And if you owned all the dollar bills?

You could pay your taxes. And all the others who need to pay their taxes, would need to trade valuable things to you for the dollars they need to pay their taxes. Also, almost all world trade is ultimately settled in dollars. And so, if you want to buy oil/food/fertilizer/machine tools/etc. on the world market, you need those dollar bills again.

The concentration of money in one hand means it is worthless for any other hand.

You can't pay taxes with worthless money.

It’s not worthless. The United States, which happens to be the largest economy in the world, requires taxes to be paid in dollars, regardless of how you’ve settled your transaction. If you and I trade a car for 40,000 chocolate bars, the IRS demands we figure out the dollar cost and pay them their due.

If I owned all the dollars, the US would simply decide to start demanding taxes in something else because it could not use those dollars for anything. If it refused to switch to another currency, it would not be able to pay the people who would force me to pay taxes, so there would be no reason for me to pay taxes.

The United States can print more dollars. Hell, they can declare all your dollars not real and throw you in jail. Every dollar is owned by the US Government. You’re just borrowing them.

The US Debt is denominated in dollars. The USA has promised to pay its entire $24+ Trillion debt, in dollars.

But that would not make any sense if one person held all the dollars. The creditors would have no use for dollars, and the US would need to switch to another currency in order to be able to pay its employees. They could print however many dollars they wanted, and could pay back the debt that way, but that would not solve the problem of the dollar no longer being useful as a currency. The government's employees would have no reason to accept the dollar because nobody else would accept it. The dollar is primarily valuable because it's used as a currency. If it stopped being used as a currency, its value would be zero. This is no different from Bitcoin.

If you had all the dollars and people still had to pay their taxes in dollars. You would be able to get a LOT of stuff for those dollars because everyone would need them.

The actual concern with this argument is that "You can only pay your taxes in US dollars" is a backing that is contingent on the policy of the US Government. The strength of that backing depends on your view about the likelihood that such a policy will stay in place. (Edit: granted, if all USD were owned by a single entity, the likelihood that such a policy would be revoked is much, much higher.)

It does depend on the policy, yes, but note that government backed (local) monopolies exist in other areas too. Like for example with hospitals, or with phone network operators.

I'm not sure how this comment relates to the topic as we aren't discussing any sort of monopoly.

If you have all the dollars then you have a monopoly on them. If the government forces people to pay their taxes in dollars you have a government supported monopoly. It stands and falls with the government's support for it, the connected regulations, etc.

> (Edit: granted, if all USD were owned by a single entity, the likelihood that such a policy would be revoked is much, much higher.)

If all of USD were owned by a single entity, the US Government just prints more. They will always have that power. That may cause inflation effects that they would be concerned about in the long term, but they have an immediate reaction lever to increase the monetary supply in such a (weird) hypothetical. (Though the correspondence between monetary supply and long-term inflation has always been much more theoretical "cause-and-effect" rather than showing practical, real world correlation much less "cause-and-effect". Especially this side of the Gold Standard the practical relationship between monetary supply and inflation is incredibly complex, and while you will find many people still presume an inflationary relationship the practical effects have been much weirder. [There are times in recent US history where USD monetary supply was at all time highs and inflation at all time lows.])

(Unless you hypothesizing an even weirder hypothetical where the monetary supply is increased by the US Government just handing the dollars to the single USD dollar holder and hoping that provides incentive to "trickle down" dollars back to everyone, but there's very little anyone can do with the onion of dumb in that weird hypothetical.)

In other words, a government mandate is necessary to arrogate value to paper.

Bitcoin is legal currency for taxes in El Salvador. And someone there will always be someone in el salvador needing to pay taxes.

Yes, but Warren Buffer doesn't live in El Salvador, so the only thing he could do with BTC is sell it to someone for USD so the point still stands

So Bitcoin should be priced according to the size of the El Salvadorian economy. Not all of the economy, but the economy conducted in bitcoin. Bitcoin can't take credit for people using alternative currencies to pay their taxes in El Salvador, or using it to buy groceries, pay rent, etc.

> And someone there will always be someone in el salvador needing to pay taxes.

1) You don't need bitcoin to pay taxes in El Salvador. You need dollars to pay taxes in the US.

2) Why would people in El Salvador give you their USD for bitcoin when you can pay taxes there in USD?

But it’s not the only one, unlike the USD

So do you believe USD would be worth zero if the US accepted foreign currencies for tax payment? Or abolished taxes?

