Only goods and services can improve our situation in life. So to properly describe its purpose, currency is a tool we use to temporarily hold some wealth in the form of deferred purchasing power, until we are ready to purchase a good or service.

The deferred purchasing power embedded in national currency is not solely reliant upon the view of market participants, as is the case for physical gold and silver. Rather, it also relies upon the creditworthiness and reliability of the issuer of the national currency, which is a feature that highlights the fundamental difference between tangible assets (land, food, an oil well, gold, etc.) and financial assets (basically anything dependent upon a counterparty).

As society developed, the most liquid and reliable tangible asset – namely, gold and silver – became money in a market process that began in pre-history, thus giving the precious metals what is now a 5,000-year track record as money. When used as currency, the precious metals enable tangible assets to be exchanged for other tangible assets, resulting in an exchange that is immediately extinguished. There is no lingering obligation.

However, if a national currency is used to “buy” some good or service, the exchange is not complete because the currency is nothing more than an I.O.U. dependent upon the promises of both the government that is the issuer and the counterparty, which is the government and its central bank in the case of cash-currency while banks are the counterparty for deposit currency. The party accepting this I.O.U. does not extinguish the exchange until they can use the national currency to purchase a tangible good or service; this period of time often entails considerable risk to the holder of the national currency. This basic monetary principle applies regardless whether one is considering a purely domestic transaction, or an international one.

In our society, one works efficaciously to produce some marketable good or service, and we all accept currency in payment. We accept currency not only because it is useful to each individual, but also because more broadly, it makes possible the division of labour, which enables humankind to achieve a higher standard of living than if we had to rely on barter.

So to understand the essential nature of the ongoing fiat currency bubble, we need to recognise that currency today is a money-substitute. It is not money itself because the dollar and other national currencies are not tangible. And to avoid being caught up in this bubble, we should hold physical gold and silver. Even though they are not used much as currency – which is a paradigm that GoldMoney eventually hopes to change – they still are money.

Trillions of dollars have been widely accepted in global commerce in the belief that those dollars can eventually be turned into tangible goods or services. The fiat currency bubble will pop as the understanding grows that dollars – and indeed all fiat currencies – have been issued to too great an extent. There are not sufficient goods and services at current prices to satisfy everyone’s desire to spend their accumulated deferred purchasing power held as dollars. As confidence in the dollar erodes, the fiat currency bubble will eventually pop. It inevitably must because the banking system continues to create dollars “out of thin air” to provide the federal government with the dollars it is spending. The structural federal deficits and the undisciplined approach to creating currency that ultimately enables the issuing of unlimited dollars explain why we are approaching hyperinflation of the US dollar. And while BitCoins may not end in hyperinflation, like all national currencies, they are not backed by anything tangible.

It is not money in my view because money is a tangible asset, and BitCoins are not.

.....while BitCoins may not end in hyperinflation, like all national currencies, they are not backed by anything tangible.

Gold?

Gold is only living on borrowed time. Once somebody mine an asteroid full of gold, it's all over for the goldbug. However, for the rest of us, it means we can use gold in area where we are previously afraid to use gold. This mean gold will get incorporated into our bodies, electronics, etc in a higher percentage.

Source (http://www.goldmoney.com/gold-research/newsdesk/q-and-a-with-james-turk.html)

Fascinating. He's clearly spent a lot of time thinking about this stuff, but misses the fact that bitcoin and gold have value for many of the same reasons... Don't know how you miss that after thinking about it for a bit.

.....

I guess it just all stems from his irrational obsession with physical tangibility.....how quaint.

I can totally understand that he doesn't get bitcoin, even is he knows monetary history.

Even if he understood perfectly well what BTC are and their potentialities, he still would have an incentive to talk them down, to discredit a big competitor to the stuff he is selling.

Source (http://www.goldmoney.com/gold-research/newsdesk/q-and-a-with-james-turk.html)

From the relevant section quoted below, James Turk (founder of GoldMoney) clearly doesn't yet grasp the nature of Bitcoin, equating it with fiat currencies "backed by nothing". Oddly enough, GoldMoney accepts fiat currencies backed by nothing. His response really had nothing to do with Bitcoin at all. Sadly, this view probably won't change for some time, if ever.

started recommending it around $0.05, to a few of Mr. Turk's friends in person even,[/i].

BitCoins are the ultimate currency backed by nothing. It is not money in my view because money is a tangible asset, and BitCoins are not.

