Next generation money

[freshman777]

This is not an intrinsic utility of money, that's what you started with if you happen to forget. For example, real estate is a good store of value (maybe, even better that gold), but that doesn't make it money. As I said, money's only intrinsic utility is transactional utility, and it already necessarily includes the utility of a store of value (since transactions are separated in space and time)...

And this utility (which is the same transactional utility only viewed from another angle) is totally independent of a utility of an asset representing money

Strictly speaking, where do you get this notion of intrinsic utility of money? Utility comes from properties that enable an asset to function as money. One of the important properties is fungibility, real estate has none of it, and consequently can't be money, but it is not because you can't transact in real estate. All units of real estate have to be somehow equal to each other, but it doesn't happen, and so it is not money.
Are goats and camels money in middle eastern and african countries? They are, because they are sufficiently fungible, you check camel's teeth to know its age and health; but their store of value is terrible, they can be seen as mixture of [perishable] bearer bonds and stocks.

Intrinsic utility. As we discussed a handful of posts earlier, does the physical enforcement count as one of intrinsic properties of fiat? It's a bit of a stretch to say it does. I could agree with you that utility of a store of value is included in the transactional utility as you insist, but this can't make the problem of choice of a store of value magically go away. This choice doesn't favor fiat.

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[ObscureBean]

Well I think it could definitely be the next step in the evolution of money but I wouldn't say it's an entirely new form of money. As a matter of fact you can't really invent a "new" type of money, it will always be a variation of the same concept. The blockchain is truly a great piece of technology and if it is successfully merged with money (whether it's Bitcoin or something else) would certainly be a vast improvement over fiat.

[expert4knowledge]

Maybe next generation of money is something more intuitive and it something based on credit of one person rather than some physical money and current credit cards are initial form of it.

[BobK71]

In the realm of money and finance, these elements interact in very interesting ways.  E.g. it's the same illegal transactions that provide demand for Bitcoin, which in turn give confidence to Chinese savers today for using Bitcoin to get around their government's capital controls and get out of the yuan

Why go only halfway? Heroin trafficking from Asia to Europe doesn't let children die from hunger in Afghanistan, so why not legitimize it?

Or do children in Afghanistan not deserve to live?

These are separate issues and separate discussions.  Mixing the merits of a monetary system with crime-fighting is a recipe for myopia.

[deisik]

This is not an intrinsic utility of money, that's what you started with if you happen to forget. For example, real estate is a good store of value (maybe, even better that gold), but that doesn't make it money. As I said, money's only intrinsic utility is transactional utility, and it already necessarily includes the utility of a store of value (since transactions are separated in space and time)...

And this utility (which is the same transactional utility only viewed from another angle) is totally independent of a utility of an asset representing money

Strictly speaking, where do you get this notion of intrinsic utility of money? Utility comes from properties that enable an asset to function as money. One of the important properties is fungibility, real estate has none of it, and consequently can't be money, but it is not because you can't transact in real estate. All units of real estate have to be somehow equal to each other, but it doesn't happen, and so it is not money

It directly follows from the concept of money. Intrinsic means inherent, i.e. a property, or quality, without which something cannot be what it is. If we deprive money of such a property money ceases to be money. Since we are talking about intrinsic utility of money, such utility is made up of (or based on) qualities that are intrinsic to money. Fungibility is just one of these properties (among many others such as scarcity, durability*, resistance to counterfeiting, etc), but it is not utility itself (just in case). The point of discord between your point and my point seems to consist in differentiation between inherent properties (without which money cannot exist as money) and accompanying (incidental) properties which may be welcomed, but are not strictly required

*When I was young and wild, I had a banknote (which made up half of my monthly scholarship then) torn in half in a street fight. After the dust settled, I went to the nearest bank office, and they changed it without a hitch. So the problem of durability doesn't exist even with paper money

[deisik]

In the realm of money and finance, these elements interact in very interesting ways.  E.g. it's the same illegal transactions that provide demand for Bitcoin, which in turn give confidence to Chinese savers today for using Bitcoin to get around their government's capital controls and get out of the yuan

Why go only halfway? Heroin trafficking from Asia to Europe doesn't let children die from hunger in Afghanistan, so why not legitimize it?

Or do children in Afghanistan not deserve to live?

These are separate issues and separate discussions.  Mixing the merits of a monetary system with crime-fighting is a recipe for myopia.