It is now possible to pay for stuff and pay taxes in BTC in multiple jurisdictions.

It is only possible to pay taxes with BTC in a few failed states like El Salvador. So that's hardly a positive. And I expect that little experiment will probably be terminated soon after Bukele leaves office.

Zermatt in Switzerland is a failed state how?

Sure, but the argument wasn't that BTC was merely overpriced, but that it was mathematically worth zero.

Hey now, Colorado has started accepting Crypto payments recently. Per the CO Dept of Revenue - "Starting September 1, 2022, the Colorado Department of Revenue (DOR) will now accept Cryptocurrency as an additional form of payment for all state taxpayers. This includes individual income tax, business income tax, sales and use tax, withholding tax, severance tax and excise fuel tax."

The state is not actually accepting cryptocurrency tax payments. Tax liabilities are still denominated in dollars. All that they have done is partner with a third party payment processor which will sell you dollars for cryptocurrency at the current market price (minus fees), and then forward those dollars to the tax authorities.

Dollar bills are backed by the full faith and credit by the US Government. As long as the US Government decides those have value (IE: forces you to pay taxes denominated in bills), then anyone interacting with the government will value those bills.

As a centralized currency, the power flows from the Government. If the US Government loses power, of course dollar bills lose value. But generally speaking, the trust in the dollar is one-and-the-same as trust in the US Government.

How come people's only definition of value of currency is that it can pay taxes?

Everything else's value is determined by the market and not the government, so how does Bitcoin have trouble finding value if the market thinks it has its utility, which is a storage of value without any third party intervention which is its unique capability that people can't seem to figure out after 10+ years of its existence.

Seashells and Rai stones have been used as stores of value without any third party intervention.

The only thing a currency needs is widespread community coordination. US Government forces this through taxes and bonds/lending, so our system is largely built on top of the dollar and a centralized bank.

Other systems can be made however you wish. But solving the coordination problem is the fundamental issue.

It's a myth that taxes are what give currency value. Plenty of currencies needed to pay taxes throughout history have hyperinflated into nothing.

Its a myth that printing money causes currency to lose value. There are an infinite Dogecoins and yet the value goes up sometimes.

Doge inflation is only on the ballpark of 0.3% per year and will continue to decrease asymptotically toward 0%. It is a very sound policy imo

By what measure?

DOGE is -53% over the last year, which means its _actually inflated_ by 212% vs the Dollar (or really like 233% in real terms, after accounting for the 9%+ inflation of USD).

DOGE inflating by 233% in a single year is horrific policy.

The parent comment was obviously regarding total/circulating number of dogecoins. It erroneously made a hyperbolic claim there are infinite dogecoins. It is a common misconception even among cryptocurrency fans that the number of dogecoins increases at a high rate, because it doesn't have a hard max total supply number like bitcoin's 21 million. In a cryptocurrency context, inflation most often refers to the rate of newly printed units because the price volatility is just from market movements and has often little to do with the monetary policy

There are only a finite number ever. The amount of Doge is limited by time. Unlike fiat, it is disinflationary (yearly supply rate goes down toward 0).

There were only a finite number of German Marks in 1923, last time I checked. A very large number, but finite nonetheless.

I'm not sure why you're trying to change the subject to money printing. But thanks for proving my point. You're right that dogecoins have value (for better or worse) and that value definitely doesn't come from any government.

Dogecoin has hyperinflated 210% this past year, while BTC has hyperinflated 340% this past year.

As far as things with inflation, we should be discussing why Cryptocoins are so terrible at it.

You've changed the subject again--I didn't mention inflation. Are you a bot or are you just parroting random talking points without reading?

Since you brought it up, YoY returns are not really relevant for a long-term investor. If you're speculating/gambling on short-term volatility, then USD/VTSAX/BTC have done poorly--but I'm not much of a speculator. I'm very happy with my 10-year returns.

As long as you keep wildly changing the subject (this applies to your next reply as well), I'll assume you have no counterpoints and agree with everything I say. I'm glad we can agree!

> hyperinflated into nothing

You literally said this. Honestly, I'm not sure what subject you want to discuss anymore. But you were the one to first bring up inflation.

If you got something to say about my root post, feel free. But you're changing the subject more than I am: https://news.ycombinator.com/item?id=33789831

You would have an immediate market for them since dollars are the only legal way to pay your taxes. Since everyone must do this, it creates a kind of Schelling point such that everyone defaults to using dollars for everything else also.

