Peter Schiff on Bitcoin

[NewLiberty]

There is quite a bit reclaimed gold as well from industrial uses.
Those old computer components have a bit here and there.
http://www.ebay.com/itm/6-lbs-5-oz-of-computer-scrap-for-gold-recovery-/300915675630

I suppose a pure utilitarian philosopher could suggest that the only values that exist are use values and that nothing is intrinsic, but those folks are pretty rare these days.

[painlord2k]

There is the "indirect exchange value" and liquid assets like gold, silver and bitcoin are used for this.
They are needed because you need to obtain things from people uninterested in your goods and services.
The more resellable, liquid, etc. commodity is useful for indirect exchange and they are considered money or quasi-money.

[joae1975]

I got a question to counter this.

What is the intrinsic value of fiat money? It is made of paper, some coins of different metals, but most of it is digital.

You can wipe your butt with paper dollars (will hurt tho), burn it as fuel for a fire, make paper airplanes, snort cocaine, melt down coins into bullets, throw coins as weapons, use them in chance games (heads/tales), etc.  That would be intrinsic value.  Gold/silver have many industrial applications, they're scarce, can't be created without blowing up a star, and are divisible.  The problem Peter has with bitcoin is it only serves one purpose and you can't hold them in your hand.  He's old school, but he'll come around when the market proves itself. 

[xavier]

The predictions of mainstream economists are pretty bad, but they look like geniuses compared to famous Perma-Bears like Schiff and Prechter who lose money even when they are right.  Peter Schiff reportedly lost some investors 40-70% during 2008.  There are plenty of bears who made billions in 2008 betting against the housing bubble, and you should listen to them instead.  Austrian Robert Prechter's newsletter has the worst track record of anyone on Wall St over 30 years.  These people are salesmen who pitch simplistic ideas that are easy to understand and play to people's fear.  Following their advice is a good way to lose money.
/rant

http://www.businessinsider.com/2009/1/peter-schiffs-clients-got-hosed-this-year-too
http://avaresearch.com/avanew/articles/713/The-Embarrassing-Track-Record-of-Robert-Prechter-Part-1.html
http://avaresearch.com/avanew/articles/302/Peter-Schiff-Wrong-on-the-Economy-Wrong-on-Healthcare-Part-1.html
http://www.youtube.com/watch?v=8oJCOlwZUic
http://www.youtube.com/watch?v=H2D3J8Jq9hw
http://www.youtube.com/watch?v=oUbhAbqKjOo

I see where you're coming from. Actually i agree with Peter Schiff on the current economic situation and what will eventually happen. The difficult thing is, how long it will take. Schiff Recommends buying gold. However if you had followed this advice from the beginning of the year, you'd be underwater. It could conceivabley take a long time for these economic predictions to play out. In the mean time, you could be loosing money.

[joae1975]

Right, The current Fed induced high our markets feel is temporary.  Its the same as the instant gradification felt by a gambler or drug user.  Its temporary.  To truly profit from the current clinate you must be patient and let things play out. Peter supports the fundamentals for the long haul.  The only obstacles Peter's philosophy faces is government regulation and market restrictions.  He cannot predict the stupid decisions politicians make.  He does have a few small connections, like Rand Paul who listens to Peters views.

On another note.  Does anyone know about the legitimacy of these gold for bitcoin companies?  Like http://www.coinabul.com ?

[painlord2k]

I see where you're coming from. Actually i agree with Peter Schiff on the current economic situation and what will eventually happen. The difficult thing is, how long it will take. Schiff Recommends buying gold. However if you had followed this advice from the beginning of the year, you'd be underwater. It could conceivabley take a long time for these economic predictions to play out. In the mean time, you could be loosing money.

The point to own physical gold is not to gain, but as insurance in case of economic collapse.
The "wealth transfer" is a side effect of it, because if you do not lose when all are losing, you are becoming wealthier compared to them.
And after the tempest is past, you are able to convert gold in productive assets (houses, shares of companies, land and so on).

