Bitcoin Forum

Bernanke trying to explain without being rude. Succeeds by doing it in a very basic and calm way for someone who does not have a background in the field. Recommended to anyone who is in doubt.

http://www.youtube.com/watch?v=2Dj9v9s9buk

You're joking, right? Sarcasm?

RP: "Why do central banks hold it, if its not money?"
Bernanke: "Well its for reserves"
RP: "Why don't they hold diamonds?"
Bernanke: Long silence..... "Well its tradition, long term tradition."

Can someone explain to me what Ron Paul's point was? 

I just looked up some definitions of money, and "generally accepted medium of financial exchange" seems to be a key part of the definitions.

All sides agree that gold has value, and stable value at that.  But is it money? 
Will the grocery store or car dealer generally accept a chunk of gold as payment for goods?

If I owned a grocery store or car dealership, I would be very upset if my salesmen didn't accept payment in Gold. It has always held its value better than toilet paper poo poo money. That is reason enough to take it over fiat.

He had multiple obvious goals in asking that question.

1) Pandering to the libertarians who back him, and "being tough" on Bernanke. This is not a bad thing.

2) Making clear and explicit Bernanke's view on the issue, and on "which side" he stands. Bernanke answered in such a way that not only is he clearly a supporter of the fiat-money status quo, but he's probably aware that he's wrong in being such (or at least, he understands his position requires a certain level of deception and subterfuge to support it.) Paul exposed Bernanke for the type of man that he is.

3) Pressuring Bernanke. Essentially, "We know the truth, and aren't afraid to ask you threatening questions about it."

4) Once again raising the issue in the public arena, hopefully causing many to pause and give some thought to it.

All good enough reasons in my book.

So theory is good, but in practice I'm not sure what Ron Paul's idea leads to. It has to do with different fundamentals in what you believe money is. The concept is two entirely different things to these two guys... and I'm not sure that either is wrong. Ron Paul sees money as something that has inherent value. Bernanke sees it as a symbol for something that has value. Both concepts work. The difference is that if you use gold (or something else with real value) then there is a risk of the value significantly changing relative to everything else, or at least relative to the goods or services involved in the transaction.

If you have to establish the value of an item relative to USD, anyway, then why is payment in gold any better? If the dollar goes up or gold goes down, you end up losing value.

I have the same question about BitCoin - since it's locked into this weird dance in which transactions are valued by calculating the price based on the current exchange rates instead of saying "This service is worth 1 BTC a week!"

I recognize that there are people out there doing things for flat rates in BTC, but the majority that I've seen is basically proxying USD values (or whatever the favored currency is.)

I guess, distilled down to a single question, how do we assess the value of BTC as if it were completely decoupled from any other currency? Or can we even? Are we just seeing a raw, uncluttered effect common to all currencies, with the effects magnified by other variables in the BitCoin system?

I've seen movies supposedly of Alaska's and California's gold rush days where a miner would come into the store with a little bag of gold flakes and nuggets.  The store owner would weigh the gold and credit his account with equivalent dollars.

That would be awfully inconvenient, and I've never seen any store anywhere with a scale at the cash register, except for the one weighing fruits and vegetables.

If we're only talking about gold in the form of minted coins, well that's looking more like money.  But is that what Paul meant?  Do banks keep their reserves in minted gold coins?



I don't see how any two currencies can ever be completely decoupled as long as it is possible to exchange them.

No, we can't, because it's not. You can at best pretend it is for a while, but then you will create opportunities for arbitrage which others will exploit until you can no longer afford to.

I can't watch the video right now but...


Unlike gold, diamonds are not fungible, that's why they can't be money.
Maybe gold is money because of tradition but right now gold is money, if it wasn't its price would be different.
I don't want gold to be money, but is better than the dollar. And is money, that's a fact.
In some parts of the world is even used as direct medium of exchange. See the gold dinar.
See what happened to the guy that proposed it as an African international currency (Gadaffi).

Indeed.  Diamonds would be a rotten way to store value.  They come in many various grades with different colours, inclusions, and clarity ratings.  Investment gold only comes in 2 grades and you're usually guaranteed that 24 carat gold is 99.99% pure.

Would you still be singing this tune when you are unable to unload your gold to anyone, resulting in your company going bust because everything that the company needs to run is paid for in dollars?

you will not EVER be unable to unload your gold. you will more likely be unable to get someone to take your dollars, even if you put some € in there somewhere^^

Yup... have you ever tried offloading those Zimbabwean dollars on the streets of London or New York? Want to place a bet on whether you can get rid of those faster than I can trade gold for any kind of cash? No? Thought so...

http://www.youtube.com/watch?v=31IYm0gQS_A

Long-term, gold is more deserving of the term "money" than anything else mankind has ever used.

As JP Morgan said, "Gold is money, and nothing else."

