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Bitcoin is Venice: Difference between revisions
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Farrington and Taleb do not see eye to eye: Farrington has published an excellent takedown | Farrington and Taleb do not see eye to eye: Farrington has published an excellent takedown | ||
===On debt and assets=== | |||
{{Quote|“Since bitcoin is a digital bearer asset and not a debt instrument —”}} | |||
This is where I v think I part fondant company with Farrington, though we may agree to disagree. | |||
Perhaps this is the nocoiner’s fundamental misapprehension. Bitcoin isn’t even ''meant'' to be a currency. If it isn’t, then criticisms that it isn't very good at the sort of things currencies are meant to do fake on deaf ears. ''So what?'' | |||
Farrington correctly sees a fiat currency as necessarily an instrument representing indebtedness. A person who holds it has a promise for value from someone else. It is, on this view, not an asset, but an ''anti-asset'': something that is no good in and of itself, but which you can only generate value with ''when you give it away''. | |||
There is an important distinction here between ''holding'' currency and ''putting it in the bank''. When, and while, you hold it, for all intents and purposes money is not there. It is meaningless. Worthless. Valueless. (If you are robbed it only creates a (negative) value when it is taken away. Holding currency in person is taking actual capital off the table; withdrawing it from the market. Since capital’s value is a function of time, you would expect a capital instrument you have disengaged from the capital market to waste away, and so it does. Cash in your wallet attracts no interest, so relatively to the value of any particular thing, it depreciates over time. That is the consequence of inflation. | |||
Cash you put in the bank ''is'' invested. With the bank. The bank paid you interest — usually not much — but it pays you a return for your investment in its capital. It must sit on some of the cash its customers give it, but that capital reserve, too, will waste away. The rest it will punt out to its borrowers. It's bankers will find creative ways of punting out as much as humanly possible, to increase shareholder return. This is the band leverage ratio. | |||
But let's not get distracted. That cash flies around the system. Depreciating as it does it is a hot potato — | |||