[joae1975]

^
Right, you maintain your purchasing power as the dollar loses value.  1 oz of gold always has and always will buy 1 good suit.

[NewLiberty]

On another note.  Does anyone know about the legitimacy of these gold for bitcoin companies?  Like http://www.coinabul.com/?

Coinabul are good folks.
My prices are better, but coinabul provide a much better retail experience.

[joae1975]

On another note.  Does anyone know about the legitimacy of these gold for bitcoin companies?  Like http://www.coinabul.com/?

Coinabul are good folks.
My prices are better, but coinabul provide a much better retail experience.

If I may ask here, what's your typical markup over spot for a Perth Mint 1oz bar?  Coinabul around 8% for 1 oz bars.  http://www.amagimetals.com/ is ~3%, WOW!  Love the John Galt and Ron Paul coins, HAHA!

edit:  I could buy some gold, max out my credit cards and disappear hehe!

[xavier]

I see where you're coming from. Actually i agree with Peter Schiff on the current economic situation and what will eventually happen. The difficult thing is, how long it will take. Schiff Recommends buying gold. However if you had followed this advice from the beginning of the year, you'd be underwater. It could conceivabley take a long time for these economic predictions to play out. In the mean time, you could be loosing money.

The point to own physical gold is not to gain, but as insurance in case of economic collapse.
The "wealth transfer" is a side effect of it, because if you do not lose when all are losing, you are becoming wealthier compared to them.
And after the tempest is past, you are able to convert gold in productive assets (houses, shares of companies, land and so on).

I will write some stuff to reply to this,.

What is the point of investing? To increase the value of your assets, right? It's a money making exercise (and hopefully not money loosing). Buying gold is an investment therefore u are looking to make money.

Also, when the tempest is past, it is a bad time to convert , I guess u mean sell , your gold because everybody else will be doing the Same. To be successful in investing u need to be ahead of everybody else . You need to be different, but also to be right when others are wrong . So the best time to sell would be when everybody is buying .

There is no such thing as insurance in investing. Investing is about making bets on the future. It is about predicting the future basically. It's also about avoiding doing stupid things and loosing your savings.

/rant

[junglist.massive]

interesting

[joae1975]

I have to agree with Xavier here on this.  Gold is not an investment.  It's a hedge against inflation.  And so is bitcoin imho.  Gold is a store of wealth.  When the tempest comes to pass, everybody and their mother is going to try to buy gold at the same time.  And its going to Skyrocket.  Similar to Bitcoin and Cyprus.  Only the real fat lady has yet to sing her song.

[tabnloz]

I see where you're coming from. Actually i agree with Peter Schiff on the current economic situation and what will eventually happen. The difficult thing is, how long it will take. Schiff Recommends buying gold. However if you had followed this advice from the beginning of the year, you'd be underwater. It could conceivabley take a long time for these economic predictions to play out. In the mean time, you could be loosing money.

The point to own physical gold is not to gain, but as insurance in case of economic collapse.
The "wealth transfer" is a side effect of it, because if you do not lose when all are losing, you are becoming wealthier compared to them.
And after the tempest is past, you are able to convert gold in productive assets (houses, shares of companies, land and so on).

I will write some stuff to reply to this,.

What is the point of investing? To increase the value of your assets, right? It's a money making exercise (and hopefully not money loosing). Buying gold is an investment therefore u are looking to make money.

Also, when the tempest is past, it is a bad time to convert , I guess u mean sell , your gold because everybody else will be doing the Same. To be successful in investing u need to be ahead of everybody else . You need to be different, but also to be right when others are wrong . So the best time to sell would be when everybody is buying .

There is no such thing as insurance in investing. Investing is about making bets on the future. It is about predicting the future basically. It's also about avoiding doing stupid things and loosing your savings.

/rant

At some stage people come to believe there is too much risk in investing in traditional markets. We see that now with currency & monetary manipulation. People are on the stocks and RE express but it is increasingly seen as fragile. Gold is then a hedge for part of your wealth, but the timing is difficult. Ideally the end game is to escape fiat death. It becomes as much a way of not losing in times of chaos as storing wealth. This is a big shift in mindset.

