Greenspan quote on Bitcoins:"To Be Worth Something, It Must Be Backed By Something"

[Silver Rocket Bitches!]

"In order for currencies to be 'exchangeable' they have to be backed by something," is the remarkably ironic initial comment from none other than debaser-of-the-entirely-fiat-dollar Alan Greenspan when asked about the "bubble in bitcoin," by Bloomberg TV's Trish Regan. Unable to "identify the intrinsic" backing of Bitcoin (or see bubbles in equity, credit, real estate, or greater fools) Greenspan is, apparently, capable of identifying Bitcoin "as a bubble," because "there is no fundamental means of "repaying' it by any means that is universally accepted." The farcical double-speak continues as the Maestro does a great job of making Bitcoin (which Ron Paul earlier noted could be the "destroyer of the dollar") look even better than the readily-printed fiat we meddle with every day.
Greenspan explains...




"when we were on the gold standard, [currencies] had intrinisc value which made people willing to exchange their goods and services with no question."
"Alternatively, when we went into "currencies", it was the "backing" of the issuer of the currencies... whose "great credit-standing meant his checks could circulate as money.""

So either its backed by real physical metal with intrinsic value - or the promise of someone...(increasingly politicians of course) with good credit (or a big army)?




"I do not understand where the backing of Bitcoin is coming from. There is no fundamental means of "repaying' it by any means that is universally accepted."

Like fiat currencies (just ask the Venezuelans)...




"Individuals with very high net worth and great reputations could create their own currency... because people would be willing to exchange their checks with each other at par."

So coming soon the BuffettCoin or MuskCoin (oh wait reputation), or the GatesCoin?
But, Greenspan sums it all up...




"I haven't been able to identfy the intrinsic value of Bitcoin - maybe someone else can...
but if you ask me if this is a bubble in bitcoin... yeah it's a bubble.

http://www.zerohedge.com/news/2013-12-04/greenspan-baffled-over-bitcoin-bubble-be-worth-something-it-must-be-backed-something

[Ares]

http://cdn.motinetwork.net/politifake.org/image/political/1207/irony-central-banking-fed-jackson-politics-1343559680.jpg

[Son-of-Liberty]

There is no fundamental means of "repaying' it by any means that is universally accepted."


Greenspan better be careful, why do you need to repay money? Could it be that all other money is made out of debt?

hmmm....

[Serpo]

Greenspan quote on FIAT:"To Be Worth Something, It Must Be Backed By Something"

[Ares]

Greenspan quote on FIAT:"To Be Worth Something, It Must Be Backed By Something"

Why I posted that Irony image.. lol Greenspan dare not speak ill of the dollar.

It's funny he calls Bitcoin a bubble but when housing and real estate was on fire it was "Irrational exuberance".

So I guess it's only a bubble if it's in a currency other than his preferred controlled currency?

[Hatha Sunahara]

I can understand Greenspan's thinking about 'backing' of a currency. Even a fiat currency such as the dollar has 'backing'. The backing is the 'creditworthiness' of the people who create it. And I don't mean the banks. I mean the individuals who borrow money from the banks. They are the ones who create the dollars, and they do it by signing a piece of paper which says they promise to repay the loan the bank makes to them. That obliges them to go out an get a job and work to earn the money to repay that loan. So, what they have done is pledge the value of their future labor to secure their loans. Therefore the dollar is backed by promises of millions of people to devote some of the value of their labor to repaying the loans that created those dollars.

The real problem with fiat money is that the value of labor in the future is uncertain, and therefore the ability of the people who are in debt to repay that debt is uncertain. When the economy doesn't create enough jobs for people to earn money to maintain their debt, their credit erodes, and therefore the value of the money drops with increase risk that it is not backed by a sound asset, but by a risky one. Bankers do not want you to think of it this way because the idea of their money being backed by your future labor empowers you in future negotiations with the bankers. So, Greenspan says that it is the credit of wealthy individuals that backs the money. Bullshit. It is the credit of everyone who borrows money that backs the currency. Including the US government whose ability to repay loans rests with its authority to tax people--and when they refuse to tax wealthy people and put a much larger burden on the middle class, their creditworthiness suffers. Therefore the bankers push on the legal system to enforce the idea of government debt being 'collective' debt that we all owe because the government borrowed it for 'our benefit', even if it is odious debt, which I won't expand on here.