If you produce something of value in return for Bitcoin, you must still acquire dollars to pay your taxes. If you refuse, men with guns will escort you to jail. That is what ultimately backs Buffet’s preferred currency.

The US government accepts these for debts and issues debts denominated in these.

Then you would hold a weird power over the worlds largest economy? It’s the official medium of exchange. The government could print more money, but you would be able to flood the market at any time, essentially being a second federal reserve. Everyone would depend on you for loans to be able to pay their taxes. Likely the US government would need to deprecate the dollar and move to a new currency, which would have incredible economic shocks. Doesn’t sound at all like owning all the bitcoin.

I get your point, but they are really not the same.

If I owned all the dollar bills the Fed would add twenty zeros to them by printing a boatload of money, making mine worth a lot less and the new dollars useful.

You buy twitter and burn it down

Exactly. The same argument can be applied to dollars, to all dollars, not the bills only.

Buffets house would look like a zen monastery if he extended these words to all facets of his life.

Buffett began his answer by saying that if all the attendees in the conference owned “all the farmland in the United States” or “all the apartments in the country” and they offered him a 1% stake for $25 billion, he would write them a check on the spot. (then went on to say that about bitcoin)

Own assets people need. It’s a pretty simple investing philosophy.

Crypto doesn’t produce anything, nor can you buy anything with it you can’t buy with fiat except perhaps drugs online. What’s the value of magic tokens whose speciality is avoiding monetary controls for illicit goods? No one needs crypto (macro scale), so why would you buy it? Because you hope a greater fool comes along.

Sure, and if he could buy 1% of bitcoin for $25 he would probably do that too? Since he could easily sell it again for a higher price.

It seems the issue was with buying _all_ the bitcoin, since it suggests that nobody wants it anymore, so he wouldn't be able to sell it.

Yep. Most of the comments here are really disappointing nonsense that take the quote out of context and apply bad reasoning to it

Yeah he doesn't do this buy low sell high thing. He is not a trader. He believes in owning things that generate value. He wouldn't take half of all btc for $25 either

Buffett is pretty consistent in living modestly in all aspects. He lived in the same house in Omaha from 1958 - 2022, which asked $877,000, which a lot less that a lot of Zen monasteries, if for no other reason than the monasteries house more people. But monasteries have a tendency to be pretty nice: you have to house a bunch of people, and the non-monks tend to donate money over time. Buffett is known for modest living. I think corporate headquarters now employs 10 people (market cap of almost $700 billion). He's pledged to give away all his money by the time he retires, and has already spent quite a few years giving it away, which is why he's down to a net worth of $99 billion.

He's no ascetic: he enjoys a good steak (and tons of Coke) and he had an $11 million vacation house. But fairly modest, especially for someone who has voting control of a $700 billion corporation (which he built from pretty much nothing).

Buffett will be dead in 5-10 years. How will Berkshire be valued then?

As a thought experiment, what if the price of gold goes to 0 next week, would you not buy because you can't sell it?

Change bitcoin to US dollars. "If you owned all of the dollars in the world and you offered it to me for $25, I would not take it..."

The same argument applies.

Not quite. With US Dollars, you could pay the US government to not send the MenWithGuns to your house because you failed to pay income tax on "all the dollars in the world" coming in to your possession.

It is a crucial difference.

If you want to say, this isn't really that solid a foundation to build a money system on... hey, I'm right there myself, honestly. The US dollar really is based on "the full faith and credit of the US government", and specifically its ability to project power in order to harass people failing to pay its taxes. Looking out into the world, I'm seeing a negative first derivative on that, and possibly a negative second derivative too. But that is still a cut above the nothing standing behind cryptocurrency. At the present time, based on its behavior, cryptocurrency is a derivative of the US dollar and is dependent on it and the prior low interest rates it had, not a separate entity with its own trust base.

why would they collect taxes on a currency they have no control over anymore? Might as well start a new currency.

Of course the hypothetical is intrinsically a bit silly, but the "US" in "US Dollar" is not extraneous. Even if you did somehow have All The US Dollars In The World, the "US" still would retain control over the currency, inasmuch as the currency that is the "US Dollar" is defined as being the currency they have control over. Even if you had all of them, they would retain the ability to print them, retain the ability to insist that you pay your income taxes to them, etc.

