CryptoCurrencies?

[TomAiello]

Hey Tom didn't gold used to have a lot of uses in the Dental trade in recent years? I'm fairly certain it is still used in dentistry to some degree because I often see people with some type of gold dental fixture in their mouth. I've also heard that gold has a few specialized electronic uses.

Gold certainly has real industrial uses. But _nowhere_ near enough to command the kind of prices it commands on the market. It's our (almost worldwide) common belief that 'gold is valuable' that sets its high price.

[The Meat man]

Hey Tom didn't gold used to have a lot of uses in the Dental trade in recent years? I'm fairly certain it is still used in dentistry to some degree because I often see people with some type of gold dental fixture in their mouth. I've also heard that gold has a few specialized electronic uses.

Gold certainly has real industrial uses. But _nowhere_ near enough to command the kind of prices it commands on the market. It's our (almost worldwide) common belief that 'gold is valuable' that sets its high price.

It is valuable, in part because it's rare and hard to obtain, and it essentially lasts forever. Gold has always been valued throughout human history.

[TomAiello]

Cash does have value. Anyone who disagrees is welcome to forward all of their "worthless" federal reserve notes to my address. :p :D

Cash may not have intrinsic value like precious metals but that doesn't mean it has no value at all.

Cash has exactly as much value as we give it. What makes it valuable is that we (almost) all universally agree that it is valuable, and that we will use it as a denomination of value for trade purposes.

There are two underlying reasons that the US dollar (or any other fiat currency) has value, aside from widespread acceptance by the general public:

1) Legal Tender Laws. Law requires that US dollars be accepted for 'all debts public and private.' In other words, if you don't accept that it has value, you can be fined or imprisoned. These laws have been largely unnecessary for a century or more, though, because almost everyone generally accepted fiat money quite a long time ago.

2) Acceptance for tax payments. Because our 'dollars' are actually just re-denominated government debt, they are accepted by the government as cancellation of equal debts in taxes. Payments to the US government are the most common payment type in the world, so a currency accepted at face value for those payments is the default standard for an international reserve currency. This logic also applies (but less so) to the internal use of their own currencies by other nations.

[TomAiello]

It is valuable, in part because it's rare and hard to obtain, and it essentially lasts forever. Gold has always been valued throughout human history.

To quote every single investment prospectus ever; "Past performance is no guarantee of future returns."

Just because something has been widely accepted for a long time is no guarantee that it will continue to be so in the future.

I'm not contesting the value of holding some precious metals as part of a diversified strategy for managing financial risk today. I think it's very prudent to hold precious metals. I'm just not willing to bet on them holding value forever, because forever is a really long time, and things change pretty fast. Sixty years ago, it was generally accepted that stock in United Fruit was an excellent, stable, long term investment. Today, that reference is obscure enough that most people would have to Google it. In fifty years, that sentence may be obscure enough that people wonder what the heck Google was.

[Naperville]

Today, that reference is obscure enough that most people would have to Google it. In fifty years, that sentence may be obscure enough that people wonder what the heck Google was.

Let's hope!

These tech overloards (amazon, google, yahoo, facebook, microsoft, apple, ...) and their constant spying is garbage!!!

[JD Spydo]

Cash does have value. Anyone who disagrees is welcome to forward all of their "worthless" federal reserve notes to my address. :p :D

Cash may not have intrinsic value like precious metals but that doesn't mean it has no value at all.

I see your point and to a small degree I'll go along with what you're saying. But I think you've overlooked the point I've made about these Federal Reserve Notes having a contrived value instead of an intrinsic value. Oh sure at this present time you've got better than 90% of all the general public believing that cash has a true value and people have traded this fiat currency for decades now.

However when people finally do realize that we are trading with a virtual game board money like in a Monopoly game>> at that point they are going to see the real value and at that point the dollar will fall like a rock tossed down into the Grand Canyon. The economic party is still going for now but if this economy takes another major hit like it did this spring I think you'll see Federal Reserve Notes plummet like the German Deutsch Mark did after World War I. It took almost a wheelbarrow full of Deutsch Marks just to buy a loaf of bread. I hope I'm wrong but I see the FRNs going in the same direction unless the "Plunge Protection Team" pulls a rabbit out of their hat.

