GoldMoney [FB post]: James Turk in conversation with Félix Moreno de la Cova

[labestiol]

He's not yet convinced, but he's getting there. He just need time (hopefully for him not too much) to be able to trust Bitcoin.
And Félix is a good speaker, clear and good arguments. Kudos to him.

Tangibility (as in "I can touch it") is clearly not important. He's saying "I can exchange a tangible asset, a silver coin, for a tangible commodity". He can also exchange the silver coin for a non-tangible asset, for example a service. A service clearly has value even if it's not tangible. And fiat money also proved that tangibility is not an issue. Most of fiat is electronic, and that's not the problem.
Problem is the amount of energy needed to expand the supply. USD supply can be expanded with a few keystrokes (basically 0 energy), gold supply can be expended by mining it (non-zero, increasing energy, sometimes not linear wrt time), bitcoin supply is expended by mining too (energy increasing arguably even faster that gold, piecewise-linear wrt time, reaching infinity in around a century if things stays like that)

"Backing" is also a complex term. To me it just means it's something desirable, not something which have another utility. Basically, in the case of money, backing would be desirable property for an object to be used as money.
Clearly bitcoin has desirable property as money :
 - divisible, fungible, verifiable, cheap & fast to transfer, peer to peer (no third party). That would be the good properties for a medium of exchange.
 - limited & predictable supply, decentralized control, and a good medium of exchange. That would be properties for a store of value.

Clearly with regards to these properties (I might have forgot some), bitcoin is superior to every other form of money. All these properties are the "backing" of bitcoin, and make it desirable.
No need to use Mises regression theorem (to me bitcoin is a good proof that this theorem is limited/wrong).

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[cypherdoc]

No need to use Mises regression theorem (to me bitcoin is a good proof that this theorem is limited/wrong).

now there's a novel thought.  we Austrians often get trapped within our theorums and never think to question whether its outdated or just plain wrong.

[labestiol]

No need to use Mises regression theorem (to me bitcoin is a good proof that this theorem is limited/wrong).

now there's a novel thought.  we Austrians often get trapped within our theorums and never think to question whether its outdated or just plain wrong.

Yep, seems to be a big problem in economics. More of a cult than a science, ignoring (or firing) contradition. Fortunately some are getting back to real science (I'm reading "Debunking economics" by Pr Steve Keen these days, this guy looks like a real scientist. Though apparently he doesn't like bitcoin because of deflation)

[jimbobway]

This is the most cordial interview ever.  Felix is one smooth talker.

[cypherdoc]

No need to use Mises regression theorem (to me bitcoin is a good proof that this theorem is limited/wrong).

now there's a novel thought.  we Austrians often get trapped within our theorums and never think to question whether its outdated or just plain wrong.

Yep, seems to be a big problem in economics. More of a cult than a science, ignoring contradition. Fortunately some are getting back to real science (I'm reading "Debunking economics" by Pr Steve Keen these days, this guy looks like a real scientist. We should ask him what he thinks about bitcoin  )

i like Keen's work very much.  especially his theory about how conventional Western based debt systems depend on accelerating debt.  just a drop off in the rate of that acceleration can lead to havoc which is where we are right now.  when you look at the contracting debt of the shadow banking system, you can understand why Ben has his panties all twisted up.

[labestiol]

i like Keen's work very much.  especially his theory about how conventional Western based debt systems depend on accelerating debt.  just a drop off in the rate of that acceleration can lead to havoc which is where we are right now.  when you look at the contracting debt of the shadow banking system, you can understand why Ben has his panties all twisted up.

You mean that graph ? :



Still wondering how you can be bearish on gold looking at that  

[tvbcof]

Watched the interview.  de la Cova touched on something which hit me as something of a 'killer app' of Bitcoin within minutes of my having a basic understanding of the solution (and have vocalized on this board off and on since that time.)  That is, as a transfer mechanism for physical gold since both gold and Bitcoin of fungible, divisible, reliable and offer a degree of privacy if one puts a priority on that.

It may occur to Turk that his outfit is potentially very well positioned to capitalize on a need for services here.  That is, if he does not mind relinquishing physical control of his inventory on demand.  And if he does mind doing so...hmmm...