The illegal transactions that "provide demand for Bitcoin" also include drug trafficking (among many other nefarious things), so I find my analogy fitting perfectly. It cuts both ways, so be careful with such logic...

The road to hell is paved with good intentions

[deisik]

Intrinsic utility. As we discussed a handful of posts earlier, does the physical enforcement count as one of intrinsic properties of fiat? It's a bit of a stretch to say it does. I could agree with you that utility of a store of value is included in the transactional utility as you insist, but this can't make the problem of choice of a store of value magically go away. This choice doesn't favor fiat.

Utility means usefulness for attaining certain ends. In case of money, these ends consist in facilitating the exchange of goods (to get rid of barter). If something (including fiat) can serve these ends well, that is, function as a good money, there is no need for enforcement, thereby enforcement is not a required (intrinsic) property of money. So your question actually boils down to how good fiat can be in the function of money. But I see where you lead me to, since there is still a problem of bootstrapping the money, and in this case we are back to the problem of consensus, which the state solves (or rather eliminates) legislatively (read through enforcement)...

But this problem (a problem of bootstrapping) is incidental (i.e. not directly related) to the concept of money and its transactional utility

[BobK71]

In the realm of money and finance, these elements interact in very interesting ways.  E.g. it's the same illegal transactions that provide demand for Bitcoin, which in turn give confidence to Chinese savers today for using Bitcoin to get around their government's capital controls and get out of the yuan

Why go only halfway? Heroin trafficking from Asia to Europe doesn't let children die from hunger in Afghanistan, so why not legitimize it?

Or do children in Afghanistan not deserve to live?

These are separate issues and separate discussions.  Mixing the merits of a monetary system with crime-fighting is a recipe for myopia.

The illegal transactions that "provide demand for Bitcoin" also include drug trafficking (among many other nefarious things), so I find my analogy fitting perfectly. It cuts both ways, so be careful with such logic...

The road to hell is paved with good intentions

All I did was observe how the forces interact.  It's just how things work.  If the state adopts a system that allows itself and its banking allies to receive unearned wealth and power and corrupt the moral fiber of the entire society, it can't be surprised that the system will become unstable when people run away from it by any means possible.  It's not for you or me to say if the net result will be positive or negative either way.  All we can do is to advise the public to push the state away from this system.

[BobK71]

Bitcoin cannot function as a world currency, it's nonsense to assume. Fundamentally the world needs monetary sanity, this can't be achieved with fiat currencies. Fiat currencies are always reset when they are invariably expanded beyond limits. Money must be what people voluntarily choose to use as money in free market interactions, not the top-down enforced thing.

This is the point about which people always make the same mistake, namely, by confusing cause and effect, again and again. Fiat currencies become reset only when the state behind them fails (and not the other way round). Actually, monetary expansion beyond limits is a last-ditch attempt to postpone the inevitable fiasco of a failed state. Essentially the same happened with states that used hard currencies (gold and silver as money). They severely debased their specie by diminishing its precious metal content whenever they got spiraling down, thereby effectively multiplying the amount of money in circulation (i.e. what fiat currencies are abused with and accused of)...

See the history of Ancient Rome, its rise and its ultimate collapse as a textbook example of this process

What you describe might have happened sometimes, but debasing currency is the main problem in its own right.  The British empire through the 19th century had no problems except the "problem" that paper sterling become the world's reserve currency.  By 1914 Britain's gold could only cover 3% of its paper money even though British politicians "considered" it a "moral obligation" to redeem paper at the same price of gold.

The problem is the incentives for the elites to receive unearned power and wealth, built into any national currency regime (including one built on gold.)  Essentially the same thing happened to the 17th century Dutch empire and 20th century American "empire," even if the precise mechanisms were different.

It's true that a strong state (and especially a global "empire") can find ways to prop up its money and related financial assets with political and military power, as has often happens.  And a weakened state will have some trouble doing this.  But we shouldn't confuse cause and effect -- every global empire, starting with 16th century Spain, always issued too many financial assets at the peak of its strength, and these assets always ended up dragging the empire down.

[deisik]

It's true that a strong state (and especially a global "empire") can find ways to prop up its money and related financial assets with political and military power, as has often happens.  And a weakened state will have some trouble doing this.  But we shouldn't confuse cause and effect -- every global empire, starting with 16th century Spain, always issued too many financial assets at the peak of its strength, and these assets always ended up dragging the empire down

You are right about this, but, look, the whole science of economy is based on the assumption that an individual in particular and economic entities in general act rationally. If they stop acting rationally (for any reason), they are essentially shooting themselves in the foot. The same story is with states, if a state's government is intelligent, it won't destroy its monetary system, since "too many financial assets always end up dragging it down". But if the government has gone nuts, could we really put such a state "at the peak of its strength", when, in fact, it is already past it?