With all of that scenario looming over us it's going to make these cryptocurrencies look more and more attractive. But I hope you're right and I'm wrong. Because if I'm calling it right we got some dark times ahead and they could be here sooner than you think. I truly hope I'm wrong but I'm not seeing evidence to the contrary.

[Naperville]

I see your point and to a small degree I'll go along with what you're saying. But I think you've overlooked the point I've made about these Federal Reserve Notes having a contrived value instead of an intrinsic value. Oh sure at this present time you've got better than 90% of all the general public believing that cash has a true value and people have traded this fiat currency for decades now.

However when people finally do realize that we are trading with a virtual game board money like in a Monopoly game>> at that point they are going to see the real value and at that point the dollar will fall like a rock tossed down into the Grand Canyon.

It would simply be the refutation of America, and I don't think we are there. Too many still want to come here. We are still a military superpower. I do not think we are near going over the precipice. The USA has gained ground on the EU, Russia and China over the last 3yrs.

[TomAiello]

I see your point and to a small degree I'll go along with what you're saying. But I think you've overlooked the point I've made about these Federal Reserve Notes having a contrived value instead of an intrinsic value. Oh sure at this present time you've got better than 90% of all the general public believing that cash has a true value and people have traded this fiat currency for decades now.

However when people finally do realize that we are trading with a virtual game board money like in a Monopoly game>> at that point they are going to see the real value and at that point the dollar will fall like a rock tossed down into the Grand Canyon. The economic party is still going for now but if this economy takes another major hit like it did this spring I think you'll see Federal Reserve Notes plummet like the German Deutsch Mark did after World War I. It took almost a wheelbarrow full of Deutsch Marks just to buy a loaf of bread. I hope I'm wrong but I see the FRNs going in the same direction unless the "Plunge Protection Team" pulls a rabbit out of their hat.

With all of that scenario looming over us it's going to make these cryptocurrencies look more and more attractive. But I hope you're right and I'm wrong. Because if I'm calling it right we got some dark times ahead and they could be here sooner than you think. I truly hope I'm wrong but I'm not seeing evidence to the contrary.

I pretty much totally agree with you.

Fiat money is pretty much a downward spiral. The only way for fiat money to maintain it's value is for the economy that it's based on the expand faster than the inflation caused by it's expansion. There has yet to be a government in control of a fiat money that could contain it's overspending for a historically significant period of time, and ours is no exception.

I do hold physical precious metals as a hedge against inflation in the fiat money system. But I also hold securities (mostly low cost broad based index funds, mostly VTI/VTSAX and VT) and real estate. I even have a small amount of cryptocurrency in my overall asset allocation.

I expect that within my lifetime we will see a collapse of the US dollar. The only thing preventing that right now is that there is no better alternative--literally all available alternatives are worse.

Unfortunately, our debt based fiat money couples money supply to government borrowing. That's honestly insane. It's structurally impossible for the government to borrow in a crisis (like a war, or a pandemic) without saddling the money supply with inflation. Almost anyone with a smattering of economic knowledge could easily design a better basis for a monetary system. A gold standard (or silver standard, or even an iron standard or a uranium standard) would be superior to a fiat system. In my view, the best basis for a money system is probably equities--for example, shares of VTI would be a vastly superior basic monetary unit to the US dollar.

[JD Spydo]

I see your point and to a small degree I'll go along with what you're saying. But I think you've overlooked the point I've made about these Federal Reserve Notes having a contrived value instead of an intrinsic value. Oh sure at this present time you've got better than 90% of all the general public believing that cash has a true value and people have traded this fiat currency for decades now.

However when people finally do realize that we are trading with a virtual game board money like in a Monopoly game>> at that point they are going to see the real value and at that point the dollar will fall like a rock tossed down into the Grand Canyon. The economic party is still going for now but if this economy takes another major hit like it did this spring I think you'll see Federal Reserve Notes plummet like the German Deutsch Mark did after World War I. It took almost a wheelbarrow full of Deutsch Marks just to buy a loaf of bread. I hope I'm wrong but I see the FRNs going in the same direction unless the "Plunge Protection Team" pulls a rabbit out of their hat.

With all of that scenario looming over us it's going to make these cryptocurrencies look more and more attractive. But I hope you're right and I'm wrong. Because if I'm calling it right we got some dark times ahead and they could be here sooner than you think. I truly hope I'm wrong but I'm not seeing evidence to the contrary.

