
Greenspan Says Bitcoin a Bubble Without Intrinsic Currency Value - diogenescynic
http://www.bloomberg.com/news/2013-12-04/greenspan-says-bitcoin-a-bubble-without-intrinsic-currency-value.html
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clarkevans
Who is Greenspan? Oh right, the fella who advocated for 1999 banking
deregulation [1] and 2001/2003 tax cuts that encouraged a historic boom (and
subsequent bust) -- cleverly calling the direct consequences of his own
policies "Irrational Exuberance".

[1]
[http://www.federalreserve.gov/boarddocs/speeches/1999/199911...](http://www.federalreserve.gov/boarddocs/speeches/1999/19991115.htm)

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tptacek
On the one hand, your snarky dismissal. On the other, the second-longest-
serving former chairman of the Federal Reserve, appointed and reappointed by 4
different Presidents.

Best part: your dismissal dings him for _not calling earlier bubbles_ , in a
story where he calls a bubble.

Also, for what it's worth, "Irrational exuberance" wasn't a Greenspan policy;
it was itself an allusion to stock market activity being bubble-like.

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panarky
Greenspan's policies consisted of easy money, dismantling regulation, and
trusting big banks to regulate themselves.

Those policies failed miserably. Greenspan cleverly called the consequences of
his policies 'irrational exuberance', and then failed to take action to rein
in these consequences.

The crisis that resulted from Greenspan's incorrect analysis and bad judgement
rivaled the Great Depression in its severity and longevity.

Greenspan's credibility is nil, so why should we listen to what he says about
Bitcoin?

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tptacek
I might even agree with you that Greenspan's credibility _as a shepherd of the
entire US economy_ is nil. But the inadequacy of that conclusion to the actual
argument at hand is obvious.

Short answer: because he knows much more about economics than we do.

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ugk
I wouldn't be so sure. The Fed is the root cause of almost all the bubbles
we've seen in US markets. As for Bitcoin he might be right, but I want to hear
his opinions on economics about as much as I want to hear Obama's opinions on
drone strikes.

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ep103
1.1) A alternative to Paypal

1.2) An alternative to Square / Venmo

1.3) An alternative to Level Up

1.4) A method of cheaply moving money between currencies without going through
a financial institution.

1.5) An alternative to buying Gold

1.6) A way for libertarians / alternative currency advocates / people who are
angry at wall street / The Fed to opt out of fiat currency, and lets remember,
these are large movements with very little other outlets for popular
expression.

1.7) Provide non-reversible transactions

1.8) Provide transactions that do not require trust on the part of either
individual.

1.9) Provide transactions that do not require any financial institutions.

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thetruthhurts
That's the ideology of Bitcoin, the reality is that the majority of people are
NOT using it for any of those things. It's still just a pyramid scheme after
all these years because of the friction and time it takes to exchange USD for
Bitcoins and back. The price changes so often you'd have to update your prices
constantly, and with the constantly rising price of bitcoin, people earn money
by keeping the currency and NOT using it.

Bitcoin encourages people to KEEP their bitcoins. Why use them to buy
something when next month they're going to increase in value.

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dragonwriter
> Bitcoin encourages people to KEEP their bitcoins.

Particularly, so long as it is preceived to be likely to increase rapidly in
value, it encourages them to use bitcoin as an investment vehicle rather than
investing bitcoins in other things.

Obviously, if you want to consume things, you need to liquidate some assets to
consume them, and if you've tied up your assets in bitcoin, you'll spend them
for consumption.

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icegreentea
The reactions always jerk too far to either side.

Currency clearly derives it value from a variety of sources, all stemming from
beliefs held by people. Bitcoin as it stands right now derives the majority of
its value from people holding that belief that its value will continue to rise
- that is it is driven heavily by speculation.

Most countries will jealously guard their currencies in foreign exchange
markets specifically to reduce the effect of speculation on the value of their
currency because they want their currency not to act as a method for people to
get rich, but to facilitate economic activity within their own country. You
can obviously see why speculation driven volatility (or this freakish
deflation that Bitcoin has right now) can be bad for actually using the
currency as a medium of exchange. This is especially true since most services
that accept Bitcoin right now still interface heavily with other currency to
deal with their suppliers and such.

It's obviously knee-jerk to say that Bitcoin has no intrinsic value.
Currencies do not require intrinsic value beyond people being fairly certain
that other people will accept the currency as payment. This is why American
dollars, gold, copper, bullets, alcohol, and seashells can all be used as
effective currency given the right situation.

