Peter Schiff: Gold vs. Bitcoin

[BigJohn]

http://www.youtube.com/watch?v=0L7SOPDOvvI


Basically his point is that gold has intrinsic value, while Bitcoin doesn't, and that most of the BTC is being hoarded and not actually used in commerce. This leads him to believe the price is highly inflated.

[1713290219]

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[MoonShadow]

And what do you think?

[BigJohn]

And what do you think?

Well he's not wrong. Bitcoin has very little intrinsic value. It does cost resources to produce. But the product of those resources is just tons of giga-hashes and the appropriate hashing equipment. Maybe if Bitcon's proof-of-work was something useful that would be a different case. Then maybe people would want Bitcoins for their own usefulness.

Also there's no doubt that people are entering Bitcoin mostly because they're expecting the price in the future to be higher. Definitely not because there's a lot you can do with Bitcoin at the moment, because there isn't. In fact, adoption by merchants seems to be the biggest thing the community is trying to achieve. So that means the bulk of Bitcoin-wealth right now is speculation. And that definitely spells a bubble.

[Jutarul]

It is difficult to get a man to understand something, when his salary depends upon his not understanding it!

Give the man a break. Peter Schiff has been right on so many accounts, he's allowed to miss this one.

[d'aniel]

... So that means the bulk of Bitcoin-wealth right now is speculation. And that definitely spells a bubble.

I think the fifth time I've dropped this insightful post in response to "bubble": http://unqualified-reservations.blogspot.ca/2013/04/bitcoin-is-money-bitcoin-is-bubble.html

Snippet:

The BTM asserts that money and a bubble are the same thing.  Both are anomalously overvalued assets.  Both obtain their anomalous value from the fact that many people have bought the asset, without any intention to use it, but only to exchange it for some other asset at a later date.  The two can be distinguished only in hindsight.  If it popped, it was a bubble.  If not, money - so far.

[Zooey]

not that old chestnut,

again...

[MoonShadow]

And what do you think?

Well he's not wrong.

Well, maybe a little wrong.

 Bitcoin has very little intrinsic value. It does cost resources to produce.

Both are true with gold as well.  Gold's intrinsic value is what it could be used for if it wasn't desired for it's monetary value, and as a jewlry doesn't count.  Gold does have industrial uses that are ignored because it's monetary value prices it out of that market, but if it no longer had any monetary value, it'd be fair to say that gold wouldn't be significantly more valuable to industry than lead is.  I wouldn't think that knowning that the intrinsic value of the stuff you're investing in is about one-thousanth of what it's current market value is would sound to many of his listeners as an acceptable bottom.

What Peter means when he says that bitcoins (the currency) has no intrinsic value, he really means that it has no non-monetary use.  In this sense, he is correct.  Bitcoin has no non-monetary use.  However, Bitcoin (the system/netwrok) does have features/characteristics that have usefulness beyond the context of a simple means of exchange, and all of those features require the use of bitcoins (the currency) to utilize.  In this sense, Bitcoin does have an 'intrinsic value' in the economic sense.  While I can't pay my taxes with it, I certainly can do many useful things with it, that no other curerncy in history can do without third party help.

Such as create blockchain enforcable contracts...
https://en.bitcoin.it/wiki/Contracts

And, perhaps eventually, the transfer of asset titles...

https://docs.google.com/document/d/1AnkP_cVZTCMLIzw4DvsW6M8Q2JC0lIzrTLuoWu2z1BE/edit?pli=1
http://www.newscientist.com/article/dn24620-bitcoin-moves-beyond-mere-money.html

And the (terriblely underused) transaction scripting system promises to do much, much more

I, for one, do see value in a completely impartial, automated and near zero cost system that not only replaces most of the functions of brick * mortor banks, but most of the functions of the county clerck as well.

But the product of those resources is just tons of giga-hashes and the appropriate hashing equipment. Maybe if Bitcon's proof-of-work was something useful that would be a different case. Then maybe people would want Bitcoins for their own usefulness.

As noted above, I want them for their unique usefulness.  But even if I didn't, my gigahashes also heat my bsement in winter.  Nothing is wasted as far as I am concerned.

Also there's no doubt that people are entering Bitcoin mostly because they're expecting the price in the future to be higher. Definitely not because there's a lot you can do with Bitcoin at the moment, because there isn't. In fact, adoption by merchants seems to be the biggest thing the community is trying to achieve. So that means the bulk of Bitcoin-wealth right now is speculation. And that definitely spells a bubble.

Time will tell.

[lumierre]

Majority of gold's value is in its ability to withstand hostile environments so it makes a perfect store of value. Its value is not so much that you could eat it and live with just gold on your pocket. It is valuable because other people want to accept it as payment. Same goes with bitcoin. However, bitcoin has really no other use than to transfer wealth but that doesn't mean it doesn't have value. The value of bitcoin comes from its ability to absolutely stay the amount for eternity, divisibility, etc. etc. This so called "intrinsic value" of a currency is no more than just the convenience of wealth exchange the currency provides.

[solex]

And what do you think?

Well he's not wrong. Bitcoin has very little intrinsic value.