And Bitcoin? What backs bitcoin? The same thing that backs the dollar. Faith. For the dollar it is faith that all the loans can be repaid. For Bitcoin, it is faith that the value will remain stable. And what will make that value stable? Faith. It is a tautology. Faith makes it stable, and stability promotes faith. True fiat.



Hatha

[vacuum]

Great analysis Hatha. The only thing I would add is it's not the faith that it will remain stable, but rather faith that everything else will become more unstable, that backs bitcoin in my view. And not just on a macro level, but on a micro level such as with potential confiscation on an individual basis.

[Hatha Sunahara]

Great analysis Hatha. The only thing I would add is it's not the faith that it will remain stable, but rather faith that everything else will become more unstable, that backs bitcoin in my view. And not just on a macro level, but on a micro level such as with potential confiscation on an individual basis.

Thank you vacuum. That apparently is what keeps the value of gold both high and stable (when price isn't manipulated in dishonest markets)--the fear that all other value will become unstable and collapse. Gold is insurance. Everything else is risk. Even Greenspan agrees with that--or he once did before he bacame a whore.


Hatha

[ShortJohnSilver]

Same thing happened in the 30s in Germany... alternative currencies sprang up only to be crushed by the Central Banks or the Govt acting in concert with them. See http://en.wikipedia.org/wiki/W%C3%B6rgl

I think, it was either here or the original GIM that Carl and CarvingBlock (not sure of username) were discussing these and other concepts.

I think there is so much power and wealth available in the seignorage aspects of money issuance that anything that the Govt cannot get its hands into will be outlawed or fought tooth and nail. With cops and troops if necessary.

[Jewboo]

And Bitcoin? What backs bitcoin? The same thing that backs the dollar. Faith. For the dollar it is faith that all the loans can be repaid. For Bitcoin, it is faith that the value will remain stable. And what will make that value stable? Faith. It is a tautology. Faith makes it stable, and stability promotes faith. True fiat.

Hatha

The only positive claim about Bitcoins is that only 11 Million can exist...making monetary inflation (https://www.google.com/search?q=monetary+inflation+definition&hl=en&site=imghp&source=lnms&sa=X&ei=sNagUvm_A4SLiAKZn4G4Bw&ved=0CAgQ_AUoAA&biw=1280&bih=576&dpr=1) impossible.



:(?? other than that I think they are a cruel joke on greedy money-for-nothing fools.

[Ares]

The only positive claim about Bitcoins is that only 11 Million can exist...making monetary inflation (https://www.google.com/search?q=monetary+inflation+definition&hl=en&site=imghp&source=lnms&sa=X&ei=sNagUvm_A4SLiAKZn4G4Bw&ved=0CAgQ_AUoAA&biw=1280&bih=576&dpr=1) impossible.



:(?? other than that I think they are a cruel joke on greedy money-for-nothing fools.

yes yes yes, we know book. Only state issued currencies with the threat of violence for the acceptance of their use can be called "money". :rolleyes:

Where the hell did you come up with 11 million? The total number to be mined is set at a hard limit within the protocol at 21 million.

[sirgonzo420]

The only positive claim about Bitcoins is that only 11 Million can exist...making monetary inflation (https://www.google.com/search?q=monetary+inflation+definition&hl=en&site=imghp&source=lnms&sa=X&ei=sNagUvm_A4SLiAKZn4G4Bw&ved=0CAgQ_AUoAA&biw=1280&bih=576&dpr=1) impossible.



:(?? other than that I think they are a cruel joke on greedy money-for-nothing fools.

There will be about 21,000,000 total, in about 2140.

Right now, there are 12,081,225 bitcoins in existence.

There are 25 new bitcoins mined approximately every ten minutes. In a couple years, only 12.5 bitcoins will be mined every ten minutes, and about 4 years after that, the reward halves again.

The "block reward" is halved every four years until there is no more block reward subsidy (and no more bitcoins created), and the miners are paid solely by transaction fees.


So right now, bitcoin is inflationary, but very predictably so... in time, bitcoin will become more deflationary. The exchange rates with fiat currencies are another matter entirely... a large holder could buy a bunch of FRNs with their BTC and a cause the "price" to fluctuate, but the amount of bitcoins that exist is a more strictly governed process. Math is the governor.