The flip side is that it should also be obvious that the current value of
Bitcoin is pretty much divorced from its value as a medium of exchange as its
clearly fueled by speculation right now. When people stop believing that they
can buy 1 BTC now and sell a few days later for 20% increase of US dollars,
and start believing that they can buy 1 BTC now and that they can hang on to
it for a few days or a few years and that it'll be roughly equally useful over
that time-frame, that will be when the "value" of Bitcoin is set.

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deftnerd
The belief that the value will rise is only a minor part of my interest and
investment in Bitcoin. My primary reason is a belief in the increase of its
abilities and usefulness. Having programmable money opens a whole bunch of
possible opportunities that haven't even been conceived yet. At the very
least, it offers opportunities to disrupt the business practices of a lot of
notaries, title companies, gambling operators, wire transfer companies,
transparent systems for non-profit finances, etc.

The concept of an open distributed ledger that doesn't require you to trust
the parties you are dealing with is exciting.

Simply put, I think its the future of monetary transfer. Perhaps not a good
system to replace daily transactions, but certainly a good system for bulk
transactions and to build a whole new generation of finance.

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D9u
I'd say that the US Dollar also has "no intrinsic value." Should the military
might which props up the USD suddenly be mitigated, and the world then decided
to abandon trading in USD, then the true "intrinsic value" of that US Dollar
will be realized.

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adamnemecek
Partial reactionary says something partial and reactionary, more news at 11.

~~~
waqf
Funny, my reaction was more along the lines of "Stephen Hawking says sky is
blue".

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dnautics
I have limited respect for Stephen Hawking; Greenspan is no Stephen Hawking.

~~~
waqf
Right, but nobody has heard of the physicists who command only as much respect
as Greenspan.

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powertower
> There is no fundamental issue of capabilities of repaying it in anything
> which is universally acceptable, which is either intrinsic value of the
> currency or _the credit or trust of the individual who is issuing the money_
> , whether it's a government or an individual.

I wonder how many people skip right over this in the article thinking that's
just another pointless or no-substance sentence.

It pretty much sums up everything that makes Bitcoin unsutable for any type of
real world (at scale) transactions and trade.

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chj
The value in Bitcoin is the network and the people joining in. Try to start
another bitcoin-like network, you will know it is not easy to set up an
alternative.

I do think Bitcoin has a deflation problem that coin holders has no incentive
to spend. And if the transaction volume goes up in future, the rewards for
those new nodes may not be able to justify the cost unless you have a way to
"rob" those early holders, or to force them spend before they die.

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hosh
What is "intrinsic value"?

Do our current, non-digital currency have such "intrinsic value?"

Seems to me, all value for all currencies are extrinsic.

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bachback
The guy who was wrong about EVERYTHING makes another prediction. what else is
new?

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rhizome
Or he did it on purpose and is now lying about being mistaken.

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nbody
Decentralized digital trust is pretty valuable, that is one of the ways to see
bitcoin and its use as such is starting to become apparent even if we haven't
really scratched the surface yet.

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ye
Whenever somebody brings up the intrinsic value of bitcoin vs something else,
like gold, I ask them - what's the intrinsic value of gold, give me a dollar
figure. It's like seeing deer in the headlights, they never thought of that,
they just keep repeating that talking point.

Bitcoin's value is not in its growing price (it's nice, I admit), but in the
fact that it solves many monetary problems - nearly free nearly instant
transfers, extremely secure, global acceptance, non-reversible, not
centralized. I admit it has its issues, but many will go away as it gains more
popularity and stabilizes.

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necubi
Gold has intrinsic value for applications like jewelry and electronics (it
being easily malleable and a very good conductor). There are many more here:
[http://en.wikipedia.org/wiki/Gold#Applications](http://en.wikipedia.org/wiki/Gold#Applications).
These uses don't explain the price of gold fully, but they (along with its
rarity) are the reason that gold has historically been considered valuable.

Bitcoin as an idea may have some sort of "value" (although it's a stretch to
compare it to a physical thing like gold), but that doesn't mean _this_
particular blockchain has value. There are only so many bits of metal in the
Earth's crust, but there are infinitely many possible cryptocurrencies.

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dnautics
gold has historically been valuable because due to relativistic contraction
you can easily assess its purity using a low-tech solution: a touchstone, and
therefore there is a trust model is built in. It's also portable, so could be
carried long distances over caravan.

Sound familiar?

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necubi
Please read my second paragraph. The bitcoin v. gold comparison is not really
valid.

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dnautics
I'm saying your first paragraph is not valid. If you're going to claim that
the ancients valued gold because it has intrinsic value as a heat reflector in
astronaut helmets or as a good conductor in electrical components, you're
crazy.

Specifically,

 _These uses ... are the reason that gold has historically been considered
valuable._