I pretty much totally agree with you.

I expect that within my lifetime we will see a collapse of the US dollar. The only thing preventing that right now is that there is no better alternative--literally all available alternatives are worse.

Tom this one point you just made about the possibility of a "currency collapse" I find most interesting>> and to a large degree really scary. For years one of my uncle's ( now deceased) used to tell me that a currency collapse ( crash) is far more dangerous than a stock market crash or real estate market crash.

Since my uncle told me that about 22 years ago I've made it a point to keep an eye on the U.S. Dollar along with other key major currencies.

After World War I the German Deutsch Mark lost virtually 90% of it's value and even more in certain cases. I heard that actually devastated the German people even more than the war did. I fear that if the USA goes through something similar that cryptocurrencies and/or precious metals might at least give you something to buy food with if nothing else. Correct me if you believe my thinking is wrong?

[TomAiello]

Correct me if you believe my thinking is wrong?

I think you're right.

I don't think we'll see a currency crash immediately, but I suppose anything is possible. With a 30% M2 injection and a contracting economy (both courtesy of SARS-COV2), we're looking at massive inflation in the intermediate term.

If you're looking for something to buy food with, you might consider small denomination US silver coins (like 1950's era quarters and half dollars), which are widely recognized and small enough in value for easy trading.

I expect any truly catastrophic dislocation to be relatively short term (because if it's longer term we're talking about general societal collapse, and then priorities are different), so you really only need enough capability to weather a few months (maximum probably a year) of instability. Laying in a good stock of staple foods and a small supply of trade-able silver coins isn't very expensive, and gives me peace of mind. Maybe I'm just being influenced by my Mormon neighbors (who hold a year worth of food in reserve as a matter of religious principle), but in my mind the cost is low and the peace of mind is high.

[VooDooChild]

If the country with the most powerful military ever, most productive economy ever, and most educated and well armed population ever, had a currency collapse.

I think the rest of the world should be a lot more worried than the citizens of that country.

[JD Spydo]

If the country with the most powerful military ever, most productive economy ever, and most educated and well armed population ever, had a currency collapse.

I think the rest of the world should be a lot more worried than the citizens of that country.

That's interesting. Because there is something to be said for a country like the USA to fall and you just know there would be a lot of effects on countries that trade with us and import/export with us. Oh for sure it would be a shot heard around the globe.

Remembering the stock market crash of 87 and the panic it caused around the globe. And that would be as insignificant as a kid's cap gun compared to how a currency crash would effect the entire globe. I doubt if many people living today could handle it like our grandparents and great grandparents did in the 1929 stock market crash. As a society we have really gotten soft I'm afraid.

I'm wondering if that were to happen if any cryptocurrency would maintain any value at all. I'm even wondering if precious metals would do anyone any good in that scenario :confused: ??

[The Deacon]

I fear that if the USA goes through something similar that cryptocurrencies and/or precious metals might at least give you something to buy food with if nothing else. Correct me if you believe my thinking is wrong?

Correct me if I'm wrong, but don't you need internet access, or at least cell phone access, to use cryptocurrency? If so, then it's not much use if the grid goes down. As for precious metals, be careful, there's apparently a lot of fake gold in China. :eek:

[TomAiello]

If the country with the most powerful military ever, most productive economy ever, and most educated and well armed population ever, had a currency collapse.

I think the rest of the world should be a lot more worried than the citizens of that country.

That could be said of the UK, circa 1900.

[TomAiello]

Correct me if I'm wrong, but don't you need internet access, or at least cell phone access, to use cryptocurrency?

Actually, you don't. It's possible to do it all manually (with paper and pencil). You can set up a series of small accounts and then just hand over the private keys (on paper) to someone else.

However, it's _a lot_ easier to do it with internet access, and all the paper and pencil transactions eventually do need to be uploaded. So you could still use crypto with a temporary (even months) loss of internet. But yes, it would certainly make it extremely inconvenient, which negates some of the major advantages.

I actually do not anticipate a currency collapse causing a loss of internet access, though. And a loss of internet access makes traditional banking (which represents about 90% of the US dollar economy/transactions) unavailable as well.

In the event of a loss of internet access, I think you'd be in a position of falling back to manually trading precious metals. And I know (because I bought some and had it tested) that there is a lot of fake gold on Ali Express (coming from Chinese retailers). Which brings us back to using vintage US silver coins.

