from Hacker News

Buffett: Bitcoin not a currency [video]

by frm1001xplrr on 3/7/14, 11:18 AM with 60 comments

by jeremysmyth on 3/7/14, 12:10 PM
His argument (that articles priced in bitcoin change their priced based on the value of a fiat currency such as USD) is valid as a qualitative judgement of bitcoin's utility as a currency, but isn't really a valid test of what is or isn't a currency.
Case in point: The Zimbabwean dollar remained a currency through its hyperinflation period, and is still considered a currency (however useless) even though it is no longer the official currency of Zimbabwe. Now that Zimbabwe officially accepts relatively stable foreign currencies, prices of goods have stabilised in that country.
by ck2 on 3/7/14, 12:23 PM
I cannot see it because it is flash only but is this from the same interview where they only ask him about bitcoin at the end for like 3 sentences?
Oh here it was, page 24
https://docs.google.com/gview?url=http://fm.cnbc.com/applica...
by vilda on 3/7/14, 12:33 PM
Just after the first world word, cigarettes were used as currency in Germany. Currency is simply anything that is accepted as a medium of exchange. That's all what makes currency a currency - doesn't matter if someone doesn't like even for (supposedly) good reasons. :)
by Cless on 3/7/14, 2:30 PM
Bitcoin isn't a currency by most textbook definitions. As Bitcoin is now, it will never replace fiat currencies because it is not a stable store of value (among other reasons). For now, Bitcoin is just another way to send fiat and something of an investment.
So Bitcoin fanatics who believe Bitcoin will replace fiat are wrong - unless they're willing to accept major changes to the system that go against their usual beliefs. (And even then, I doubt many governments would sit idly by, for good reason.) But for practical people who don't want to deal with buyer fraud, exorbitant fees, and lack-of-privacy, Bitcoin is great.
Buffett may be a killjoy and trying to preserve the current system which tends to benefit the wealthy and well-connected. I'd guess he probably has a lot of stake in that. But he is correct for now.
by boon on 3/7/14, 1:27 PM
The concept of a cryptocurrency subsumes traditional currency. You cannot just say, "bitcoin is not a currency". Well of course it isn't! It's an entirely different animal.
It would be like saying the Internet is not a phone system.
by iambateman on 3/7/14, 3:04 PM
When I was a kid on the beach, my cousin and I played a game. He collected wet sand and I collected dry sand. We were building separate castles (true story) and we exchanged our sand by trading shells.
In that moment, shells were a currency. It doesn't matter that no adults on the beach would accept the shells as payment for their Coke or that shells aren't legally endorsed by a government.
If we played this game today, we would have our phones out and trade our wares in bitcoin and it too would be a currency. Whether or not it's a good or reliable or sustainable currency is a totally different matter.
by tim333 on 3/7/14, 2:00 PM
Obviously it depends how you define 'currency'. Dictionary.com has at it's first meaning "something that is used as a medium of exchange" as it's first definition, for which bitcoin qualifies. From that point of view it is in some ways better than USD as there is less friction for international transfers.
In other ways it's different - most currencies are backed and regulated by governments. Though things like cigarettes have been used as currency in prisons. I guess the test is whether you can go buy stuff with the thing in which case bitcoin qualifies while gold does not.
The question of what units you use to price future transactions is interesting and more what Buffett is talking about. Like if I'm going to offer to sell you some oil next month I'll probably price it in $usd as that's conventional, and almost certainly not in bitcoin as who knows what it'll be worth in a months time. You could argue though that we could do with some other unit to price contracts, say something like average annual US wage divided by something, that would not be change value much with inflation in the way that fiat currencies do, so you could use it for say pension payments and say in 50 years we'll pay 0.5 average wages or some such which is kind of what you want rather than saying us$40k - who knows what that will buy in 50 years.
by terranstyler on 3/7/14, 1:14 PM
Buffet IMO gets way too much credit for what he achieved.
AFAIK his holdings in 2008 got bailed out, saving his financial empire from destruction.
Frankly, I don't care what Buffet or Soros say and I don't see how they could have earned the money if not with corruption, insider trading, you name it ...
Very unlike start-up founders where you exactly know why they got the money...
by hawkharris on 3/7/14, 1:56 PM
Buffet is famous for having strong convictions as an investor. He refuses to invest in any business, industry or technology if he doesn't understand how it works.
Though his point about Bitcoin may be valid, we should take it with a grain of salt. Buffet is often predisposed to be standoff-ish about emerging (digital) technology.
by sanderjd on 3/7/14, 3:27 PM
A side note: I opened this in a tab along with a number of other things. By the time I got to it, it was some Jim Cramer thing and there were about 30 other things in my history, and I had to come back here to find the original link again. Terrible usability for a news site.
by NateDad on 3/7/14, 1:45 PM
Who cares if it's not a currency or store of value or whatever other economics 101 term? Could it be gone in 10-20 years? Sure. But I doubt it. And if it is, it's because something similar but somehow vastly better comes along (anything only slightly better cannot hope to compete with Bitcoin's network effect and name recognition).
by cLeEOGPw on 3/7/14, 2:07 PM
His definition of currency is nonsensical. He gave a valid point, but it has little to do whether a unit is a currency or not. Wasn't he the one who initially called bitcoin "rat's poison"? Wonder who he referred to as "rat" that the bitcoin is poisoning.
by Cless on 3/7/14, 2:07 PM
Just wondering: why do people here keep spelling his name 'Buffet' rather than 'Buffett'? Is it some form of veiled insult?
by kaa2102 on 3/7/14, 1:53 PM
Money is a store of value, a medium of exchange, and a unit of account. Currency is money that is created and backed by the faith and credit of a Government. Central banks control the money supply with the aim of controlling inflation and/or maximizing employment. Bitcoins supply is fixed making it deflationary. Bitcoins function more like a commodity than a currency.
by acd on 3/7/14, 2:06 PM
Buffet owns a large stake in Goldman Sachs. Goldman Sachs is one of the big banks who benefit from the current system with the central bank FED. Goldman Sachs is a part owner of the FED who centrally plans the price of new money the interest rate. FED is a private institution owned by the regional federal reserves, the regional federal reserves is in turn owned by the private banks.
Thus the old system fear Bitcoin because with Bitcoin you do not need the banks. With Bitcoin the banks cannot create new debt/credit money through thin air so the banks do not have a special privilege in that system. The banks took Satoshi Nakamotos family home via foreclose and then he created Bitcoin, score settled.
http://mag.newsweek.com/2014/03/14/bitcoin-satoshi-nakamoto....
But I would agree Bitcoin is not a currency Bitcoin it is a new economic system where alternative crypto currencies compete with the Central banks FIAT money. Bitcoin also competes with credit cards and payment providers such as Paypal and money wire transfers Credit Union.