Of course GoldMoney has to put up with all of the regulatory issues so it legitimately may not be worth the hassle to broker physical gold transfers.  Like Bitcoin itself, a much higher degree of questionable financial behaviour would be involved with a population of participants who value the capabilities of the solution.  And I personally am not about to hand over my biometric data to PayPal, Mt. Gox, or GoldMoney even though there is nothing I do which is even remotely questionable...at the present time and under the presently understood laws of the jurisdictions in which I operate at least.

[beckspace]

Is there a quick counter-argument for the "bitcoins are not tangible"?

It should be added to the Bitcoin - Myths, in honor of James Turk.

I liked the interview, James Turk seems reasonable enough. If the "tangible" is the only issue for him to embrace the idea, man, that's easy.

[hazek]

Is there a quick counter-argument for the "bitcoins are not tangible"?

It should be added to the Bitcoin - Myths, in honor of James Turk.

I liked the interview, James Turk seems reasonable enough. If the "tangible" is the only issue for him to embrace the idea, man, that's easy.

The best way to approach this fallacy is to dig a bit deeper and ask if he thinks gold coins are money around the world because they are tangible. If you dig deeper you see it has nothing to do with it's tangibility but rather it's history of having value, the properties it has and utility value it has, a gold coin that is. A counter could be that tomorrow we could discover another tangible element with far better qualities and properties suited for the role of money that could make golds value plummet due to having an inferior quality as money or we could find that it's easy to mine asteroids for gold and gold looses it's property of being scarce again rendering it less useful as money which could make it's value plummet.

So tangible has nothing to do with it being accepted as money and therefor it's irrelevant. What is relevant are the utility value and it's properties and history of course which are all aspects of money bitcoins can match and/or surpass gold's performance at.

[Severian]

No need to use Mises regression theorem (to me bitcoin is a good proof that this theorem is limited/wrong).

As I understand Mises's regression theorem per Rothbard:

"[money] must develop out of a commodity already in demand for direct use, the commodity then being used as a more and more general medium of exchange."

Bitcoin follows the theorem perfectly if it's perceived in its environment: the network. TCP/IP itself has already been commoditized long ago and IP addresses, domain names and network access themselves are all commodities.

Bitcoin is a natural evolution of the network and trading on it, just as gold, silver and seashells were natural progressions of trade in the meatspace.

[Portnoy]

I keep waiting for humanity to get sick of Sumerian economic theory...

Some nam-shubs are hard to recover from.   

[cypherdoc]

i like Keen's work very much.  especially his theory about how conventional Western based debt systems depend on accelerating debt.  just a drop off in the rate of that acceleration can lead to havoc which is where we are right now. when you look at the contracting debt of the shadow banking system, you can understand why Ben has his panties all twisted up.

You mean that graph ? :



Still wondering how you can be bearish on gold looking at that  

yep.  b/c that graph indicates net debt destruction which will paradoxically drive UP the value of the remaining USD's in the system.

[Severian]

Some nam-shubs are hard to recover from.   

"Debt is money" is apparently a strong one.

[cypherdoc]

Watched the interview.  de la Cova touched on something which hit me as something of a 'killer app' of Bitcoin within minutes of my having a basic understanding of the solution (and have vocalized on this board off and on since that time.)  That is, as a transfer mechanism for physical gold since both gold and Bitcoin of fungible, divisible, reliable and offer a degree of privacy if one puts a priority on that.

It may occur to Turk that his outfit is potentially very well positioned to capitalize on a need for services here.  That is, if he does not mind relinquishing physical control of his inventory on demand.  And if he does mind doing so...hmmm...

Of course GoldMoney has to put up with all of the regulatory issues so it legitimately may not be worth the hassle to broker physical gold transfers.  Like Bitcoin itself, a much higher degree of questionable financial behaviour would be involved with a population of participants who value the capabilities of the solution.  And I personally am not about to hand over my biometric data to PayPal, Mt. Gox, or GoldMoney even though there is nothing I do which is even remotely questionable...at the present time and under the presently understood laws of the jurisdictions in which I operate at least.

watch the interview again.  Turk did ask him how one would become an exchange for Bitcoin...

[Trader Steve]

Here's another take on the "regression theorem" in this context:

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]

Is there a quick counter-argument for the "bitcoins are not tangible"?