And should we blame just "too many financial assets" that broke the state's back?

[HeroCat]

This probably will be altcoin with very fast transaction time and new technology, also may be fast mining. 

[Barbut]

Bitcoin is answer on your question. For me, and many other people it's totally new, revolutionary thing. Blockchain technology is that new thing, and bitcoin like first coin based on that already made big things in this world. Will it survive, or some new coin will come is not so important now. We have something big, so let's work together to make it even bigger.

[BobK71]

It's true that a strong state (and especially a global "empire") can find ways to prop up its money and related financial assets with political and military power, as has often happens.  And a weakened state will have some trouble doing this.  But we shouldn't confuse cause and effect -- every global empire, starting with 16th century Spain, always issued too many financial assets at the peak of its strength, and these assets always ended up dragging the empire down

You are right about this, but, look, the whole science of economy is based on the assumption that an individual in particular and economic entities in general act rationally. If they stop acting rationally (for any reason), they are essentially shooting themselves in the foot. The same story is with states, if a state's government is intelligent, it won't destroy its monetary system, since "too many financial assets always end up dragging it down". But if the government has gone nuts, could we really put such a state "at the peak of its strength", when, in fact, it is already past it?

And should we blame just "too many financial assets" that broke the state's back?

True, each individual is assumed to act rationally in their own interest.  The state is a more complicated question.  I like to think that the reality in democratic system is that politicians will act in the collective interest only if voters monitor them for the issue at hand.  Otherwise, they act in their personal interest.  The US politicians who issued debt and allowed money to be issued by banks in the 50s and 60s don't have to live the consequences of their actions.  The people of negative age then, who couldn't vote, do.

It may not be easy to decipher at which point an empire reaches its zenith.  The incentives to issue financial assets, however, are always there.

[BobK71]

Intrinsic utility. As we discussed a handful of posts earlier, does the physical enforcement count as one of intrinsic properties of fiat? It's a bit of a stretch to say it does. I could agree with you that utility of a store of value is included in the transactional utility as you insist, but this can't make the problem of choice of a store of value magically go away. This choice doesn't favor fiat.

Utility means usefulness for attaining certain ends. In case of money, these ends consist in facilitating the exchange of goods (to get rid of barter). If something (including fiat) can serve these ends well, that is, function as a good money, there is no need for enforcement, thereby enforcement is not a required (intrinsic) property of money. So your question actually boils down to how good fiat can be in the function of money. But I see where you lead me to, since there is still a problem of bootstrapping the money, and in this case we are back to the problem of consensus, which the state solves (or rather eliminates) legislatively (read through enforcement)...

But this problem (a problem of bootstrapping) is incidental (i.e. not directly related) to the concept of money and its transactional utility

It's a question of incentives.  Any human-issued money has the wrong incentives built in.  In purely theoretical terms, incentive doesn't necessarily translate into action, but historically these monies and their related assets are always debased.

[deisik]

You are right about this, but, look, the whole science of economy is based on the assumption that an individual in particular and economic entities in general act rationally. If they stop acting rationally (for any reason), they are essentially shooting themselves in the foot. The same story is with states, if a state's government is intelligent, it won't destroy its monetary system, since "too many financial assets always end up dragging it down". But if the government has gone nuts, could we really put such a state "at the peak of its strength", when, in fact, it is already past it?

And should we blame just "too many financial assets" that broke the state's back?

True, each individual is assumed to act rationally in their own interest.  The state is a more complicated question.  I like to think that the reality in democratic system is that politicians will act in the collective interest only if voters monitor them for the issue at hand.  Otherwise, they act in their personal interest.  The US politicians who issued debt and allowed money to be issued by banks in the 50s and 60s don't have to live the consequences of their actions.  The people of negative age then, who couldn't vote, do.

It may not be easy to decipher at which point an empire reaches its zenith.  The incentives to issue financial assets, however, are always there.

