

Buffett: Bitcoin not a currency [video] - frm1001xplrr
http://video.cnbc.com/gallery/?video=3000251666

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jeremysmyth
His argument (that articles priced in bitcoin change their priced based on the
value of a fiat currency such as USD) is valid as a qualitative judgement of
bitcoin's _utility_ as a currency, but isn't really a valid test of what is or
isn't a currency.

Case in point: The Zimbabwean dollar remained a currency through its
hyperinflation period, and is still considered a currency (however useless)
even though it is no longer the official currency of Zimbabwe. Now that
Zimbabwe officially accepts relatively stable foreign currencies, prices of
goods have stabilised in that country.

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mnw21cam
Bitcoin isn't _legal tender_ anywhere. One could argue that a currency is
something which is legal tender somewhere in the world.

~~~
nly
If I had 30 million British pennies it wouldn't be legal tender, because
nobody is required to accept that volume by law. Does that mean my 30 million
pennies aren't currency?

~~~
jljljl
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.

~~~
JetSetWilly
You are incorrect: [http://www.royalmint.com/aboutus/policies-and-
guidelines/leg...](http://www.royalmint.com/aboutus/policies-and-
guidelines/legal-tender-guidelines)

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 place in legal tender or only within the amount denominated by the
> legislation

~~~
jljljl
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.

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ck2
I cannot see it because it is flash only but is this from the same interview
where they only ask him about bitcoin at the end for like 3 sentences?

Oh here it was, page 24

[https://docs.google.com/gview?url=http://fm.cnbc.com/applica...](https://docs.google.com/gview?url=http://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2014/03/03/2014-03-03+Ask+WarrenBuffett+complete+transcript.pdf#:t.page.23)

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doyoulikeworms
Yup, this video is a subset of that interview. Thanks for the transcript, by
the way.

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ck2
Would have posted it but for some reason HN has taken away my posting
privileges.

All my links are auto-dead now. I can only comment :-(

~~~
TeMPOraL
Your last submissions were about Ukraine and the current situation there;
maybe some mod got trigger happy with banning "mainstream news" posts?

:(

~~~
ck2
Possibly.

But they seem to allow military A10 and F15 posts, no problem.

Now they suddenly just made it so I can only reply in comments like once an
hour, I had to wait a long time to reply to this.

 _You 're submitting too fast. Please slow down. Thanks._

This is someone's cowardly way of bullying me off HN, or a big bug - I suspect
the former.

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vilda
Just after the first world word, cigarettes were used as currency in Germany.
Currency is simply anything that is accepted as a medium of exchange. That's
all what makes currency a currency - doesn't matter if someone doesn't like
even for (supposedly) good reasons. :)

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Cless
Bitcoin isn't a currency by most textbook definitions. As Bitcoin is now, it
will never replace fiat currencies because it is not a stable store of value
(among other reasons). For now, Bitcoin is just another way to send fiat and
something of an investment.

So Bitcoin fanatics who believe Bitcoin will replace fiat are wrong - unless
they're willing to accept major changes to the system that go against their
usual beliefs. (And even then, I doubt many governments would sit idly by, for
good reason.) But for practical people who don't want to deal with buyer
fraud, exorbitant fees, and lack-of-privacy, Bitcoin is great.

Buffett may be a killjoy and trying to preserve the current system which tends
to benefit the wealthy and well-connected. I'd guess he probably has a lot of
stake in that. But he is correct for now.

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boon
The concept of a cryptocurrency subsumes traditional currency. You cannot just
say, "bitcoin is not a currency". Well of course it isn't! It's an entirely
different animal.