I disagree. The "intrinsic value" is absolutely massive, but perhaps not obvious. A bitcoin is a unique type of data which can be copied millions of times, as is usual, but unlike other data can't be counterfeited. It is a perfect implementation of DRM. It also has its ledger system and peer-to-peer transmissability. All of this gives utility for digital commerce which is "intrinsic" to it.

In this sense, he is correct.  Bitcoin has no non-monetary use.  However, Bitcoin (the system/netwrok) does have features/characteristics that have usefulness beyond the context of a simple means of exchange, and all of those features require the use of bitcoins (the currency) to utilize.  In this sense, Bitcoin does have an 'intrinsic value' in the economic sense.

Exactly.

[BitTrade]

I love peter Schiff as much as any other libertarian, but guys, come on... He has millions of dollars invested in gold and built his ENTIRE company around precious metals.  Maybe a LITTLE bias coming through there.  

The other day he claimed that moving the decimal place for bitcoin is the same as "printing" money.  So yeah.  You can predict the housing collapse and be ignorant.

[smoothie]

What Peter misses is that "intrinsic" also means non-tangible value like trust/security/absolution (2+2=4) and thus can't be coerced by any government.

It's really pathetic to see him still trying to talk down Bitcoin even after he admits that it is too complex for him to understand. So he ultimately disqualifies himself on being a qualified candidate to speak educatedly on the topic of "Gold vs Bitcoin".

lol

[MoonShadow]

I love peter Schiff as much as any other libertarian, but guys, come on... He has millions of dollars invested in gold and built his ENTIRE company around precious metals.  Maybe a LITTLE bias coming through there. 

After all, he's only human.  He's spent his entire career talking about and selling gold.  One can really expect for every smart man to notice the inflection points in history while it's happening.   A lot of people were still investing in buggys & horse whip manufacturing long after Ford Motor Company was mass producing the Model T.

[solex]

I love peter Schiff as much as any other libertarian, but guys, come on... He has millions of dollars invested in gold and built his ENTIRE company around precious metals.  Maybe a LITTLE bias coming through there.  

Agreed. But what goldbugs fail to understand (which was me too until 1 year ago) is that gold is best for 19th Century face-to-face commerce, It is not good enough for a 21st Century economy where most transactions are remotely executed. This is why fiat survives even though CBs are forced to print it to death because of FRB and government debts. Crypto is a 21st Century currency fit for purpose.

[lumierre]

I hold gold and bitcoin.

i buy things with btc all the time.

i have never ever ever ever bought anything with gold.

And that's what makes bitcoin Gold 2.0.

[MoonShadow]

I hold gold and bitcoin.

i buy things with btc all the time.

i have never ever ever ever bought anything with gold.

I'm exactly the same way, except I mostly hold silver.  I've never directly bought anything with silver, but I've bought everything from mobile phone service to honey candies to digital artifacts (TF2) to handmade things on Etsy with bitcoin.

[Melbustus]

Reading between the lines, Schiff is coming from a strict interpretation of Mises Regression Theorem with regard to "intrinsic value". Overly strict interpretation thereof is a problem for Austrian economists with respect to bitcoin.

What people like Schiff need to understand is that "intrinsic value" is just a synonym for "utility" or "use-value". Well, bitcoin has fantastic utility as money in our modern electronic times....for all the reasons that he thinks gold is good money, with the enormous and critical plus of being instantly transportable over any distance. That feature is an absolute necessity for something to be a good money in modern times and guys like Schiff need to get over their mental blocks.

In that video, Schiff says that you can't do anything with bitcoin and that the only value is the hope to sell to someone else higher. Guess he hasn't heard of bitpay and their 10,000+ merchants. Guess my use of bitcoin to buy Christmas presents online doesn't count. Or when I bought CVS and Amazon gift-cards via Gyft the other day. Or paying for lunch with bitcoin. Or settling restaurant bills with friends......etc.

Furthermore, he dances around the implication of his own argument; namely, that gold should be valued according to its industrial demand. I think I've read that'd be about $300/oz. Well, it's valued a lot more than that because people think it has a monetary purpose. Same with bitcoin. He fails to acknowledge that his criticism of bitcoin applies equally well to 75% of gold's value.

[BitTrade]

Reading between the lines, Schiff is coming from a strict interpretation of Mises Regression Theorem with regard to "intrinsic value". Overly strict interpretation thereof is a problem for Austrian economists with respect to bitcoin.

Lots of Austrians are starting to denounce regression theorem, and/or fit Bitcoin into it.  Only those completely ignorant to Bitcoin seem to still be defending a strict interpretation.   It can be argued that Bitcoin has already rendered it false, if you interpret it strictly.  

[Lauda]

He is pretty much wrong in every aspect.

[cryptoanarchist]

I hold gold and bitcoin.

i buy things with btc all the time.

i have never ever ever ever bought anything with gold.

I'm exactly the same way, except I mostly hold silver.  I've never directly bought anything with silver, but I've bought everything from mobile phone service to honey candies to digital artifacts (TF2) to handmade things on Etsy with bitcoin.

I'm a long time silver bug, but I'd much rather pay someone with silver. At this point, I'm not spending a single bitcoin until they're accepted everywhere.

[lumierre]

Here you go:
http://youtu.be/V8_HT8zfc78?t=14m55s