[Operatr]

Gold has an intrinsic value because it:

Is rarer than most metals (if Gold were plentiful and Iron was rare, we would be hedging with Iron instead)

Takes a lot of time and energy to mine


Bitcoin is modeled after this.

They have integrated rarity

They take a lot of time and energy to "mine"



Usually I like what Schiff has to say, but I don't think he is quite right on this one. Like most firmly stuck in Fiat world they don't quite seem to get the concept completely but feel at home talking about it anyway as some kind of curiosity but not "real money", whatever the hell that means.

Liberty Reserve was a sloppy enterprise and got what it deserved

[Seth Otterstad]

Economic disaster /= everyone tries to buy gold.  The gold price dropped during the 2008 crash along with everything else.  Gold is also a terrible inflation hedge.  The 1980's saw periods of double digit inflation, during which the gold price was falling.  The US is only 21% of the world's economic activity, so it makes little sense to think that this globally traded commodity is going to reflect the policy of a single government.

There are WAY better ways to profit if you think a crash or hyperinflation is coming than just buying gold.  People like Kyle Bass became billionaires in 2008 betting against the housing bubble.  Peter Schiff was not one of them.  You can safely ignore anything he has to say because he makes his money by selling gold.

Obviously gold performs better in the very long run (>20 years) than something that targets an inflation rate of 2-3% with periods of double digit inflation in the 1980's.  In the long run, fiat currency is the worst investment around.  It goes to zero by design.  To think this matters, you have to ignore the fact that no one "invests" in USD.  People invest in productive assets like stocks.  Not only do stock prices beat inflation, they get a dividend every year.

BTW, Schiff only recommends 15-20% gold in portfolio, or at least he did a couple years ago.

Aspiring gold bugs should read this: http://bilbo.economicoutlook.net/blog/?p=2562

Here is some more stuff:
http://online.barrons.com/article/SB50001424052748704372504578289922761002366.html#articleTabs_article%3D1
http://www.zerohedge.com/contributed/2012-12-07/hidden-dangers-gold

[joae1975]

Gold dropped in '08 because the dollar didn't drop. People still had faith in the dollar.   But that sentiment is slowly changing.  I notice customers at work, through conversation, we look for the rare silver dimes/quarters.  Then again this libro girl I'm kinda dating has no clue.  She gets mad when I try to explain it all to her.

Anyway I live how we're all preaching to the choir here.

[NewLiberty]

On another note.  Does anyone know about the legitimacy of these gold for bitcoin companies?  Like http://www.coinabul.com/?

Coinabul are good folks.
My prices are better, but coinabul provide a much better retail experience.

If I may ask here, what's your typical markup over spot for a Perth Mint 1oz bar?  Coinabul around 8% for 1 oz bars.  http://www.amagimetals.com/ is ~3%, WOW!  Love the John Galt and Ron Paul coins, HAHA!

edit:  I could buy some gold, max out my credit cards and disappear hehe!

Thus my point about their superior retail experience.  We don't take credit, but we do take Bitcoin, and other non-reversible transactions.

[joae1975]

Links added on first post.

[Raize]

"Intrinsic value" is a misnomer, intentionally designed to mislead people. The only legitimate use of the term is in futures/options trading as there is a "present value".

Case in point, answer these three questions:
1) What is the intrinsic value of water?
2) What is the intrinsic value of water if you are lost in a desert?
3) What is the intrinsic value of water if you are drowning?

One's answer will always be different for all three cases, indicating there is no such thing as "objective value". In the case of #2, the average person may be willing to lose a limb to avoid dying of thirst. In the case of #3, the average person may be willing to lose a limb to see enough water removed that they could obtain another breath.

Value is always "subjective", no matter what adjectives are added to it. To argue there is some inherent property of an entity that provides an objective value to it, is to purposely mislead people.

Bitcoin is money (or can be used as such) because it is like gold and other precious metals. They are all scarce, which gives them *some* value, even if it's not always a stable one. Even fiat money has scarcity, regardless of inflation, it is not infinite, even if some might be trying to make it infinite even today.

