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The Article.

The concise reply:

1. Liquidity [look it up] is only possible in an economy that has cash, but media of exchange emerge in barter economies [which have no cash] as well.

2. You showed that wide demand does not imply marketable. But I am claiming marketable implies wide demand. Not the same thing. Just the opposite, in fact.

3. Menger’s definition of “saleable” is not relevant to Mises when he talks about the regression theorem. Mises is talking about a barter economy [as well as a cash economy]. In barter economies, there is no cash price for things, because there is no cash.



  1. Kyle Reese says:

    SD, I see you have been vocally disliking Bitcoin for many years now. How long will it take for your predictions to come true? Maybe put another way, what do you have to see to change your dislike for Bitcoin?


  2. Smiling Dave says:

    What do you have to see to change your dislike for the law of gravity?

    Bitcoin cannot possibly be more than a bubble, by laws of economics as unforgiving as the law of gravity.

    As for the “many years”, the Ithaca Hour lasted 18 years before dropping to zero. Beanie Babies lasted ten years. I have written my humble prediction that bitcoin will die forever when the next deep recession forces people to sell their assets for cash, including bitcoin, thus setting of its decline and permanent fall.


  3. Peter Šurda says:

    1. You still do not explain the relationship (or the lack thereof) between “liquidity” and “marketability”, in fact I predicted that your next step would be to deny they refer to the same phenomenon as you do just now. Furthermore, the fact that I use the term “liquidity” has no bearing on the validity of my post, as I reference Menger exclusively. Had I avoided the term “liquidity” altogether, the meaning of my post would have remained exactly the same.

    2. While it is correct that the two implications are different, this is a new argument which you haven’t made before. Which is my main point: you change your position all the time while pretending you don’t.

    3. Mises built on Menger and they refer to the same phenomena. There is no indication that Menger’s argument somehow precludes barter. Furthermore, we do not have barter now so the objection is not relevant for Bitcoin. And last but not least, this is what Mises says about marketability (in Human Action):

    “There are goods for which it is not difficult to find applicants ready to disburse the highest recompense which, under the given state of affairs, can possibly be obtained, or a recompense only slightly smaller. There are other goods for which it is very hard to find a customer quickly, even if the vendor is ready to be content with a compensation much smaller than he could reap if he could find another aspirant whose demand is more intense. It is these differences in the marketability of the various commodities and services which created indirect exchange.”

    We see all the core points mentioned by Menger: the economic price and the easiness with which it is achieved. There is no sign of “width”, only “intensity”.


  4. Kyle Reese says:

    So if Bitcoin does not die in the next deep recession you will change your opinion of Bitcoin? Will you be sad if you are wrong?


  5. Smiling Dave says:

    It’s not about my opinions or feelings.


  6. Smiling Dave says:

    1. Liquidity is an irrelevant topic only you have introduced.

    2. It’s the same argument, that you did not understand before.

    3. “Not difficult to find applicant” means wide demand. The rest of your comments, especially your attempt to brush aside the barter economy, show you have a ways to go, my son. .


  7. Peter Šurda says:

    1. That’s a non-sequitur, as I just explained. It does not address my argument at all. That’s similar as if I said that “width” is an irrelevant topic that you (technically Terrell, but we’ll get to it later) introduced. But whereas your argument depends on “width” being equivalent to “marketability” (or being a subset thereof as you now argue), mine does not depend on the term “liquidity” being eqivalent to “marketability”/”salability”, because I quote primary sources (Mises and Menger) and repeat the factors they analysed, rather than factors of what you allege is a different term.

    2. Even if I had not actually understood your point (which I deny, obviously), this is still the first time you formulated it this way. That you are unwilling to provide coherent formulations at an early stage of a debate is not my fault.

    3. You miss exactly the core of Menger’s and Mises’ point (the combination of time and place where a sale at economic prices can occur). That is what “not difficult to find applicant” means. Not the proportion of population that demands it.

    But even then, this how Terrell explains the relevance of “wide demand”:

    “Its wide use meant that people could be reasonably assured that they could easily find a buyer, and the buyer could easily discern the quality of the goods.”

