Bitcoin Forum

One sees "sound money" being talked about a lot on the interwebs; but what is the definition of "sound money"?

I googled it for you and got back:

"Sound money is a phrase technically synonymous with a currency backed by or pegged to some good or commodity. It can also mean a currency that is not rapidly inflating or deflating in value. As even the technical definition is rather fuzzy, in reality, it's often synonymous with whatever economic woo its promoter is hyping. Sound money is often a cover for gold buggery, though it can mean whatever the hell the bullshit purveyor wants it to mean."

Did you get that from here?

http://rationalwiki.org/wiki/Sound_money

Seems like a very biased article. For example does sound money really need to be "backed by or pegged to some good or commodity".

In my view that article isn't very credible at all; seems more like propaganda.

I was hoping for a definition that says something like:

sound money is a currency that cannot be debased or counterfeited...

Yep ........... it says "the technical definition is rather fuzzy", so yeah, sure, go ahead and define it how you like, you don't need to "hope" ;)

Modern economic definitions have not quite caught up yet with redefining everything in terms of bitcoin.

I strongly suspect you are right about that.

Feel free to redefine "sound money" to take into account bitcoin.

But honestly, I don't hear the phrase "sound money" that much, where do you keep hearing it?

Redefine it from what?


Really? Do you only read mainstream media finance articles?

The phrase is used a lot in the Daily Reckoning for example:

http://dailyreckoning.com/why-the-feds-really-hate-sound-money/

Redefine it from whatever definition you don't like.

I don't read dailyreckoning.com, sorry, never heard of it.

The underlying idea is a currency that is not susceptible to large increases in its underlying quantity ("inflation" in the strict sense - as oppose to the more modern but less accurate meaning of inflation as rises in the overall price level).

There are three types of sound currency. 

1. A managed fiat currency that has a good historical record of not being inflated - e.g. the old deutschmark and (until recently) the Swiss Franc. In this case, the constraint on inflation is that the currency is managed by a central bank with a conservative ethos.

2. A commodity or commodity-backed currency  - e.g. the various versions of the gold standard. In this case the constraint on inflation is the nature of the underlying commodity which cannot be "printed" at will.

3. A currency that is inflation proof for other reasons - e.g. because of the nature of the underlying protocol -  bitcoin being the prime example (there are no historical examples that I know of).

The conventional usage refers to 1. and 2. But 3. also qualifies, since bitcoin is just as inflation proof as gold. Indeed in the long run, more so.

can we merge these "is bitcoin money? / what is currency?" threads into one big one? this is getting ridiculous

edit: I pm'd a mod

Why would you want to do that?

The question of whether of not bitcoin is money and what is "sound money" are two different questions and warrant their own thread.