There's an old saying that goes: "Money is a matter of functions four: a medium, a measure, a standard, a store."

Gold and other precious metals have problems with the second of these: measure (AKA unit of account).

A good unit of account has to be divisible, fungible, and countable.

Precious metals meet the fungible and countable requirements, but have struggled over the years with meeting divisibility. After all, suppose you were to do work that is the equivalent of 5.1 grams of gold. The individual you did the work for reaches into their pocket and gives you 6 grams and asks for .9 of a gram in change. How do you provide it?

Bitcoin solves the divisibility problem of scare goods, while still meeting all the other requirements of money.

So if you wanted to say there was any sort of "objective value" of Bitcoin, it would be the following: Bitcoin is a medium, a measure (divisible, fungible, & countable), a standard, and a store.

From there you can argue whether or not it fits these attributes better than fiat money, but it almost certainly meets these attributes at least as well as precious metals.

[xxjs]

"Intrinsic value" is a misnomer, intentionally designed to mislead people. The only legitimate use of the term is in futures/options trading as there is a "present value".

Case in point, answer these three questions:
1) What is the intrinsic value of water?
2) What is the intrinsic value of water if you are lost in a desert?
3) What is the intrinsic value of water if you are drowning?

One's answer will always be different for all three cases, indicating there is no such thing as "objective value". In the case of #2, the average person may be willing to lose a limb to avoid dying of thirst. In the case of #3, the average person may be willing to lose a limb to see enough water removed that they could obtain another breath.

Value is always "subjective", no matter what adjectives are added to it. To argue there is some inherent property of an entity that provides an objective value to it, is to purposely mislead people.

Bitcoin is money (or can be used as such) because it is like gold and other precious metals. They are all scarce, which gives them *some* value, even if it's not always a stable one. Even fiat money has scarcity, regardless of inflation, it is not infinite, even if some might be trying to make it infinite even today.

There's an old saying that goes: "Money is a matter of functions four: a medium, a measure, a standard, a store."

Gold and other precious metals have problems with the second of these: measure (AKA unit of account).

A good unit of account has to be divisible, fungible, and countable.

Precious metals meet the fungible and countable requirements, but have struggled over the years with meeting divisibility. After all, suppose you were to do work that is the equivalent of 5.1 grams of gold. The individual you did the work for reaches into their pocket and gives you 6 grams and asks for .9 of a gram in change. How do you provide it?

Bitcoin solves the divisibility problem of scare goods, while still meeting all the other requirements of money.

So if you wanted to say there was any sort of "objective value" of Bitcoin, it would be the following: Bitcoin is a medium, a measure (divisible, fungible, & countable), a standard, and a store.

From there you can argue whether or not it fits these attributes better than fiat money, but it almost certainly meets these attributes at least as well as precious metals.

I agree with most of what you say here, except your description of "intrinsic" as "objective". Intrinsic value, when used in the money domain, means the value that is not echange value. It is not objective by any means, it is defined by supply and demand as everything else.

Imagine that gold is unsellable as a used item, like an opened bag of potato chips. What is the value? You could make things out of it, use it in electronics and so on. A piece of jewelry is nice, but the wearer (and everybody else) is also conscient of its exhange value, so lets take that out. I would say that it is worth far less than the current gold price, driving its use up and the mining down. This is the intrinsic value (intrinsic used in the money domain).

Money is the stuff that is used for indirect exhange. Gold, silver, fiat, bitcoin. The quality of a sort of money is decided by its traits like fungibility, scarcity, divisibility and some others. In fact, the best money has no intrinsic value. Gold having intrinsic value means that its use as money displaces its use in electronics. Imagine food being money - saving would make somebody hungry.  Anything can aquire some moneyness, or exchange value, especially in times of hyperinflation or when use of the best money is restricted.

If you don't like the word "intrinsic", which, outside of the money domain, means inherent, fundamental or genuine, use either "direct use-value" or "value apart from its exchange value"

Present value is the value calculated using some future value and some interest rate.