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Posted on 4/12/13 at 5:44 pm to WikiTiger
FWIW, just to do some back-of-the-envelope calculations with respect to price, according to Wikipedia, about 171,300 metric tons (~5.5 billion troy ounces, at 32150 oz/ton) of gold have been mined in human history, with about 2500 metric tons (~80.4 million troy oz., or ~1.5% of the historical total) being extracted per year in recent years.
Only about 40% of gold is used for investment purposes, but assuming easy convertibility of other gold for investment purposes, the total amount of gold wealth in the world is at about $1600 x 5.5 billion = $9 trillion.
So if bitcoins were to achieve the same level of currency demand as gold bullion, given a supply of 21 million, that would work out to about $400,000 per bitcoin.
I don't think bitcoins will ever achieve the same level of demand that gold does (and I also think that gold price is currently somewhere between 2-3 times more expensive than where it usually is in historical terms), but it's an interesting comparison to make just to show how arbitrary the demand for a non-legal-tender currency can be.
One of the problems with bitcoin value is that it will necessarily fluctuate up and down relative to the amount of government financial repression out there, and is not tied down to any intrinsic worth with redemption value or legal tender status. Thus, it's use for storing wealth will probably never be very good. It's value for clandestinely transporting wealth, however, is what makes it interesting.
Only about 40% of gold is used for investment purposes, but assuming easy convertibility of other gold for investment purposes, the total amount of gold wealth in the world is at about $1600 x 5.5 billion = $9 trillion.
So if bitcoins were to achieve the same level of currency demand as gold bullion, given a supply of 21 million, that would work out to about $400,000 per bitcoin.
I don't think bitcoins will ever achieve the same level of demand that gold does (and I also think that gold price is currently somewhere between 2-3 times more expensive than where it usually is in historical terms), but it's an interesting comparison to make just to show how arbitrary the demand for a non-legal-tender currency can be.
One of the problems with bitcoin value is that it will necessarily fluctuate up and down relative to the amount of government financial repression out there, and is not tied down to any intrinsic worth with redemption value or legal tender status. Thus, it's use for storing wealth will probably never be very good. It's value for clandestinely transporting wealth, however, is what makes it interesting.
Posted on 4/12/13 at 5:57 pm to Doc Fenton
What also makes this particularly interesting to me is that it could stand as a model for how a government might control supply of a future legal tender currency.
This is where we get into all the theoretical talk about the proper course of monetary policy, the "Taylor Rule," the classical monetarist policy recommendations of Milton Friedman on the proper growth rate for a currency (even though he was not in favor of having a central bank), etc.
In a sense, that gets back to the point that Felix guy was making in the original post. If I were to start a country and create a monetary system from scratch, I think having some bitcoin-like system where the currency automatically increased at a rate near the economic growth level would be a good idea. I would certainly prefer this to having money created by a central bank via reserve ratio and interest rate policy decisions.
Just random stuff to think about I guess...
This is where we get into all the theoretical talk about the proper course of monetary policy, the "Taylor Rule," the classical monetarist policy recommendations of Milton Friedman on the proper growth rate for a currency (even though he was not in favor of having a central bank), etc.
In a sense, that gets back to the point that Felix guy was making in the original post. If I were to start a country and create a monetary system from scratch, I think having some bitcoin-like system where the currency automatically increased at a rate near the economic growth level would be a good idea. I would certainly prefer this to having money created by a central bank via reserve ratio and interest rate policy decisions.
Just random stuff to think about I guess...
Posted on 4/12/13 at 5:57 pm to Doc Fenton
quote:
An economy might run into inefficiencies if its supply of currency gets too small, particularly its legal tender currency. For an individual currency itself that is just one of many within the wider economy, however, a stable supply is actually beneficial to its value. This is why American colonists loved the thaler and the Spanish pieces of eight so much.
By Gresham's Law, the stable currency will tend to be more for storage and transport, while currencies with higher supply growth rates will tend to be stored only sparingly and used more frequently for common transactions, but this does not make one currency more "successful" than the other. It simply means that the currencies tend to be utilized in different ways.