I guess things are even more complicated than that. When an empire is at its prime, issuing "too many financial assets" is not an issue at all (pardon the pun), since it is not yet reached that limit which divides just many from too many. In other words, the state can still prop up these assets either through political or military power until it loses any of the latter, as was the case with Spain when it started to give up its role as a European superpower to its rivals represented by the emerging British Empire and the Netherlands in the second half of the 16th century. Thereby, the primary cause is still the state losing its grasp, not just issuance of too much paper per se...

To sum it up, too much paper simply means too little power (left)

[Zooplus]

Bitcoin will only be the next generation money if the government will legalize the use of this one. They need to make sure that they were able to track the bitcoins movement to prevent money laundering but if the features of bitcoins does not fix the requirements of the government it would be hard for that to realize.

[BobK71]

I guess things are even more complicated than that. When an empire is at its prime, issuing "too many financial assets" is not an issue at all (pardon the pun), since it is not yet reached that limit which divides just many from too many. In other words, the state can still prop up these assets either through political or military power until it loses any of the latter, as was the case with Spain when it started to give up its role as a European superpower to its rivals represented by the emerging British Empire and the Netherlands in the second half of the 16th century. Thereby, the primary cause is still the state losing its grasp, not just issuance of too much paper per se...

To sum it up, too much paper simply means too little power (left)

There are a couple of ways to look at this...

One perspective is that financial asset inflation by itself creates instability and thus weakness in imperial system, everything else being equal.  The reason is that, as private investors look at an increasing total amount of financial claims issued, they have to worry about the value of those claims and whether they want to hold on to them, while knowing other investors are thinking the same thing.

On this count, while the system is stable, the combination of imperial economic size and manipulative power would have to increase, indefinitely, in order to continue to contain the instability indefinitely.  The history of global empires shows that asset inflation always eventually outpaces these factors of stability.  (Which would be consistent with my argument that the problem lies in the incentives faced by individual members of the elites.)  This is not to mention that a good part of modern imperial power is 'soft,' ie based on the perception that the imperial state is singularly respectful of market forces and will not do the things it actually has to do to contain the instability.  At some point, this fundamental deception is exposed.

Another perspective is that asset inflation weakens the social, institutional, and individual strengths within the imperial power.  As members of the imperial elites and citizenry enjoy unearned power and wealth through creating financial assets trusted by the rest of the world, the wrong behavioral incentives begin to pervade their entire system.  People and institutions weaken because problems can be 'solved' by creating assets out of thin air.  (This is pretty much the sad story of the US.)

All of these factors of instability reinforce each other.  What we are left with, then, is an inescapable path to decline.

[deisik]

On this count, while the system is stable, the combination of imperial economic size and manipulative power would have to increase, indefinitely, in order to continue to contain the instability indefinitely.  The history of global empires shows that asset inflation always eventually outpaces these factors of stability.  (Which would be consistent with my argument that the problem lies in the incentives faced by individual members of the elites.)  This is not to mention that a good part of modern imperial power is 'soft,' ie based on the perception that the imperial state is singularly respectful of market forces and will not do the things it actually has to do to contain the instability.  At some point, this fundamental deception is exposed

It is a well-known fact that any empire should be constantly expanding to remain internally stable (keep internal stability). In this way, I would argue that whenever it stops expanding, or something stops it from expanding (natural limits or belligerent neighbors), then and only then the asset inflation begins to outrun the counterbalancing factors (i.e. expansion) and eat away the power of an empire. This may be called a point of no return after which the empire starts to decline. But since the elites can't restrain themselves, the point of no return is eventually reached and passed by...

They simply can't stop since that would promote (or trigger off) an even faster decline in power, so they got stuck between the upper and the nether millstone with a one-way ticket in the pocket

[redsun114]

Bitcoin will only be the next generation money if the government will legalize the use of this one. They need to make sure that they were able to track the bitcoins movement to prevent money laundering but if the features of bitcoins does not fix the requirements of the government it would be hard for that to realize.

Yes obviously as bitcoin being totally anonymous it is hard for them to legalize in most of the countries but its up to us We are always anonymous too so no need to fear anything. I am really enjoying this next generation money.

[Ayers]

Bitcoin will only be the next generation money if the government will legalize the use of this one. They need to make sure that they were able to track the bitcoins movement to prevent money laundering but if the features of bitcoins does not fix the requirements of the government it would be hard for that to realize.

i think they will follow their route, by building a fiat altcoin, and not following bitcoin, they hate bitcoin, so bitcoin will never be legalized by government, they have already some centralized altcoin in project