Bitcoin, Krugman and the intriNsic value of money

2 gennaio 2014

Bitcoin, Krugman and the intriNsic value of money

Recently I read a NYT article about Bitcoin by Paul Krugman.

Krugman believes that Bitcoin is a great medium of exchange but not a medium of value conservation, thus satisfying just one of the two fundamental requisites of a currency.

Well, it is my belief that this is indeed the true surplus value – and a revolutionary one – of a currency, i.e. of not having an intrinsic value but instead working exclusively as a medium of exchange, as an instrument. Nothing is more practical, efficient and clear than Bitcoin.

Economists say that a currency that doesn’t loose value (thus causing inflation) brings deflation, that is a negative inflation, discouraging expense and demotivating consumers (what a pitiful word, ‘consumers’) from spending their money. In fact, in a deflationary system, people are temped to wait before spending money because time is going to lower prices. Thus by wating they will be able to buy the same object at a more convenient price.

Well, if you think about it, this is already happening with almost all of electronic goods. From years now, computers, tablets, smartphones are victims of deflation, and their value diminishes. So ask yourself why you buy them. Because you can’t wait to have the most up to date, astonishing electronic gadget. You could wait, it would be convenient, since the worste thing that could happen would be that in a few months you would be able to buy something with more functions at the same price.

You may have already understood my point by now: in this last sentence is implicit the value of a currency as BTC, which has no inflation, no intrinsic value and leaves all the value to the things it represents. A currency that doesn’t eat the value of the objects exchanged thanks to its use, but instead leaves their intrinsic value intact exalting their qualities. In this way we will buy an object now because it is well made and not beacuse in a year it will be more expensive. At the same time we won’t feel tempted to wait because buying the object now won’t change its value, since all the intrinsic value is inside the object itself, thanks to its good quality, its resistance, or whatever reason we are inclined to buy something and see added value in it.

[versione italiana]