Solid post.
Posted on 4/12/13 at 6:03 pm to joshnorris14
How are your 1.03 bitcoins doing?
Posted on 4/12/13 at 6:04 pm to Vols&Shaft83
Solid, thanks for asking.
Posted on 4/12/13 at 6:14 pm to joshnorris14
quote:
Solid, thanks for asking.
Cool, I want in. I'll trade you a front row seat to the Rich Dad Academy Real Estate Training Seminar for 1 Bitcoin, what do you say?
This post was edited on 4/12/13 at 6:15 pm
Posted on 4/12/13 at 7:09 pm to Vols&Shaft83
I wonder when Paul Krugman is going to weigh in on bitcoins? He can hypothesize about a single bitcoin being worth $1 trillion and the Satoshis worth $10,000 and further fractional units worth lesser amounts. All the U.S. government needs to do is buy a few hundred bitcoins and hold them until they are worth $1 trillion each, and we can pay off our national debt. Meanwhile Congress can deficit spend to its heart's content.
Posted on 4/12/13 at 7:13 pm to Poodlebrain
quote:
I wonder when Paul Krugman is going to weigh in on bitcoins?
from September 2011: Golden Cyberfetters
from today: Adam Smith Hates Bitcoin
Posted on 4/12/13 at 7:15 pm to WikiTiger
quote:
from today: Adam Smith Hates Bitcoin
by the way, Krugman shows his ignorance by calling out the process of "mining" without even understanding it.
quote:
And now here we are in a world of high information technology — and people think it’s smart, nay cutting-edge, to create a sort of virtual currency whose creation requires wasting real resources
Ummm, hello Krugman, go do some research...."mining" is the process that secures the network. It serves a vital purpose. But hey, he's no different that you morons on this site: making all kinds of claims, arguments and prognostications without actually understanding what you are talking about
This post was edited on 4/12/13 at 7:20 pm
Posted on 4/12/13 at 7:16 pm to WikiTiger
quote:
Adam Smith Hates Bitcoin
He also hated stupidity, I see a pattern.
Posted on 4/12/13 at 7:21 pm to joshnorris14
quote:
Solid, thanks for asking.
As solid as the shares of Wells Fargo and JP Morgan Chase Bank which I bought & sold today to make a little over $1,300???
Posted on 4/12/13 at 7:24 pm to WikiTiger
quote:
he's no different that you morons
Now, now wiki. Take a deep breath and exhale slowly.....
PS- BTW, it's "than" you morons, not "that."
Moron.
Posted on 4/12/13 at 7:26 pm to LSURussian
quote:
As solid as the shares of Wells Fargo and JP Morgan Chase Bank which I bought & sold today to make a little over $1,300???
Yes
Feel free to send me some bitcoin with those profits
1DPkEFW9W5DcPN7w4ExAsD4mDD9pQFiAzf
Posted on 4/12/13 at 7:28 pm to joshnorris14
They are on their way.....
On second thought, GFY. I'm not yo' momma.....
On second thought, GFY. I'm not yo' momma.....
This post was edited on 4/12/13 at 7:38 pm
Posted on 4/12/13 at 7:36 pm to LSURussian
quote:
They are on their way....
Hey Russian,
next time. send him my azcoins. They are just as safe as bitcoins. Just send the cash to me, and I will send him a long stream of numbers...
Posted on 4/12/13 at 7:37 pm to lsu_tiger_az
quote:
next time. send him my azcoins. They are just as safe as bitcoins. Just send the cash to me, and I will send him a long stream of numbers...
it's so funny to watch you old people squirm as you don't understand new technologies. i hope i never get like that
Posted on 4/12/13 at 7:39 pm to lsu_tiger_az
quote:
send him my azcoins
Are those pronounced "arse-coins"?
Posted on 4/12/13 at 7:41 pm to WikiTiger
Wiki Mad Brah? Yeah Wiki Mad
Posted on 4/12/13 at 7:42 pm to WikiTiger
quote:
it's so funny to watch you old people squirm as you don't understand new technologies
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