James Turk's Q&A with GoldMoney followers includes section on Bitcoin

[miscreanity]

Source

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.

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.

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[bitcool]

used to like his talk ... getting tired ... 

sad to know this.

[BkkCoins]

I used to have money/gold there. But same old, same old.
We'll see how tangible gold is once the bubble pops again.
I don't think anyone who has huge stake in something is going to uproot their beliefs.
Whether it be gold, fiat or Bitcoin.

[foggyb]

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 isn't backed by anything either.

If I can't touch a bitcoin, that doesn't mean its not real & fungible.

One can't touch the internet either. Yet no one denies its value or the demand it creates.

[Melbustus]

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.

Where he says the following is also an amazing error:
"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)."

Hmm...which of these 4 is not like the others: land, food, an oil well, gold ... ? Does he really think that gold has a fundamental human-use utility like the other three items which yields its current value? How can this guy have been thinking about money and finance for years, mostly pretty well, and missed such key insights?

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

[kiba]

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.

[Peter Todd]

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.

A fun statistic is that if you could somehow mine the gold that sunk to the earth's molten core as the world formed, you could cover the entire surface of the planet with about a foot and a half of pure gold.

Also while gold seems to be currently uneconomical to directly synthesize, there are other precious metals like palladium, rhodium and ruthenium that may be worthwhile to extract as part of the nuclear waste reprocessing process. In addition, by the time you extract those three, extracting silver may be worthwhile too. If you decided to base the whole economy on gold-backed currency I'm sure prices would skyrocket to the point where people starting firing up gold synthesis plants. Basically "all" you have to do is buy a bunch of mercury, separate out isotope 196Hg, leave it in a nuclear reactor for awhile, and remove everything created but the gold. Sure it sounds crazy, but at 100x current prices it might not be.


Personally I explain Bitcoin to people by first talking about fiat currencies, how they're basically just big accounting systems where governments decide how many coins to create, and then say that Bitcoin is just another form of fiat but where the accounting is guaranteed by participants voting on what transactions are valid and how many coins to create, with one vote per unit of CPU power. You're submitting the the fiat of the democratic vote of everything participating, in a very direct manner. I then go on to explain that participants in the voting get free Bitcoins, but only if they vote the same way as 51% of every other participant. With that you can make an analogy to the notoriously stable US election system, where third parties are unthinkable...

Edit: http://en.wikipedia.org/wiki/Synthesis_of_precious_metals

[Syke]

Source

BitCoins are the ultimate currency

Well said, sir!

[sunnankar]

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 think it has more to do with humility and a willingness to learn. You would be surprised at the arrogance of most of these gurus.

Bitcoin is not simple but extremely abstract and being able to comprehend it and the economic and monetary science implications takes an extremely keen mind plus the ability to not be dragged back to old paradigms. It takes an ability to analyze things objectively and with extreme vision and foresight. Keep in mind that so many of these people derive so much of their personal identity from their work; work which they have trumpeted for years.

But then perhaps I am just the pot calling the kettle black. Having been around Bitcoin for a few years and having started recommending it around $0.05, to a few of Mr. Turk's friends in person even, it appears that quite a few of these supposed experts have willfully missed the trade of the decade, if not the century.

13.50/.05=270x.

Wouldn't it be ironic if the huge transfer of wealth the sound money folks like Mr. Turk have predicted goes not to the holders of gold and silver but instead to the holders of bitcoins. Oh wait, isn't that what is happening? If they missed and are missing the call on Bitcoin then I am not so sure they are worthy of the faith so many put in their opinions. Sure, they got a few things right but at the end of the day not what truly mattered and one's net worth proves it.

[labestiol]

Well, clearly James Turk missed an occasion to shut up here imo. He should have stated that he's not good enough to understand the technology, and therefor let people do their own due diligence.

I can totally understand that he doesn't get bitcoin, even is he knows monetary history. You need to understand the underlying technology to understand it's had indeed tremendous value. For non-tech savy people, especially those who got burned during the tech bubble, it's easy to say it's just an "internet-thing", and dismiss it. And I won't blame them, but i'll try to explain it to them. Mass education will take time, but it will happen.

And I also think that people who says the precious metals era is over because now we have bitcoin neglect that fact. Sure most of us (me included) think that bitcoin has superior properties to most other forms of money, but the transition won't happen overnight.

I do think both investment are good in this economic environment, bitcoin being the riskiest and therefor can be the most profitable one.

[markm]

Its not as if there is any urgent need to get such people on board, lets see how they feel when the block reward goes down to 12.5...

-MarkM-

[conspirosphere.tk]

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.

[labestiol]

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.

Depends if he's honest, or just pumping gold price. I don't know the answer to that, so i won't accuse him of anything. But the btc market is such a dwarf compared to gold market, i don't think the incentive is that high. The incentive to discredit gold to pump btc is far superior imo

[Stephen Gornick]

Source

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.

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.

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.  Using the analogy for James Turk's company, Gold is the blood but there is no gold-based veins.  There was for a while.  GoldMoney used to have Metals Payments, where you could pay to another party some of your GoldGrams from your account.  Ruxum exchange (now defunct) once accepted GoldMoney metals payments as a deposit method in which those funds would then be used to buy bitcoins.  Late last fall, however, GoldMoney discontinued the GoldGrams metal payments system (except for those in the nation of Jersey, which is where GoldMoney operates from).

Now there are some innovations to watch in this space.  Some of the same innovation that is related to Bitcoin also works for precious metals.  We already have had an asset backed security on GLBSE.  That is not really the same as GoldMoney's service since with GoldMoney you can withdraw as physical ... with some restrictions.  Also the organization behind that specific GLBSE issue may not have been audited, the asset may not have been verified, etc.  And GLBSE itself as an exchange is not entirely without risk.

An upcoming  development to watch is Open Transactions (OT).   OT makes it possible for there to be a GoldMoney of the cyber-equities space.  This is discussed in the GoldMoney thread:

 - http://bitcointalk.org/index.php?topic=24714.msg523685#msg523685

And there have been other approaches discussed:
 - http://bitcointalk.org/index.php?topic=76318.0

[Stephen Gornick]

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

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

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

[bracek]

we should have a bitcoin kit

a collection of a few links like wikipedia, a few threads in this forum, and a few articles
all that packed with a foreword written by evorhees or a few respectable members here
to actually give proper starting point for bitcoin exploration


when those kind of people hear about it, they probably google it, and find a bunch of contradictions, then conclude the "safe
path"

it would be nice if Turk got this and had his second chance to grasp btc

[DublinBrian]

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.

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.

[Trader Steve]

Bitcoin: A New Commodity Created To Serve Market Demand
http://economicsandliberty.wordpress.com/2011/06/22/bitcoin-a-new-commodity-created-to-serve-market-demand/

[sunnankar]

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.

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."

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.

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.

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).

[bitcool]

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

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

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

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.