Buffett: Bitcoin not a currency [video] • Hacker News Board

Re: Buffett: Bitcoin not a currency [video]

#61

Post by Tyrannosaurs » Fri, Mar 07, 2014, 8:34 PM UTC

kordless wrote: post #57

Tyrannosaurs wrote: post #41

Earlier quoted context omitted.

Does Bitcoin meeting a dictionary definition of a currency (that is being a medium of exchange) really matter given his actual point (which you've clearly understood)? Also, if your defence of Bitcoin as a currency is to compare it to the Zimbabwean Dollar (a currency ridiculed and later abandoned) then is it OK if I ever need a lawyer that I pass on you and go to the next guy? ;-)

His primary point of view is making money. If I can't figure out how to make money on something, I will dismiss it. This is likely what he is doing ATM, but not a good assumption moving forward.

I don't think he's dismissing it for all time, he's just raising a valid point about it as it stands right now.

I don't read what he's saying as anti-Bitcoin per se, he's just saying that right now the massive variability around it means that it's not really a functional currency. That's a valid view and not one he's alone in holding - most economists, hell most people, whether they're pro or anti-Bitcoin will accept that the current fluctuations are problematic when it comes to day to day use.

Re: Buffett: Bitcoin not a currency [video]

#62

Post by jljljl » Fri, Mar 07, 2014, 11:46 PM UTC

JetSetWilly wrote: post #55

jljljl wrote: post #53

Earlier quoted context omitted.

That is not what legal tender means. Legal tender means that the form of payment is a legally accepted option for extinguishing a debt. If you owed someone a debt of 30,000 British pounds, you could repay that debt with the pennies, and they would have to accept it. So pennies are both a legal tender and a currency in that case.

You are incorrect: http://www.royalmint.com/aboutus/policies-and-guidelines/leg... Pennies are only legal tender for amounts not exceeding 20p edit: Also, as the link makes clear, you don't have to accept them even below 20p. All that legal tender means is: > that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender. It does not mean that any ordinary transaction has to take plac…

I did not realize there was a limitation on Pennies as legal tender. Good to know.

However, your second point agrees with what I was trying to say. The fact that a business does not accept change below a certain amount has nothing to do with whether a denomination is legal tender or not. Legal tender only has to do with cancelling out or paying debts.

From the child post: >>Yup, one of the common misconceptions about money. There's also no legal requirement to give change.

This also has nothing to do with whether a coin/denomination is legal tender or not.

Re: Buffett: Bitcoin not a currency [video]

#63

Post by jljljl » Fri, Mar 07, 2014, 11:49 PM UTC

acd wrote: post #34

Buffet owns a large stake in Goldman Sachs. Goldman Sachs is one of the big banks who benefit from the current system with the central bank FED. Goldman Sachs is a part owner of the FED who centrally plans the price of new money the interest rate. FED is a private institution owned by the regional federal reserves, the regional federal reserves is in turn owned by the private banks. Thus the old system fear Bitcoin b…

Is there anything about Bitcoin that prevents the existence of fractional reserve?

Because otherwise, it's entirely possible for banks to "create debt/credit money through thin air"

Re: Buffett: Bitcoin not a currency [video]

#64

Post by dragonwriter » Sat, Mar 08, 2014, 12:00 AM UTC

jljljl wrote: post #63

acd wrote: post #34

Buffet owns a large stake in Goldman Sachs. Goldman Sachs is one of the big banks who benefit from the current system with the central bank FED. Goldman Sachs is a part owner of the FED who centrally plans the price of new money the interest rate. FED is a private institution owned by the regional federal reserves, the regional federal reserves is in turn owned by the private banks. Thus the old system fear Bitcoin b…

Is there anything about Bitcoin that prevents the existence of fractional reserve? Because otherwise, it's entirely possible for banks to "create debt/credit money through thin air"

> Is there anything about Bitcoin that prevents the existence of fractional reserve?

Fractional reserve itself is not impossible (a bank offering BTC denominated accounts could lend out some of the BTC and not retain enough on hand to cover all deposits.)

But because of the supply characteristics of bitcoin, you'd probably have to charge depositors to store money rather than giving them low-to-zero interest, and give loans at zero-to-low interest compared to typical major fiat currency rates for otherwise similar loans, and then why would depositors pay to store with you rather than keep coins in their own wallet?

So, fractional reserve is possible, but it may be tricky to make a viable business model out of it.

Re: Buffett: Bitcoin not a currency [video]

#65

Post by penguindev » Sat, Mar 08, 2014, 12:31 AM UTC

dragonwriter wrote: post #64

jljljl wrote: post #63

Earlier quoted context omitted.

Is there anything about Bitcoin that prevents the existence of fractional reserve? Because otherwise, it's entirely possible for banks to "create debt/credit money through thin air"

> Is there anything about Bitcoin that prevents the existence of fractional reserve? Fractional reserve itself is not impossible (a bank offering BTC denominated accounts could lend out some of the BTC and not retain enough on hand to cover all deposits.) But because of the supply characteristics of bitcoin, you'd probably have to charge depositors to store money rather than giving them low-to-zero interest, and give…

I hope we all realize that 'viable business models' in the world of finance requires merely that they last a few decades. Or at least until the oldest people forgot about the last scam / debt bust / ponzi scheme/ bailout / depression...

Secondly, assuming you're taking on risk, there's no reason at all you wouldn't be paid a fair amount of interest. I believe under the gold standard, government debt had a small but positive rate of interest, and other debt (and equity securities) were riskier and had a higher premium. (Graham and Dodd's Security Analysis)

But I agree that if you are just trying to save money without any risk, like people in the old days who just saved gold coins or paid off their mortgage, that's different and should not earn a lot or any interest. And trust banks at your peril.

Re: Buffett: Bitcoin not a currency [video]

#66

Post by tfinniga » Fri, Mar 21, 2014, 1:52 PM UTC

chii wrote: post #46

tfinniga wrote: post #22

Earlier quoted context omitted.

Whether it's a currency is a separate discussion from whether it has value. Currencies have value based on the stability of the government, how many goods are priced in that currency, the GDP and trade balance of the country, etc. I'd guess that Buffet is confident in his ability to measure the value of a currency. Bitcoin is not a currency. I'd bet that Buffet doesn't feel confident about measuring the value of bitc…

I think you may have gotten it the other way around - Buffet doesn't feel confident about measuring/guestimating the value of bitcoins, and so he doesn't consider it a currency. A while ago, i read that Buffet's investment strategy is to find companies/stock that is undervalued, and buy it. That means his mindset is that any investment must be made by first making value judgements. In the case of bitcoins, he must be…

I think we mostly agree.

Bitcoin is not bullion. Bitcoin is not bank notes. Bitcoin is not fiat currency. Bitcoin is something new.

In this case, when Buffett said that bitcoin is not currency, I think he specifically meant that bitcoin is not fiat currency, or any other type of currency where the method of measuring value is well understood.

The main idea behind value investing, as far as I can tell, is to buy things that are being sold for much less than their intrinsic value. If you can't determine the intrinsic value, then on what basis would you invest?

Not that bitcoin doesn't have value - it's just that for someone that practices value investing like Buffett, there's not enough information to decide to invest.