This development in Venezuela could be viewed as a very real step away from Fiat currency and a very real step toward a permanent commodity-backed currency.A crypto currency that is actually a currency in the sense of a zero maturity liability issued by a sovereign nation that is exclusively accepted in exchange for at least some liabilities to the state.
This is quite interesting since the Bolivar remains the unit of account.
Zero Hedge
The Post-Fiat World Begins: Venezuela's Cryptocurrency A Necessity To Obtain A Passport
Tyler Durden
12 comments:
“Bloomberg is reporting that the only way Venezuelans can get a passport is through the country's new ‘Petro’ cryptocurrency, which is backed by Venezuela's oil and mineral reserves.”
This “backed by a commodity” nonsense is an illusion.
On a sports scoreboard, points are “backed” by players’ and spectators’ consensual agreement to abide by the scoreboard. There is no need for points to be “backed” by physical commodities.
Likewise, a currency is “backed” by everyone’s willingness to use it, and by the central government’s ability to enforce laws connected with it.
Consider the “gold standard” farce. Politicians used the “gold standard” gimmick to convince the masses that there was “no money” for social programs. But when politicians wanted to massively increase spending for major wars, politicians created limitless dollars out of thin air. After the wars, politicians again evoked their “gold standard” gimmick. They falsely claimed that dollars were worthless unless “backed by” gold.
“This development in Venezuela could be viewed as a very real step away from Fiat currency and a very real step toward a permanent commodity-backed currency.”
The petro is not a currency. It is a crypto-currency. A quasi-currency. A sort-of currency. Venezuela’s government is experimenting with alternatives to dollars and bolivares in an attempt to get a handle on currency speculation, and to get around US sanctions. Another alternative is the bolivar soberno (sovereign bolivar) as opposed to the current bolivar fuerte.
If the petro ever became a real currency, it would be backed by fiat. The fiat would be bestowed by whoever issued it and regulated it, and passed laws making it legal tender.
All real currency is ultimately fiat currency.
If they demand payment for something in something besides a Bolivar, they are just creating another unit of account. That's it. Completely meaningless.
Makes zero difference is they call it "crypto"; it is just a fledgling currency. We already have the equivalent here.
Headline: "businesses in the US have to buy a digital cryptocurrency to send packages with the government". Stamps (the kind you scan).
Yawn
(ok, those denominated in $ still, but we could just as easily invent something else, the "passporto" and it would become a currency to the degree it is demanded by the gov for payment of things.)
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Of Bitcoins and Balance Sheets: The Real Lesson From Bitcoin
Konrad has it right (the last sentence). And this is not the case since 1971... It has always been the case (hence Gresham's Law). In other words, because govs didn't understand "money", they often tried to make their tokens a commodity. But those gold/silver/copper coins had to have a fiat value higher than the commodity value or they would go out of circulation. In other words, they were always, if still circulating, fiat, and the decision to make them out of anything more than scrap metal or paper was merely due to the weight of history and ignorance.
Maybe the knowledge and software/hardware to operate a currency system doesn’t exist in Venezuela so they are going to try using a crypto as an off the shelf black box instead...
“But those gold/silver/copper coins had to have a fiat value higher than the commodity value”
What would the “commodity value” then be measured in? A foreign currency?
“they often tried to make their tokens a commodity.”
It’s a very common cognitive deficiency:
https://en.m.wikipedia.org/wiki/Reification_(fallacy)
“Reification (also known as concretism, hypostatization, or the fallacy of misplaced concreteness) is a fallacy of ambiguity, when an abstraction (abstract belief or hypothetical construct) is treated as if it were a concrete real event or physical entity.[1][“
99.999% of people working in the discipline have under developed skills in abstraction... this is due to the dialectic method used in Liberal Art schools which is non rigorous training..
"What would the “commodity value” then be measured in? A foreign currency?"
Matt, you buy 50 oxen with a gold coin, but if you melt it (transforming it into bullion) you would buy 30 oxen.
"Value" is not the samething as "price"...
That would be because the labor/expenses it would take to mine the gold would be less than to raise the oxen....
"What would the “commodity value” then be measured in? A foreign currency? "
Matt, You had me stumped for a second! :)
Answer: it would still be priced in the tax=credit currency unit.
You can go online and see it happening now - just look at the $ price of old US silver dimes and silver dollars :)
tax-credit (typo above)
No, I am talking about the exactly same amount of gold. At one instant you have it as a coin and can by 50 oxen, at the following minute you melt the coin and get the exact same amount in gold, but now in bullion form, and now it is worth less (30 oxen)...
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