[2017-11-07] Trichet, former ECB President: Bitcoin is not a currency

[fanatseal2]

Jean-Claude Trichet’s position when it comes to Bitcoin is very similar to that of Axel Weber. And by the way, they are both former bank presidents, which might explain the similarity.

In his latest interview to Bloomberg, Mr. Trichet, born in 1942 and President of the European Central Bank from 2003 to 2011, explains about three main features of any currency and then tells that Bitcoin lacks at least one of them - established value. It oddly jumps up and down and the dynamics are so untypical for Trichet that he calls it a speculative instrument.

However, his tone notably changes when he tells about blockchain, the technology Bitcoin is based on...Read more

[Irvinn]

Now it is rather difficult to argue with such statements that the currency is not, in fact, a currency. This is especially true of bankers. It is understandable. Crypto currency, including bitcoin, is not a currency in the classical established definition of this word. But no one especially argues with this. Crypto currency can be called a financial asset, recognize it as a means of payment, and while it will be enough for a crypto currency. Perhaps in the future the concept of currency will change and the digital currency will be recognized as a full currency.

[gentlemand]

The value is established every single time it's bought or sold. But overall he's right. It's not a currency and it's very unlikely to ever be used as one. People simply do not want to spend it if they have another form of money to hand. There always will be spending as currency of course, but I doubt it'll ever make up more than a small amount of throughput.

[senin]

For crypto currency, in my opinion it will be enough if it is recognized as payment means even without the status of the currency. The main thing is that it continues to gain recognition and support of the public, and is highly appreciated by many governments of different countries, especially its revolutionary blockchein technology.

[Wekkel]

Maybe it is enough for Bitcoin just being there. A stable numeraire in which seats of people believe. One's groceries can be paid with StateCoin or another efficient currency du jour. We should not pretend that our little box as representation of the world equals to the real world out there.

And in the end, Honey Badger does not care.

[Carlton Banks]

It's not a currency and it's very unlikely to ever be used as one.

Hmmm, what about all the times Bitcoin was used as currency before you wrote that though? Do you live in some alternate reality where the past doesn't exist? Must make simple stuff difficult to do, like remembering the words to use in order to speak total nonsense, for instance.


Trichet has made the quintessential bankers mistake: telling people what is money and what isn't money. Bitcoin is living proof that this is not how it works.

Gold, salt, shells, teeth, stones and all sorts of other objects have all been considered money in the past. People with loud or powerful voices can pretend that it's their words that makes something money, that's happened many times too.

But what pre-dominates monetary history is choice. When a critical mass of people use something as money, that thing becomes money. It's as simple as that.

[aigeezer]

Mr. Trichet, born in 1942

M. Trichet is a dinosaur, not because of his age, but because he has vested interests in dino-world. I was born in 1943 and I've been using BTC since early 2011. I'm not a banker, so I know it's a currency, especially when I buy goods and services with it.         

[Samarkand]

...

But what pre-dominates monetary history is choice. When a critical mass of people use something as money, that thing becomes money. It's as simple as that.

I would agree with that statement if you would include a condition that the "something that people use as money" must be scarce.

If you take a look into monetary history you will see that things like shells were only used as a medium of exchange in regions
where shells were incredibly scarce (= hundreds of miles away from the next shore). Consequently, shells would have been
useless in regions where shells are found in abundance and therefore they never gained any traction as a medium of exchange
in these parts of the world.

This is also one of the reasons why gold continues to store value after thousands of years. Even if the annual global output of gold would be doubled, the impact
on the global supply would be negligible (the current annual output of gold is not even 2 % of the already distributed supply). Obviously, it is
incredibly difficult to ramp up the mining of gold, because resources are scarce and often located in politically unstable parts of the world.

[Carlton Banks]

I would agree with that statement if you would include a condition that the "something that people use as money" must be scarce.

If you take a look into monetary history you will see that things like shells were only used as a medium of exchange in regions
where shells were incredibly scarce (= hundreds of miles away from the next shore). Consequently, shells would have been
useless in regions where shells are found in abundance and therefore they never gained any traction as a medium of exchange
in these parts of the world.

This is also one of the reasons why gold continues to store value after thousands of years. Even if the annual global output of gold would be doubled, the impact
on the global supply would be negligible (the current annual output of gold is not even 2 % of the already distributed supply). Obviously, it is
incredibly difficult to ramp up the mining of gold, because resources are scarce and often located in politically unstable parts of the world.

I didn't say whether the money was good or not, and deliberately so.


Shells (and other seemingly scarce money, such as paper or coins with a printed nominal value) do appear to make sense as money to those that haven't thought about the issue carefully enough. But experience teaches better than anything else; nominal printing led to notes for millions or billions of currency units in Weimar Germany or Zimbabwe more recently, and Dutch traders successfully bought Manahattan island from North American Indians using shells from sea molluscs that they farmed intensively using scientific methods.

So abundant money stuffs are actually common in history, and also the status quo. The status quo that Bitcoin is disrupting right now.

[Spaffin]

From the banker's point of view, bitcoin, of course, is not a currency. Under the classical definition of currency, it certainly is not suitable. However, in bitcoin, there may still be everything ahead of this. If it begins to dominate as a means of payment in the world, then the concept of currency can be changed to a digital currency.

[Carlton Banks]

From the banker's point of view, bitcoin, of course, is not a currency. Under the classical definition of currency, it certainly is not suitable.

What "classical" view is this?


The actual classical view is that money is the good that is traded most frequently, for whatever reason. There are good reasons to choose gold, rice, cigarettes or bullets as money, depending on the situation.