It should be added to the Bitcoin - Myths, in honor of James Turk.

I liked the interview, James Turk seems reasonable enough. If the "tangible" is the only issue for him to embrace the idea, man, that's easy.

Mr. Turk's logic is twisted; particularly in the interview. He asserts, "Bitcoin is not a tangible asset. ... A financial asset has counter-party risk." This is probably because he conflates definitions and has incorporated a factor and treated it as an element.

The issue is whether either corporealness or scarcity is an element for tangibility?

If I were in the interview I would have retorted and reframed it, "What is tangible? Does something have to be corporeal to be tangible?"

Then I would have used his own words against him. He asserts that Goldgrams are tangible as they represent ownership of the underlying tangible and corporeal asset, gold. But the legal construct of ownership is incorporeal; and some may argue not even tangible, or at least not as tangible as the realness imparted by the physics and chemistry sciences, because it is not based on something real (laws of men).

From one of my earlier posts:

"The word tangible means 'perceptible by touch' or 'clear and definite; real' but the etymology for tangibility has more to do with mental sense than corporeal status. It appears to be used to connote realness as opposed to fantasy, delusion or illusion.

I have been thinking a lot about tangibility and how it applies in monetary science in an attempt to formulate a rule or theorem.

In the Information Age I think organized information, information objects, can have properties of tangibility just as clear and definite, or real, as physical objects. Thus, for something to be real it does not have to be corporeal.

The Bitcoin Magazine exists in both a corporeal (paper) and incorporeal (PDF) form. Both are both clear and definite thus they are equally real. One is an information object the other a physical object. But this distinguishment does not go to tangibility as they both exist in the real world and are not figments of imagination, fantasy, delusion or illusion. We would agree that the Bitcoin Magazine Issue #1 is tangible, regardless of paper or PDF form, and flying fire breathing black dragons are not tangible. Indeed, a bitcoin may be more tangible than a Goldgram because bitcoins are backed by the laws of mathematics while Goldgrams are merely backed by the laws of men (transfer of 'ownership').

Then Mr. Turk adds counter-party risk and payment risk in a discussion about financial assets. But Bitcoin is not a financial asset, at least not if those two risks are elements, as bitcoins have neither counter-party nor payment risk and if he thinks it does then he does not understand the 'double spend solution' as well as he thinks he does. The software solution to the double spend issue limits bitcoins while technology has the potential to synthesize precious metals, like gold, through nuclear transmutation or electricity or space is another example. Thus, using Mr. Turk's logic you could have things which are tangible but not scarce and things which are not tangible yet scarce.

A bitcoin is real because it has clear and definite organization of information therefore making it an information object in the real world and is not a figment of imagination, fantasy, delusion or illusion. Bitcoins are not subject to counter-party risk and there is not payment risk so long as the Bitcoin network is functioning. Bitcoins exist solely as organized information. Therefore, a bitcoin is tangible but not corporeal.

Thus, the argument can be summed up as Bitcoin:Gold::math:physics/chemistry.

At least, that is a rought draft of the argument and why the use and definition of words is so important for the communication of ideas.

[Trader Steve]

No need to use Mises regression theorem (to me bitcoin is a good proof that this theorem is limited/wrong).

As I understand Mises's regression theorem per Rothbard:

"[money] must develop out of a commodity already in demand for direct use, the commodity then being used as a more and more general medium of exchange."

Bitcoin follows the theorem perfectly if it's perceived in its environment: the network. TCP/IP itself has already been commoditized long ago and IP addresses, domain names and network access themselves are all commodities.

Bitcoin is a natural evolution of the network and trading on it, just as gold, silver and seashells were natural progressions of trade in the meatspace.

+1

Yes, pre-existing commodities/assets have been re-organized into a new form (the essence of entrepreneurship) to create a new commodity that is valued in the marketplace.

[sunnankar]

watch the interview again.  Turk did ask him how one would become an exchange for Bitcoin...

Considering MtGox has, as of August 2012, 192,270 registered accounts with 15,391 active in the last 30 days (about the same size as GoldMoney's 22,349 customers), and has grossed about $525,000 from Jan-Aug 2012, surely Mr. Turk cannot be so dense as to not sense the tremendous business opportunity; particularly given the relatively low cost of implementation because of GoldMoney's current system of AML/KYC, etc. already in place.

