If you can make that distinction, you can make the next. You may be satisfied with "ending up" with gold or bitcoins to finalize a trade, but what of the interim? What if someone doesn't have gold or a bitcoin to give you today, but they will tomorrow, and you want to get your thing off your hands in the mean time? Money is the answer. It is an IOU; a credit; an "I'll pay you with something of value tomorrow, but here's a token which represents that today". Fiat banks and money deal in the facility of time lagged trade, not the goods or services themselves.
Then that's a loan, not "money." Gold is money, Bitcoin is money, gold or other commodity-backed currency is money, I'll even allow that fiat is money, albeit only backed by your trust in the issuer. But fiat is not an IOU for anything. Accepting fiat is not accepting an IOU for something later, it's accepting that the issuer won't ruin the exchange value of the fiat by printing up more.
I meant "fiat money is the answer", not "all money", and I didn't think I needed to clarify that, but in hindsight perhaps I should have. All money can be used to satisfy a debt, sure, but only fiat money is loaned into existence by a bank for the purpose of a specific purchase - from bonds to cars to coffees. There is no naturally found fiat money anywhere in the universe. Fiat money is a loan between a bank and a borrower. Just because you got the money off that borrower, doesn't destroy that loan. All other forms of money are representations of themselves, or of a specific quantity of something in a vault. The fact that everyone predominantly trades fiat money like other forms of money, when all these other commodities still exist to freely trade right now, just goes to show you how cheap and convenient it is in comparison to everything else. That might change, but it needs a good reason to.
While BTC are also not naturally found anywhere in the universe, they still require some competitive "work" to produce, and are thus fundamentally closer to gold than fiat, which is created by tapping a few keys in a central bank. Even fiat requires some work to create, but its cost is orders of magnitude lower.
I agree, that fiat will always have a lower value than anything of inherent value. That doesn't necessarily make it a better facilitator of trade. Using gold, or silver, or BTC for trade doesn't mean that you're "paying for" the inherent value, but that what you are paying for is worth more than the inherent value, whether that is the labor of a worker, or a hamburger. And gold is not volatile at all. Neither is silver. Volatility only applies when comparing to another currency. It's not the gold that's volatile, it's the Dollar.
PMs have industrial use, and even if it's marginal it's still a non-zero cost. If demand skyrockets tomorrow because of a new discovery (or any other reason), those using gold as a trade token suddenly benefit by "momentarily" having it, and those temporarily without it are at a sudden disadvantage, and the same is true in reverse...not in the ongoing trade, but in the time lagged trade. Every moment that you do or don't have gold you're risking
usage volatility
and trade volatility...the same thing any business looking to trade in BTC faces today. Think you're getting $10 by selling for 1btc today, and only get $9 when you cash out tomorrow does not make for a happy owner. You can make the cashout instantaneous to avoid this, but B2B transactions, which happen over months, will prefer the currency that provides stability over months. You can conduct trade however you want, but people will naturally flock to the cheapest.
Fiat will never have any such "new use" discovery, and you only ever risk trade volatility. QE is a new spin on the same old idea.
Like fiat, Bitcoins don't really have an industrial use, but they still deride their holding value via some difficult competitive work to create, and that plus it's actual trade token value gives it an exchange of around $10/coin. Do you think 100% of the BTC price is because people are buying it because it's sooooo much better to buy their coffees with than fiat? If not 100%, how much? When big business cares about a 0.01% increase in profit, when will BTCs have a lower running risk than fiat?
Saying the $ is volatile and responsible for pm/btc appreciation is only a half truth. If it was completely true, since we *know* the $ always depreciates, how could the price of btc go from $32 to $2 in 6 months? Did the $ deflate that much in that same time period?
If McDonalds accept both fiat and silver for a burger, are you telling me that you'd seriously trade appreciating silver than any spare depreciating fiat you have? I don't think so. If you want to use PMs in a trade, that's all well and good, but you no longer have a need to facilitate trade, and no need for a currency either. You're simply bartering. Fiat money satisfies a need which bartering simply cannot.
The only people who are seriously going to use BTC "only" are those for whom fiat is otherwise unacceptable or draws unwanted attention...for whom the cost of BTC is outweighed by its benefits.
If McDonalds started taking silver, I'd get the fuck out of fiat as fast as possible. That would be a sure sign of the the end. Again, silver doesn't appreciate, the dollar depreciates.
Of course, industrial demand has no effect on the price of silver.
Even if it is a marginal difference, it's still non-zero, and that matters.
I was referring to "store of value" as "settle immediately", and "facilitator of trade" as "settle at a later date". The two ideals are mutually exclusive, because you cannot both settle now and at a later date also.
Well, here, at least, we finally agree. You cannot both settle a debt now and settle that debt at a later date. Thankfully, not even fiat claims to be an attempt to settle debt at a later date. So your definition of "facilitator of trade" is false.
The debt that is to be settled with fiat, is the one in which an entity promised to pay back fiat to a bank (plus interest) in return for creating the fiat for a loan they wanted to take. They have to figure out a way to get the fiat they gave you, back off you, or go bankrupt.
...Gold and bitcoins are the items of value that are traded. They have inherent value due to scarcity or usage or whatever.
No way. Gold, Bitcoin, and fiat are ALL money because they have significant value above industrial/direct-use value, and they can all facilitate trade. They certainly vary quite a bit in terms of various properties (ease of transacting, ease of storing, time-preference for holding, etc), but they're all money. The "inherent value" you reference is the same for all; it comes from scarcity (real or perceived) for all three, combined with trust that other people will still value it in the future.
Fiat money is the only one without
any and which will never have any industrial value, except for bitcoins. Something like 97% of fiat money is digital now, too, so it can't even be used for toilet paper any more. Bitcoins share this advantage with money, but are currently too inconvenient for fast transactions.
Fiat money satisfies a need which bartering simply cannot.
The world used gold and silver for quite some time before fiat came to dominate. That was not barter.
The need is for legitimized and standardized credit. I don't think many civilizations actually worked on a bartering system at all. Perhaps in the ancient days when you were unlikely to see someone ever again, but there was evidence that all civilizations had a currency with a trivial placeholder.
The only people who are seriously going to use BTC "only" are those for whom fiat is otherwise unacceptable or draws unwanted attention...for whom the cost of BTC is outweighed by its benefits.
Bitcoin is great for modern transactions. Obviously it's impractical to use *only* bitcoin without more places accepting it, but one of its best properties is ease of transaction.
It won't replace fiat unless it's cheaper. Being novel does not make it "great". More places won't accept it unless they make more money from doing so.