It would be like saying the Internet is not a phone system.

~~~
tfinniga
I think the main thing is that he's unsure what the value of bitcoin is. The
value of a currency is pretty well understood at this point.

There is still a lot of uncertainty in assessing the value of bitcoin. Is it
more like bullion? Currency? Tulip bulbs? The answer is like you said, it's
something new, but it's not clear yet how to properly value that. If you don't
fully understand where the value comes from, then it's safest to not invest.

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iambateman
When I was a kid on the beach, my cousin and I played a game. He collected wet
sand and I collected dry sand. We were building separate castles (true story)
and we exchanged our sand by trading shells.

In that moment, shells were a currency. It doesn't matter that no adults on
the beach would accept the shells as payment for their Coke or that shells
aren't legally endorsed by a government.

If we played this game today, we would have our phones out and trade our wares
in bitcoin and it too would be a currency. Whether or not it's a good or
reliable or sustainable currency is a totally different matter.

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tim333
Obviously it depends how you define 'currency'. Dictionary.com has at it's
first meaning "something that is used as a medium of exchange" as it's first
definition, for which bitcoin qualifies. From that point of view it is in some
ways better than USD as there is less friction for international transfers.

In other ways it's different - most currencies are backed and regulated by
governments. Though things like cigarettes have been used as currency in
prisons. I guess the test is whether you can go buy stuff with the thing in
which case bitcoin qualifies while gold does not.

The question of what units you use to price future transactions is interesting
and more what Buffett is talking about. Like if I'm going to offer to sell you
some oil next month I'll probably price it in $usd as that's conventional, and
almost certainly not in bitcoin as who knows what it'll be worth in a months
time. You could argue though that we could do with some other unit to price
contracts, say something like average annual US wage divided by something,
that would not be change value much with inflation in the way that fiat
currencies do, so you could use it for say pension payments and say in 50
years we'll pay 0.5 average wages or some such which is kind of what you want
rather than saying us$40k - who knows what that will buy in 50 years.

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terranstyler
Buffet IMO gets way too much credit for what he achieved.

AFAIK his holdings in 2008 got bailed out, saving his financial empire from
destruction.

Frankly, I don't care what Buffet or Soros say and I don't see how they could
have earned the money if not with corruption, insider trading, you name it ...

Very unlike start-up founders where you exactly know why they got the money...

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Tloewald
Buffett did not get bailed out. He was a small part of the effort to prevent a
financial collapse.

Buffett is a long term investor. Soros is a currency speculator who sometimes
manipulates markets to his own advantage. Could not be more different in terms
of their methods. That said Soros has repeatedly proposed simple legal changes
to put him and his kind out of business, but while it's legal and profitable
to do what he does, he does it.

~~~
chii
I have respect for people who can find the "loopholes" in the system, exploit
it, but also work to close it. This is a process in which a selfish individual
can slowly improve the overall system, while not having to behave
altruistically.

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hawkharris
Buffet is famous for having strong convictions as an investor. He refuses to
invest in any business, industry or technology if he doesn't understand how it
works.

Though his point about Bitcoin may be valid, we should take it with a grain of
salt. Buffet is often predisposed to be standoff-ish about emerging (digital)
technology.

~~~
maratd
> Though his point about Bitcoin may be valid, we should take it with a grain
> of salt.

Why? His point _is_ valid. Just because something is digital doesn't make it
magical and certainly doesn't make it a good idea.

For all intents and purposes, the dollar has been digital for a while.
Certainly, there is the analog equivalent and certainly it is centralized, but
it's definitely digital.

I want a pure decentralized digital currency as much as the next guy, but
bitcoin is definitely not there yet.

~~~
chii
> a pure decentralized digital currency as much as the next guy, but bitcoin
> is definitely not there yet

i would say bitcoin is the closest contender yet, compared to all prior art in
digital currency.

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sanderjd
A side note: I opened this in a tab along with a number of other things. By
the time I got to it, it was some Jim Cramer thing and there were about 30
other things in my history, and I had to come back here to find the original
link again. _Terrible_ usability for a news site.

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NateDad
Who cares if it's not a currency or store of value or whatever other economics
101 term? Could it be gone in 10-20 years? Sure. But I doubt it. And if it is,
it's because something similar but somehow vastly better comes along (anything
only slightly better cannot hope to compete with Bitcoin's network effect and
name recognition).

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cLeEOGPw
His definition of currency is nonsensical. He gave a valid point, but it has
little to do whether a unit is a currency or not. Wasn't he the one who
initially called bitcoin "rat's poison"? Wonder who he referred to as "rat"
that the bitcoin is poisoning.

~~~
Cless
That was Charlie Munger, but Bitcoin fans tried to pin it on Buffett too,
because he is a billionaire and happened to be in the same room as Munger at
the time.

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Cless
Just wondering: why do people here keep spelling his name 'Buffet' rather than
'Buffett'? Is it some form of veiled insult?

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kaa2102
Money is a store of value, a medium of exchange, and a unit of account.
Currency is money that is created and backed by the faith and credit of a
Government. Central banks control the money supply with the aim of controlling
inflation and/or maximizing employment. Bitcoins supply is fixed making it
deflationary. Bitcoins function more like a commodity than a currency.

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acd
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 because with Bitcoin you do not need the
banks. With Bitcoin the banks cannot create new debt/credit money through thin
air so the banks do not have a special privilege in that system. The banks
took Satoshi Nakamotos family home via foreclose and then he created Bitcoin,
score settled.

[http://mag.newsweek.com/2014/03/14/bitcoin-satoshi-
nakamoto....](http://mag.newsweek.com/2014/03/14/bitcoin-satoshi-
nakamoto.html)

But I would agree Bitcoin is not a currency Bitcoin it is a new economic
system where alternative crypto currencies compete with the Central banks FIAT
money. Bitcoin also competes with credit cards and payment providers such as
Paypal and money wire transfers Credit Union.

~~~
jljljl
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"

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dragonwriter
> 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.

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penguindev
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.