I don't know who originally came up with idea of referring to Bitcoin as being "both the blood and the veins", but that would have been a perfect way to respond to this.  Bitcoin is both a store of value (blood) and the veins (payment network).

James Turk is describing how he does not believe Bitcoin has value as an asset.  But the question was simply asking when Bitcoin would be a payment method directly supported by GoldMoney.com.

This position is not compatible with his later statements about fiat currency. Fiat currency is tangible too because it is made of paper, steel, copper, nickel etc. These are tangible commodities.

The point Turk is missing is scarcity. Gold has more value than paper because it is much scarcer. And that is why bitcoin has value, because it is scarce.

There's an interesting article about GoldMoney.  Have you seen it?  :D

 - http://www.runtogold.com/goldmoney/goldmoney-scam-goldmoney-fraud-complaints-problems/

I think I read once before that Mr. Mayer was quite positive and supportive of bitcoin.

From the relevant section quoted below, James Turk (founder of GoldMoney) clearly doesn't yet grasp the nature of Bitcoin, equating it with fiat currencies "backed by nothing". Oddly enough, GoldMoney accepts fiat currencies backed by nothing.

I've always held that Bitcoin and gold are so close to one another when contrasted with fiat that for a lot of conversations they can be considered identical.

Charlie Shrem of BitInstant came up with the blood and veins analogy or at least it was the first time I heard it (on a phone call a few months ago). I have been using it ever since because it is so accurate and easy to understand.

Additionally, Mr. Turk should separate his personal beliefs from business practice. As the chairman of GoldMoney he should be concerned with his fiduciary duties and not strutting around as some religious zealot with a particular philosophical agenda. In this case, he has a customer that has a particular need and is asking if GoldMoney will provide a service for that need and he told the customer to go pound sand because it conflicts with his philosophical assertion.

It does not matter what Mr. Turk's personal belief is about whether Bitcoin has value as an asset (obviously it does and the market says so because millions of dollars worth trade every day) and the market does not give two craps what Mr. Turk's opinion is. A good businessman would have responded something like, "Well, that depends on whether we can provide a service customers demand and make a profit. Currently we have not had enough customers demand Bitcoin integration to justify making the investments required."


Mr. Turk's argument is logically flawed and he is completely missing how the Bitcoin source code has solved the double-spend problem. Plus, his arguments beg the question: What is tangibility? He tries to solve the double-spend problem with auditors, a trust company, etc. or in other words corporate governenance and segregation of duties. But only particular people are allowed to enter the vaults and verify the bullion. On the other hand, Bitcoin solves the double spend problem with source code that is available for anyone to review. Therefore, GoldMoney's system is closed source were double spends are possible while Bitcoin is open source where double spends are impossible (or the risks can be more easily calculated).

The owner of runtogold.com, Trace Mayer (who also owns HowToVanish.com), is very close to Mr. Turk. I don't expect anything negative coming out from the site. 

I think I read once before that Mr. Mayer was quite positive and supportive of bitcoin.

Dude...

sunnankar=Trace mayer

aha, it's a small btc world after all.

Dude...

Yup.  Take almost any goldbug article, do
 $ %s/gold/bitcoin/g  
and what you end up with makes nearly perfect sense to a bitcoiner.

Don't know what you are talking about.

http://doctorgrasshopper.files.wordpress.com/2010/01/skeptical-cat1.jpg

I always thought that this reworking of Exter's pyramid by gengix was really insightful in showing how gold and bitcoin relate to each other.  Gold is the best tangible money.  Bitcoin is the best intangible money.  Each is a mirror image of the other, sitting at the top of their own category.  They do not compete, they complement.

It seems gold is best at transferring value over time while Bitcoin is superior at transferring value over distance. Sure, more of the systems need to be built out but it can clone and graft much of the current infrastructure like the new BitInstant Credit/Debit card (http://codinginmysleep.com/6-8-weeks-until-bitcoin-debitcredit-card-says-bitinstant/).

Gold has a few thousand years of history behind it... that amount of momentum counts for a lot in human events.

OTOH saving in gold and paying in bitcoin would be an extremely powerful and flexible combination.

I think that the guys at http://coinabul.com/ (http://coinabul.com/) have the right idea. Mr. Turk should take note. After all, he does not believe in fiat dollars or euros but still accepts them in payment...