That is exactly my position. The underlying technology is very compelling, but Bitcoin's present valuation is nutty.
It's like the web. Pets.com and Flooz were silly, but the web was not.
The former's value is intrinsically fluid to the point where it's a weakness as well as a strength, however the latter's value is quite distinct. The BTC transaction network is reliably robust, spans the globe irrespective of national boundaries, quite secure, and fast.
Some people call BTC the internet's gold, but that couldn't be further from the truth -- gold just sits there gathering dust. Gold has some industrial applications but at the end of a day it's just a store of value, whereas BTC encompasses the transaction network just as much if not more than acting as a store of value.
Put another way the value of bitcoin is the value of the network. How do you value the network is the big question.
(I don't necessarily think there is strong case for those scenarios, but it's pretty hard to decide at what exchange rate the thing becomes unstable).
An obvious argument for any currency system based on a physical media limited by scarcity. Which is "artificially" true of bitcoin, another part of the viability of the system. But you already knew this, however I wanted to explore it on a similar high level idea.
Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.
A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond."
I pick the gold.
If not, what is special about gold? Are you confident that wouldn't change if all the gold were held by one individual?
I find it staggering that the calibre of a Warren Buffet can demonstrate so little capacity for sound thinking about value, wealth and wealth assets.
Is the Mona Lisa worthless because it's priceless? What about a Picasso, do you expect it to produce crops or refine oil? When you fondle a French castle, do you expect it to respond?
"I ask you, how can currency price gold? Indeed, no price will work!" ~ Another
"how can paper currency that represents "the thoughts of a nation blowing in the wind" be used to value real money of ancient world class proportions, gold? It cannot! Any price you can think of will do, as in no price will work!" ~ Another
Gold could absorb the worlds derivatives debt tomorrow in value and not a thing would change in the world, except many headaches gone. Gold could be managed at around production costs for many many decades since 71 and not a problem was found with this. Gold's currency price is meaningless, it's utility for "inter-generational" wealth preservation at a "giant scale" is priceless indeed. Because it is so unproductive, representing "great wealth" comes at no cost infringing on the "productive economy". Why hoard rice or industrial-strength silver to represent your wealth across currency regimes, social upheavals and technological fads and whims and political and market ups and down, when there is gold that can represent "much wealth" in very small physical chunks! Come on Warren, you gotta be kidding me. This piece must be intentional disinformation. He must have been walking around much old-world wealth in his life, and here he pretends "gold, I'm not getting it, gimme ExxonMobile shares any day" (or why not Enron if you're so into energy?).
Then again, he prefers giving all his excess wealth to charity instead of doing the old-school "intergenerational family wealth" thing, truly American I suppose, so yeah, makes sense he see's no value in gold. Someone like Warren Buffet must truly believe that the American Dream will never expire, its currency never weaken in the eyes of the world, it's stocks always be cutting edge. At his age and with his life experience, can we fault him for that? Guess not.
Why hoard gold? Inflation-protected treasury bonds can "represent wealth" in an even smaller, more efficient manner.
> Someone like Warren Buffet must truly believe that the American Dream will never expire, its currency never weaken in the eyes of the world, it's stocks always be cutting edge.
As he says, "400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be"
Even if you believe that in the future humans won't need to eat crops, or that climate change will so damage the environment as to render US farmland barren, the general case for owning productive assets over holding unproductive stores of value seems like a good one.
That is, they may well appreciate with or outstrip inflation, but they are not really meant to earn a yield "productively" like crop and ExxonMobile shares do.
They aren't "investments" in the proper, classical "value investor" sense, they are wealth assets in their own right. Even Ben Bernanke knew that much and told the world in the open! But Warren doesn't know gold's usefulness? Give me a break.
Gold isn't an investment in the same way a life preserver isn't a treadmill. Both have their time and place in life.
Non-productive, non-investment wealth assets: they don't stimulate much economic activity, but they also carry much lower counterparty and other risks and don't infringe on "everyone else's productive economic activity" by stockpiling needed resources in gigantic quantity when they could be put to productive economic use by the nation. Gold is so valuable here precisely because it's (economically) "so useless". You can't eat gold? That's precisely the point! Perfect hoarding medium.
If you look back on a lifetime of very savvy investment work, like Warren does, you'll find your investments will have earned you much "excess income" that can be either put back into economically productive investments, or transformed into non-productive, non-counterparty-risk, by-and-large-in-the-long-run-value-preserving wealth assets. Many very wealthy people after a lifetime of earning excess income from economic/investment savvy do choose to "cash in some of their chips", so to speak. And over millenia, if they do so in assets that don't infringe on society's economic activity, everyone is better off and the hive will leave them alone.
Warren may be one of the few who doesn't wish to do so, but he cannot possibly pretend not to know that this is Gold's proper and totally reasonable purpose in today's times.
Other than massive Central Bank stockpiles that is, of course.