There have been many fiat currencies in history to look at. It doesn't take long to see that pure fiat currencies really are based on the full faith and credit of the issuing authority. These issuing authorities don't have to be governments; the only thing stopping private parties from issuing currencies is just that governments tend to see that as muscling in on their turf, but it's not otherwise impossible or even particularly difficult. (Getting everyone to accept your currency is what is difficult.) The US dollar is a derivative of the US government. Something that is not a derivative of the US government is something other than a "US Dollar". The US government really couldn't start a new currency because the base case of the currency, what it really is under layers and layers of finances and financial structures and loans and everything else, is "what the US government accepts".

Again, the hypothetical is impossible anyhow, which kind of skews how you think about it, but at its core, at the deepest level, what the US Dollar is is what the US government accepts as payment, and below that, the fact that it is the US Government that will come after you if they are not satisfied with your payment. Anything else that they would accept for the same reason is basically the same thing as a US dollar as a result, and if the US government tried to create "multiple currencies", the financial system would swiftly come to an exchange rate based on precisely how much of the US Government threat can be avoided with each one. That is the base case upon which all the further recursion is based.

And again, I'm not making any more claims beyond "that is what it is"; I'm not saying that's obviously good, or that's obviously stable, or that anyone who questions it is an idiot... this post is simply about understanding what is. How you feel about what is, and what further conclusions you come to about what is, are up to you.

On a long enough time horizon all governments and empires fall. All paper money ultimately becomes worth only the paper it is printed on.

This is where I disagree with the maximalists of specific cryptocurrencies. If utility means anything, better payment networks will emerge as tech advances.

Of course gold solves for both of these issues.

Agree with your other points to a degree. Cryptocurrency is derivative in that it discounts the heavily regulated financial markets. The easy money policies can be viewed as part of that. Part of the value proposition in users choosing voluntary means rather than collaborating with coercive money.

Even for a simple use case like online shopping there is regulatory overhead. Chargebacks, merchant agreements and AML considerations all come into play. Try billing users $1 or 25 cents with PayPal as an example. Most shops won't allow you to buy a pack of chewing gum with a card.

I'm sure he meant this tongue in cheek, but dollars are ultimately backed and propped up by the US government. Sure, no currency is worth anything if it's literally controlled entirely by one person. There are plenty of cryptocurrencies that are pretty much identical to bitcoin but that didn't take off. The only thing that bitcoin has going for it is a shared belief that it's worth something.

On the other hand, the US Dollar is a worth something because of a shared belief that the US government is going to do whatever it takes to make sure it's worth something. Even if I thought that the US government is gonna get overthrown next year, I still need to pay this year's taxes in US dollars, so it derives at least some of its value from there.

To be fair to Buffett, he doesn't care about owning dollars either. Or even gold, which has a damn good track record of being valuable. His assets are pretty much entirely in some form of equity. He likes owning shares of companies that sell some product. Sure, he needs dollars to transact, but it's not like he's holding tons of dollars either.

No it does not. See my previous comment.

Yes it does, see my answer to some previous comment.

Hmm. something wierd going on. Both of us don't seem to have a previous comment. Perhaps it got deleted or my memory is going poor. Anyway, my earlier point was that US dollars have an intrinsic value in that they keep you in good standing with the US federal and local Govs. You can pay your taxes in US dollars and nothing else. If someone had all the US dollars in the world, then everyone else would need to trade very value things to that person to get those dollars. The value of those dollars would go up a lot in terms of a basket of tradeable assets Bitcoin is the opposite I think. If someone had all of the bitcoins, then I would expect bitcoin to be worth nothing.

So you’re a gold bug?

Warren Buffet got his start with pinball machines, which have no inherent value beyond entertainment. His only option was to sell back the pinball machine either all at once or in pieces at a time through timeshare (quarters for a game).

They have inherent scrap value at the very least. Copper is really pricey these days and pinball machines have a LOT of wiring.

Parting out the visible bits could be lucrative too, especially if it's a desirable machine like No Good Gofers or Attack from Mars.

So it comes down to believe that bitcoin trading had an entertainment value of a trillion dollars a few months ago?

> have no inherent value beyond entertainment.

Entertainment is an inherent value of something.

I don't quite understand this analogy, can you expand on what you mean?

I think they mean that there is no value in being entertained and people spending money on it are idiots.

If that sounds stupid that's because it is. It's like saying there "is no inherent value" in a textbook because all it does is teach you calculus.

Bitcoin is entertaining to some people. It also allows you to lower transaction fees in certain situations, or make an electronic irreversible transaction relatively quickly compared to ACH/wire.