The US Dollar is but another experiment in fiat paper currencies... and only about 35 years old, since it was delinked from gold in the early 70's. The US Dollar as a money has declined in value steadily since it was created. Gold as money has maintained its purchasing power throughout thousands of years. I know which one I trust more.

Gold is not money as it is not a generally accepted medium of exchange. Most places, at least in the developed world (and most developed worlds), do not generally accept gold as a form of payment. Of course, extreme examples like a bar of gold for a carton of milk would be accepted, but only because the person accepting it probably bought the gold from the guy and paid the store the $2.

Bernanke had no choice but to make that statement as he is the head of the federal reserve.

Diamonds are a crappy example (besides not being fungible) because their value is largely artificial and subjective. Even the same grading company has varying levels of strictness depending on where the grading is done.

Not only that, but we would be at the mercy of foreign entities that control the production and distribution of diamonds, which greatly affects their value.

There's something called a gold/silver bullion store and they offload very easily including ones in major cities.

Offload it for what?  Cash?  If you have to take your money to a special store to exchange it for cash, it's hardly money.

It's money in small circles. The same could be said about Bitcoin.

You would probably get a kick out of this:

  http://www.youtube.com/watch?v=Ef0VG1WEP10

even if it proves Ben's point...among other things.

I actually side with Ben on this one.  All current legally supported monetary systems are, I would argue, debt based (which gold...and bitcoin...are not.)  I don't think it means a whole lot, and I expect it is just a matter of time before things shift in this respect.  Perhaps not a lot of time.

In fact he said "Gold is money, everything else is credit".
But I think that gold has also a component of credit. Gold is money only because people accept it as such. If nobody accepted gold as money, the credit component would evaporate and gold would be only an industrial commodity.


Very clever observation. The dollar as it is today only has about 35 years old. The old dollars were gold certificates.
The US defaulted back then.

Sure you can. How do people asses Labor, how do people asses Drugs , How do people asses ideas? You can asses them in whatever currency you want BTC , USD , Both, and to whatever value you want. The exchange value only matters if you need/want too exchange the BTC for USD or USD for BTC. It represents one simple thing : What value of USD/PLN/EUR someone was willing to give away for one BTC and vice-versa .

If you need USD for resources you can always speculate and asses the BTC at higher values and ask less BTC for a certain product/service , or more , depends on how you asses them.  And then all that matters is how the customers will asses your product. If your assessment and your customer's assessment are close then the customer will buy.


But right now the BTC economy is quite small and it is mostly based on the exchange value because most of the BTC economy is composed of mostly traders which buy with dollars and add a small commission and then convert that value to BTC . If there were more producers and service providers assessing their products in BTC then the economy will move from one based on the exchange value (couplet to other currency) to one based on the assessment of BTC/PRODUCT and BTC/SERVICE.

from beverly hills ninja:
http://www.youtube.com/watch?v=REjzRk3clNM  (sorry, couldn't find the english version)


translation:
Haru: I would like to rent one of your lodgings, is the cost great?

Desk Manager: Compared to what? A hut and a rice patty? Sir, we are a five star hotel, with 600 rooms, booked 6 months in advance.

Haru: I have money.

Desk Manager: I'm sure you do, but unfortunately, we don't take Wompum.

Haru: Do you perhaps - take Gold?
[pours out about 15 pieces of gold]

Desk Manager: [rings bell] Front!
Desk Manager: Perhaps I shall send Dom Perignon to your room?

Haru: I prefer to be alone tonight, perhaps later I will meet your friend Don.

This argument is nothing but semantic masturbation.

1)  I don't see any popularity/circulation criteria in the definition of money.  It seems like people are holding up some weakly defined concept and calling it "money" and applying it like a badge of honor upon certain mediums while using it as a club to smash other mediums, within the context of their own narrow idealogical definitions.

2) If you want to play that game, there are 348 merchants in the DFW area alone ( http://www.opencurrency.com/directory/marketplace/regmerch3.php?rid=135 (http://www.opencurrency.com/directory/marketplace/regmerch3.php?rid=135) ) that accept AOCS rounds (gold/silver/copper) in exchange for goods and services.

3) From a historical perspective, if you find "money" in a box that's been buried for 200 years, and have to take it to a special store to exchange for cash (ie, a collector of historic memorabilia), it's hardly money.

Many people use it for direct exchange (http://www.youtube.com/watch?v=nNtIsSWVJBI).

Gadaffi proposed it for international trades between African countries. Maybe Libya would sell its oil only for gold later. International and central bankers don't like that. Saddam announced that that Irak was going to accept euros instead of dollars before the war.

Let's bet back to the whole point of this thread, which was to note that Bernake got pwned. Which was hilarious.

Gold is worth the same amount it always was.  It's the values of Fiat Currencies that change(like the USD).  Values of USD goes down, price of Gold goes up.

You could get a nice suit in the 50's for an ounce of gold(lets say $40-50).  Same holds now, you can get a nice suit for an ounce of Gold(about $1600).