Plus, given all the negative experiences MtGox customers have had they could use a good competitor.

[labestiol]

No need to use Mises regression theorem (to me bitcoin is a good proof that this theorem is limited/wrong).

As I understand Mises's regression theorem per Rothbard:

"[money] must develop out of a commodity already in demand for direct use, the commodity then being used as a more and more general medium of exchange."

Bitcoin follows the theorem perfectly if it's perceived in its environment: the network. TCP/IP itself has already been commoditized long ago and IP addresses, domain names and network access themselves are all commodities.

Bitcoin is a natural evolution of the network and trading on it, just as gold, silver and seashells were natural progressions of trade in the meatspace.

+1

Yes, pre-existing commodities/assets have been re-organized into a new form (the essence of entrepreneurship) to create a new commodity that is valued in the marketplace.

Thanks for that. Basically bitcoin would be just another digital commodity within the network, with better properties as money. Interesting thought

[hazek]

Is there a quick counter-argument for the "bitcoins are not tangible"?

It should be added to the Bitcoin - Myths, in honor of James Turk.

I liked the interview, James Turk seems reasonable enough. If the "tangible" is the only issue for him to embrace the idea, man, that's easy.

Mr. Turk's logic is twisted; particularly in the interview. He asserts, "Bitcoin is not a tangible asset. ... A financial asset has counter-party risk." This is probably because he conflates definitions and has incorporated a factor and treated it as an element.

The issue is whether either corporealness or scarcity is an element for tangibility?

If I were in the interview I would have retorted and reframed it, "What is tangible? Does something have to be corporeal to be tangible?"

Then I would have used his own words against him. He asserts that Goldgrams are tangible as they represent ownership of the underlying tangible and corporeal asset, gold. But the legal construct of ownership is incorporeal; and some may argue not even tangible, or at least not as tangible as the realness imparted by the physics and chemistry sciences, because it is not based on something real (laws of men).

From one of my earlier posts:

"The word tangible means 'perceptible by touch' or 'clear and definite; real' but the etymology for tangibility has more to do with mental sense than corporeal status. It appears to be used to connote realness as opposed to fantasy, delusion or illusion.

I have been thinking a lot about tangibility and how it applies in monetary science in an attempt to formulate a rule or theorem.

In the Information Age I think organized information, information objects, can have properties of tangibility just as clear and definite, or real, as physical objects. Thus, for something to be real it does not have to be corporeal.

The Bitcoin Magazine exists in both a corporeal (paper) and incorporeal (PDF) form. Both are both clear and definite thus they are equally real. One is an information object the other a physical object. But this distinguishment does not go to tangibility as they both exist in the real world and are not figments of imagination, fantasy, delusion or illusion. We would agree that the Bitcoin Magazine Issue #1 is tangible, regardless of paper or PDF form, and flying fire breathing black dragons are not tangible. Indeed, a bitcoin may be more tangible than a Goldgram because bitcoins are backed by the laws of mathematics while Goldgrams are merely backed by the laws of men (transfer of 'ownership').

Then Mr. Turk adds counter-party risk and payment risk in a discussion about financial assets. But Bitcoin is not a financial asset, at least not if those two risks are elements, as bitcoins have neither counter-party nor payment risk and if he thinks it does then he does not understand the 'double spend solution' as well as he thinks he does. The software solution to the double spend issue limits bitcoins while technology has the potential to synthesize precious metals, like gold, through nuclear transmutation or electricity or space is another example. Thus, using Mr. Turk's logic you could have things which are tangible but not scarce and things which are not tangible yet scarce.

A bitcoin is real because it has clear and definite organization of information therefore making it an information object in the real world and is not a figment of imagination, fantasy, delusion or illusion. Bitcoins are not subject to counter-party risk and there is not payment risk so long as the Bitcoin network is functioning. Bitcoins exist solely as organized information. Therefore, a bitcoin is tangible but not corporeal.

Thus, the argument can be summed up as Bitcoin:Gold::math:physics/chemistry.

At least, that is a rought draft of the argument and why the use and definition of words is so important for the communication of ideas.

Wow!  What an excellent post. Very well stated! Loved it!