Where the value of money comes from
October 29, 2015 § 29 Comments
 But Jesus knowing their wickedness, said: Why do you tempt me, ye hypocrites?  Shew me the coin of the tribute. And they offered him a penny. And Jesus saith to them: Whose image and inscription is this?
 They say to him: Caesar’ s. Then he saith to them: Render therefore to Caesar the things that are Caesar’ s; and to God, the things that are God’ s.
All paper or electronic currencies (other than bitcoin and the like) have intrinsic value, because they are all options which entitle the bearer/owner to something else – something other than the currency itself – which is (that something else) of value. Fiat currency entitles the bearer to settlement of tax liabilities. Bank deposits entitle the owner to on-demand access to fiat currency, backed by the balance sheet of the bank. Gold-backed sovereign currency entitles the bearer to settlement of tax liabilities and, at least notionally, a quantity of gold. Stock (often used as currency) entitles the owner to profits from a business and liquidation value of any excess over liabilities. Stock options entitle the owner to the purchase of stock at a particular price. Etc, etc.
Bitcoins entitle the owner to nothing at all. Their ‘value’ actually is purely conventional, based on the deluded notions that people trading in them have about money. They have approximately the same intrinsic value as a photograph of someone doing something stupid.
Note: I am sure there are old posts here, which I leave in place for the record, where I accepted the fairly conventional view that money is ‘nothing in itself’: that it was simply based on a vaporous ‘full faith and credit, so use it dammit’ assertion by the sovereign. I was never especially comfortable with that view, and in recent years I’ve come to better understand why.