    Again, this is closer to the factors pointed out by Menger and Mises (time and place where a sale at economic prices can occur), rather than a proportion of population or whatever you use to define it. As I pointed out in my blog post, the “wide demand” in your use of the term is not a sufficient condition (merely you consider it a necessary one) for the emergence of a medium of exchange. By taking the position that “wide demand” is merely a necessary rather than a sufficient condition, you think that you refute my argument. Instead, you reveal a gap in your own argument, because there is still the open question left about what the sufficient condition is, or to put it in other words, an explanation why “wide demand” is insufficient is missing, and as a result you undermine your own position. Instead, someone who actually wanted to create a coherent argument would explain why houses are not used as a medium of exchange other those than the factors I mentioned. That would address my argument.

    Last but not least, you still fail to explain where the alleged distinction of barter in Menger’s and Mises’ approaches is, and why is it relevant for our debate. Menger’s argument explains the emergence of commodity media of exchange irrespective of whether this occurs in a barter system or a monetary system. At best, Mises extended the argument of Menger to money substitutes and fiat money, which is not relevant for Bitcoin anyway. You appear to imply (again, this is part guesswork becuase of your unwillingness to provide coherent formulations of your own positions) that somehow Menger’s position requires “cash prices”. There is no basis for this argument. Menger’s position only requires that trade exists. At best, you could argue that the “organised markets” that Menger mentions must use money and cannot exist in barter (which I disagree with but I’ll accept it for the purposes of debate in this paragraph). Mises did not appear to mention organised markets, but that is not because he disagreed with Menger, rather because he concentrated on other aspects of the issue. Most importantly though, my argument does not require that organised markets did not exist in barter. That’s another non-sequitur.


  8. Smiling Dave says:

    I will have to rely on the reader to sort out the tangled mess of your arguments here. But the basics remain the same. Put aside the jargon and meaningless hairsplitting for a moment.
    Here are the basics. Ponder them well. All of them are written in Mises, and are solid commom sense.

    1. A medium of exchange [as the phrase is used in the context of discussions of the regression theorem] and a money differ in only one thing, the percentage of people who will accept payment in it. Indeed, the borderline, the magic number where the percentage who accept it makes it a money, is not clear.

    2. A medium of exchange is the most marketable good. This is not a technical jargon term, and not to be analyzed into hairsplitting irrelevancies, because economics is about human action, meaning how normal people behave and think. Normal people will accept X in payment for their hard work if and only if one of two conditions exist. Either they need X for their own use [=has intrinsic value, which bitcoin doesn’t], or they can easily trade it [=”not difficult to find an applicant”] for something they do need.

    3. Now how in the world can they easily trade it for every possible thing they need? How can it possibly be that the butcher, the baker, the candlestick maker, the gas station, the landlord, all the stores in the mall, everyone, will accept thing X in exchange for something this fellow wants? Common sense and Mises and Menger tell us there is only one way in the world that can happen. Only if everybody wants thing X, only if thing X is coveted and desired like gold and silver, and bottled water in war torn Iraq, and hard to get cigarettes in a prison, in other words, as Gary North explained in an article you probably have read, there is a HUGE HUGE HUGE demand for the thing for its intrinsic use. And by demand I mean EVERYBODY WANTS IT, AND A LOT OF IT. Nobody wants a thousand houses, and I’m surprised you tried to use houses as a counterexample. But everyone would love to be Scrooge McDuck, with his swimming pool full of gold, and have a huge warehouse full of bottled water in that ruin of a city in Iraq, or have a million cigarettes in that prison. And they would love to have all that quantity just for their own use, to make a gold throne and gold silverware and gold paneling in their palace, and to drink the water, them and their family and friends, and to smoke those cigarettes for their life sentence in prison. Who wants a swimming pool full of bitcoin for their own use, not to buy things with? Nobody. Because what can they use it for? Nothing. So bitcoin is and will forever remain the very opposite of something in wide demand for its intrinsic use, because it has zero intrinsic use.

    4. So what’s all this demand for bitcoin we see? It’s idiots speculating. It has happened many times in the history of the world, and it’s happening again.

    I see that you have finally come around to admitting Timothy Terrell agrees with me. The beauty of his article is that he wrote it when bitcoin was but a twinkle in the ponzi scheming eye of Satoshi Whoever. I think he wrote it about ten years before the first bitcoin existed. Gotta hand it to him.

    So forget about time and place and width and jargon and hairsplitting and get back to the basics. Read my articles again, with opened eyes. Learn, my son.

    Pete, I’m closing this place for comments from you, because I have a life broader than endless bitcoin arguments. You may comment in the form of sending a link to your blog if you have anything more to say, and I will publish that. Don’t forget to be professional, meaning no getting personal.


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