What I can say for certain, though, are two things. One is that they are not created by a government. And the only way that you can be sure that what you offer in exchange for something else has value is if it is offered by a government who has backed it up with a promise to pay, as is true of almost all the world’s major currencies.
This, of course, makes crypto more reliable than some to many government issued currencies. Indeed, this was rather the point of the design of Bitcoin, that there’s a set amount that will ever be in issue.
There’s lots wrong with crypto but that they’re not government issued isn’t one of them.
So gold is worthless?
Silver? Oil reserves?
For that matter, Apple stock.
Like I’ve said before, he simply does not understand the role of money in commerce. It is simply a token of value that can be widely, readily & confidently accepted in exchange for goods & services. And anything* that satisfies those criteria can be used as money. It most definitely doesn’t require a government.
Spud can’t past the entries in ledgers to understand what the numbers represent. Book-keeper’s mentality.
*I’d say Bitcoin & crypto in general don’t satisfy the criteria & are therefore not currency. To satisfy, you need sufficient proportion of the currency issuance circulating in commerce so the token of value is valued by the quantity of goods or services it is exchangeable for. Bitcoin etc are valued by their exchange rate with other currencies & their valuation against goods or services. There’s not sufficient commerce being done directly with them.
almost all of the world’s major currencies.
Seems a bit unkind to exclude the good ol’ VEF and ZWD?
has value is if it is offered by a government who has backed it up with a promise to pay, as is true of almost all the world’s major currencies.
FFS! Does anyone know of a major currency where the “promise to pay” is in anything other than the same currency? Say a national bank where you can take their scrip & exchange it for dollars US or gold or something?* The statement is completely meaningless.
*Oddly enough, I think Costa Rica might just qualify. CR uses the $US in commerce. But there are still some CRP(pesos?) in issuance. So a CR bank might take your CRPs & give you $US. I think there may be some other small nations like that.
The two CFA Franc country blocks (West and Central Africa) had their currency backed by France and the FFR. Whether that survived the Euro and how I couldn’t say.
The ZWD is now ZWG, or ZiG, now partially backed by gold bullion, plus FX reserves, since April, I think.
It’s El Salvador mucking about with BTC?
“And the only way that you can be sure that what you offer in exchange for something else has value is if it is offered by a government who has backed it up with a promise to pay”
Fix my boiler and I’ll sort out your book-keeping. There, credit’s been created (because I haven’t done my bit yet so I’m in debt), value is assured because the plumber knows & trusts me …. and there isn’t a government in sight.
As someone else says, he just doesn’t get it. And it’s not the book-keeper’s mindset he suffers from, not really, because we’re supposed to adhere to the principle of recognising “substance over form”. And he’s way too blinded by the form.
It’s El Salvador mucking about with BTC?
Not sure if that’s a reality. To replace a currency with Bitcoin, he’d have to get the Bitcoin into circulation. Which would mean exchanging government scrip for Bitcoin. Where does he get the Bitcoin? Nobody will sell it in return for El Sal scrip so dollars? Need a lot of dollars. And then, why not just do a CR & use dollars. If you want electronic transmission use electronic dollars. As long as the banks are holding dollar reserves match the circulation, it’s valid.
Of course there nothing to prevent using Bitcoin in El Sal commerce. Or any other currency. It’s getting it into circulation to so is the problem. Someone has to have some to start with.
The number of things offered by government as a promise to pay that were then never paid is large.
I think Murphy’s next grant should be paid out in Confederate dollars.
Too American? Reichsmarks. Or perhaps Soviet rubles. Bonus for that; even when they were being made they weren’t exportable.
What’s the matter? They were all offered by official governments with the promise to pay after all.
As Ducky said, Zimbabwe introduced a gold-backed currency this year: https://en.wikipedia.org/wiki/Zimbabwean_ZiG
Currency “has value if it is offered by a government who has backed it up with a promise to pay”?
The “promise to pay” is meaningless; take a tenner to the Bank of England and all they’ll give you in return for it is another of their tenners. Or two of their fivers if you ask nicely.
However in Jersey the “promise to pay” does actually mean something; take a Jersey tenner to the government and they’ll give you a Bank of England tenner in exchange. And to back up that promise they hold UK government bonds equal to the amount of Jersey pounds in circulation.
But that means that the only place that meets Murphy’s definition of a currency is a tax haven that he wants to abolish.
>And the only way that you can be sure that what you offer in exchange for something else has value is if it is offered by a government who has backed it up with a promise to pay, as is true of almost all the world’s major currencies.
But not all of them. So he’s undermining his own thesis.
Secondly, backed up by a promise to pay *what*, exactly? The Dollar is backed by a promise to pay . . . Dollars? That I already have in hand?
Thirdly, this ignores the existence of barter. Tons of stuff can be exchanged for goods moderately to fairly (gold) easily.
There are good reasons to have currency. There are good reasons to have *fiat currency*. But there’s nothing fiat does that non-fiat currency doesn’t – fiat is just more amenable to fine-control and faster response to changing conditions.
*If* you have decent, smart, people, isolated from politics, running your central bank.
“the only way that you can be sure that what you offer in exchange for something else has value is if it is offered by a government who has backed it up with a promise to pay,”
So if I go into a supermarket and buy a bar of chocolate, the only way I can be sure that the bar of chocolate has value is if it is offered by a government with a promise to pay? What nonsense. If it is sufficient for the purchaser to assure themselves of the value of bar of chocolate, then it is equally sufficient for the vendor to assure themselves of the value of whatever is tendered in payment.