A lot of very elegant people say a lot of very ridiculous things about the online currency Bitcoin. For the most part we can say: Bitcoins aren’t a real currency. Bitcoins only exist online. They are not issued by any government, and they can be used totally incognito. Ever since their introduction in 2009 Bitcons have sold for around $10 each.
The price lately, however, has been astounding around more than a drunk after last call. As of last recorded, the trading exchange Mt. Gox was selling them for $266 each. Later on the value distorted to $105, then rebounded to $180 and then dropped again to $120.
In the olden times of money shows it’s not just fiat currencies that have no inherent value. None of the things people conventionally think of as money, counting gold and jewels, actually have intrinsic value. If they did then cowrie shells would never have been utilised as currency. This matter was used for one simple reason: Money is the supreme, longest-lived combined misapprehension in humanity’s history.
Gold is an ideal example. Gold’s only essential value is if you need a very impressionable metal that is also a superb electrical conductor. In that case, it has immense value. Yet somebody or a group of somebodies decided a long time ago that because gold was hard to come by that they would provide goods and services in swap over for it.
The idea broadened so far and so wide that a nation’s collection of gold eventually decided how much money it would print. This created economies that went bang and bust with amazing promptness. Most industrialized nations slash the link between gold and currency around World War I because if they didn’t they wouldn’t have been able to afford to keep fighting the war.
The value of money today is determined by how much faith people jointly have in a nation, its regime and its economy. That’s why exchange rates oscillate. This method, while valuable, is even more unreasonable than it seems. The European financial crisis has been supported by investors who were worried about countries’ debt levels.