My point is that Buffet seems to understand non-tangible benefits are still valuable, and not only that he is hypocritical in his reasoning that he would have to sell it back to you.

Entertainment has inherent value in that humans for all of known history and prehistory have engaged in entertainment and expended energy (hence money, whether they knew it or not) to acquire it.

Money has no inherent value other than that which you can buy with it, and so far the biggest value of bitcoin is in being able to buy USD, or other fiat.

I find bitcoin entertaining, and incrementally so the more I have.

Your enjoyment on bitcoin is likely contingent on mass participation. If you owned all of it, your entertainment-per-BTC would probably be a lot lower.

Pinball machines are fun with or without this. Warren Buffet is saying he wouldn't want all bitcoin (in this hypothetical scenario where it is 100% concentrated under a single owner) because there is no reason for him to believe he could sell it to anyone.

Creating demand for essentially nothing is way harder than creating demand for something that has immediately demonstrable economic value. This is why crypto is so full of scams and pyramid schemes and shady marketing.

Would it still be entertaining if you owned all the bitcoin and nobody else used it?

Pinball can be entertaining without a market for pinball machines, I don't see how bitcoins would be entertaining if there were no market for them.

Great! So long as people like you exist, bitcoin has value .In fact, in my opinion, the entertainment aspect has been the main driver of bitcoin and other crypto value over the past year. In fact, almost any pump and dump is really fun for all players. It only settles in after you end up bag holding. It's like gambling.. People consistently love to lose money.

So if you view bitcoin as a consumable you are consuming to provide entertainment to you, that's great. I'd personally take a lower cost source of entertainment, but to each his own.

Personally what I have almost exclusively used based on bitcoin is its altered codebase litecoin.

I have used it exclusively for lowering transaction costs, lowering my cost to buy bullion such as silver. Most vendors in the US do not have any lower cost of buying bullion online in a way that clears under an hour, particularly during times when they wave crypto fees. ACH and wire (sometimes) can be free but never clear (for me) in under an hour (and on occasion even get held up for days), and I find the counterparty risk of waiting 1-3 days unacceptable.

Pinball machines do have inherent value. They are made up of actual physical components that can be used for something unrelated. Granted, that inherent value is much, much lower than any price you'll see them sold for, but it is there.

> Because what would I do with it?... It isn’t going to do anything.

This isn't strictly true. The fundamental utility of crypto assets is to pay for transactions that execute on blockchains. Blockspace is a scarce resource, and running transactions on-chain requires bidding for inclusion in a fee market that's denominated in the native currency of the chain.

This isn't just hypothetical. Currently, more than $2 million worth of Ethereum per day is being paid to the network as "gas" necessary for Ethereum transactions.[1] The blockspace demand comes from a variety of blockchain applications, such as NFT marketplaces, DeFi applications like Uniswap and AAVE, and stablecoin payments such as USDC[2]. (Not to mention simple peer-to-peer Ethereum transfers.)

We can debate a long time about whether blockchain based applications are here to stay or just fads. But there is a compelling case that some users and use cases will value the decentralization, immutability, censorship resistance and credible neutrality that comes with on-chain applications. In that type of decentralized digital economy, native crypto is very useful in the same way that crude oil is very useful to the industrialized economy.

[1]https://cryptofees.info [2]https://etherscan.io/gastracker

> "Blockspace is a scarce resource"

That might be true within a system. But anyone with the skills can start a new cryptocurrency at any time.

In the same way that someone can also start a new city at any given time. Yet, the price of real estate in Manhattan remains expensive. Blockspace on major pre-existing chains is valuable because 1) the ability to compose with other applications running on that chain, and 2) higher value of native assets increases the security of consensus in PoS networks.

Again, this isn't just hypothetical. Today, users pay an orders of magnitude premium for Ethereum block space compared to other chains. That's because Ethereum has much higher value applications to compose against and better security guarantees around consensus.

This is all in the context of Buffet's quote, where one person owns all of the Bitcoin in the world at the same time.

In that situation, there is no scarce resource that has value. People can create as many new cryptocurrencies as they want. The fact that you happen to own all of the one called Bitcoin is meaningless.

Buffet wants investments, when Bitcoin is meant to be a low-time-preference store of value.

And of course, central planners and standard economists, Buffet's buds, are all high-time-preference and that's why the economy is an instant-gratification consumerist junk hellscape.

If I owned all of the USD in the world, would you pay me 25 euros for it?