[VooDooChild]

Correct me if I'm wrong, but don't you need internet access, or at least cell phone access, to use cryptocurrency?

Actually, you don't. It's possible to do it all manually (with paper and pencil). You can set up a series of small accounts and then just hand over the private keys (on paper) to someone else.

However, it's _a lot_ easier to do it with internet access, and all the paper and pencil transactions eventually do need to be uploaded. So you could still use crypto with a temporary (even months) loss of internet. But yes, it would certainly make it extremely inconvenient, which negates some of the major advantages.

I actually do not anticipate a currency collapse causing a loss of internet access, though. And a loss of internet access makes traditional banking (which represents about 90% of the US dollar economy/transactions) to be unavailable as well.

In the even of a loss of internet access, I think you'd be in a position of falling back to manually trading precious metals. And I know (because I bought some and had it tested) that there is a lot of fake gold on Ali Express (coming from Chinese retailers). Which brings us back to using vintage US silver coins.

If the people accepting the paper "keys" also dont have a way to quickly verify those keys then it doesnt work. Since everybody would just lie, and when its time to cash in you are s.o.l.

So someone accepting "payment" wouldnt allow this, it would just be a bunch of worthless IOUs.

[The Deacon]

Correct me if I'm wrong, but don't you need internet access, or at least cell phone access, to use cryptocurrency?

Actually, you don't. It's possible to do it all manually (with paper and pencil). You can set up a series of small accounts and then just hand over the private keys (on paper) to someone else.

If the people accepting the paper "keys" also dont have a way to quickly verify those keys then it doesnt work. Since everybody would just lie, and when its time to cash in you are s.o.l.

So someone accepting "payment" wouldnt allow this, it would just be a bunch of worthless IOUs.

That's exactly what I was thinking.

[TomAiello]

I was thinking of it more as a technical exercise, but fair point.

I don't actually think an internet failure is very likely though. A currency collapse is definitely something I'd rank as far more probable.

[JD Spydo]

I fear that if the USA goes through something similar that cryptocurrencies and/or precious metals might at least give you something to buy food with if nothing else. Correct me if you believe my thinking is wrong?

Correct me if I'm wrong, but don't you need internet access, or at least cell phone access, to use cryptocurrency? If so, then it's not much use if the grid goes down. As for precious metals, be careful, there's apparently a lot of fake gold in China. :eek:

I'm not much worried about a fake gold coin. I've handled so many of the popular one ounce gold coins over the years ( Krugerrands, Maple Leafs ect) that it would take a pretty well made fake to fool me at this point. I've never handled anything that has the feel of real gold>> gold has a "feel" to it unlike any other metal I've ever handled.. There is just something about the weight and mass and density of real gold that would be really difficult to counterfeit, fake or imitate.

I can't for the life of me see how they could "fake" or imitate real gold :confused: Unless someone who is inexperienced would deem it to be gold by appearance alone. Because nothing I've ever handled has the same properties that gold does.

[The Deacon]

I fear that if the USA goes through something similar that cryptocurrencies and/or precious metals might at least give you something to buy food with if nothing else. Correct me if you believe my thinking is wrong?

Correct me if I'm wrong, but don't you need internet access, or at least cell phone access, to use cryptocurrency? If so, then it's not much use if the grid goes down. As for precious metals, be careful, there's apparently a lot of fake gold in China. :eek:

I'm not much worried about a fake gold coin. I've handled so many of the popular one ounce gold coins over the years ( Krugerrands, Maple Leafs ect) that it would take a pretty well made fake to fool me at this point. I've never handled anything that has the feel of real gold>> gold has a "feel" to it unlike any other metal I've ever handled.. There is just something about the weight and mass and density of real gold that would be really difficult to counterfeit, fake or imitate.

I can't for the life of me see how they could "fake" or imitate real gold :confused: Unless someone who is inexperienced would deem it to be gold by appearance alone. Because nothing I've ever handled has the same properties that gold does.

Point taken, JD, However, your original post never specified gold coins and the fake gold in China I was referring to was gold bars, tons of them, used as collateral for bank loans there. I'd imagine a tungsten bar plated with, for example, 1/8" of gold might be a lot harder to spot that a fake Krugerrand.