Is Facebook Becoming a Central Bank? 232
wasimkadak sends this quote from an article at Forbes:
"Facebook's 27-year-old founder, Mark Zuckerberg, isn't usually mentioned in the same breath as Ben Bernanke, the 58-year-old head of the Federal Reserve. But Facebook's early adventures in the money-creating business are going well enough that the central-bank comparison gets tempting. ... Initially, the Credits-based economy was confined to the virtual world’s trifles. Credits could be spent to buy imaginary gold bars for aficionados of Mafia Wars, or bouquets of virtual flowers for birthday postings on friends’ Facebook accounts. This new form of digital money was cute but essentially useless for mainstream activities. Lately Credits have become more intriguing. Warner Brothers this summer offered movie-goers a chance to watch Harry Potter and The Dark Knight for 30 Credits apiece. Miramax and Paramount countered with film-viewing offers, too. In a provocative post this week on Inside Facebook, guest blogger Peter Vogel argues that Credits in the next few years will become more of a true currency. Facebook's 800 million worldwide users represent a lot of buying power. He figures Credits could evolve into commercial mainstays for digital movies and music."
Cash out early (Score:5, Informative)
The history of the web is filled with play-online games for points that could be used for other things... but all crash in an inflationary spiral. Points are free, but the prizes offered are not and eventually the value falls below the "par value" the site originally had. Has anybody recently cashed out with GSN Oodles or Moola.com's Moola points?
Look I'm sure they'll only create a few extra (Score:5, Funny)
When they discover they can get stuff for free. Same way the US government has done.
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Which is the importance of getting your contracts specified in a currency that they can't print. For US contracts, get the money paid in Euros. For European contracts, get the money in Yen (or whatever Asian currency you prefer), and for Asian contracts, get the money paid in US dollars.
The government will call their brethren overseas to trade their currency for the one specified in your contract. Get a general idea of when they make that transaction, and you can make some more money -> I call it fractio
Re:Look I'm sure they'll only create a few extra (Score:5, Insightful)
Ummm, no. The finance majors don't say that. Nor do the economists. There is chutpzah, there is subterfuge, and there are varying indicators, but it's not pretend.
When a letter of credit clears, there's a complex set of events that's spawned. Lots of people get paid. Sometimes they get paid in differing currencies, but they get paid. When the Russians had their post Soviet-breakup crunch, maybe they paid in potatoes, but they paid. Trading is something humans do well, and there is some predictability beyond "pretend".
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Actually, economics majors say that money is a "thin veil over barter", so you don't have to worry about it. Queue the Global Financial Crisis, and they say it can only be modelled as a shock. They don't like considering debt, because it would help them predict crisis, and then they'd get blamed if they modelled it wrong. It's better to say that financial crisis are an unpredictable shock to otherwise perfect markets.
Re:Look I'm sure they'll only create a few extra (Score:5, Interesting)
It is relatively easy to spot debt bubbles. I predict here that higher education is next.
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Advertising is the next bubble. Advertising budgets are relatively fixed, but the number of companies chasing those dollars are growing at an expanding rate. The dot com crash will be followed by the mobile app crash and web 2.0 crash in the next few years.
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Interesting, who is loaning these companies money?
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Can't I take a number and come back later?
Trade forex like a pro! (Score:2)
I was expecting a link to some scammy website like the ones that advertise on CNN/BBC World.
Re:Cash out early (Score:4, Informative)
I actually cashed out $10 worth of cybergold, back in 1998. That was the minimum amount you could cash in, never got more than 10 cybergold cents after that. Originally they offered points for surveys and adviews, but after I cashed out it was changed to more of a rewards program for shopping at certain sites and incentive to apply for credit cards.
And, with perfect investing prowess... (Score:4, Insightful)
Cool - your $10 in cybergold could be about 6 grand now, if you played your cards right!
Of course, if you left that tenner in your coat pocket, you can only get about $7.50 1998 equivalent worth of stuff...
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Which leads to the question... why do people buy tech products now if they are going to be cheaper later?
Re:And, with perfect investing prowess... (Score:4, Informative)
Because they don't live forever? Because they have problems that have to solved now, not 10 years later. Because they want to be entertained now, not 10 years later. Why buy a concert ticket for tomorrow, if I have no use for it the day after tomorrow?
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That sounds like the correct use of money. In contrast to basically being forced to spend it ASAP (if you are rational) due to inflation.
Re:And, with perfect investing prowess... (Score:5, Insightful)
Left it in my coat pocket? Heck no, I was a college kid back then. It was the end of the school year, and I was pretty much broke. That $10 was enough to buy food for two weeks!
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Jack Daniel's isn't food, brah.
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http://ecx.images-amazon.com/images/I/41FB6IAL6LL._SL500_AA300_.jpg [images-amazon.com]
http://www.vinaglobo.de/shop/show_product.php?products_id=780&language=en&SESS=18a623b7248011172901eb8b834ec8c4 [vinaglobo.de]
I suspect it might not be healthy to subsist on these alone, though...
Re:Cash out early (Score:5, Informative)
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Everyone says "you can't eat gold", but it IS a fungible commodity... a handy point of reference is that, in say 1960, a 50 cent piece would by you a nice lunch.
In 2012 that same (90% silver) coin will still buy you lunch, since it is valued at over $11...
I would bet in another 50 years that Ben Franklin coin will STILL be worth lunch money, but $11 worth of "folding money*" (usd, pounds or euros) will not.
* note that "silver certificates" stopped being honored by the US Govt
silver certificates (Score:2)
I suppose it doesn't make sense to keep an offer going indefinitely, the US government did give plenty of warning before they stopped redeeming them, and many people did redeem them towards the end.
That and any other old US currency is still legal tender at face value
Of course, the metal coins kept value in the collector/bullion market in a way that paper certificates didn't.
Re:Cash out early (Score:5, Insightful)
The real value of silver has undergone drastic changes in the past, sometimes because of enormous new finds, sometimes for other reasons.
It's probably better to use "a nice lunch" (as in a good but unpretentious restaurant meal of tasty, nutritious, healthful food, containing about 500 kcal) as your price reference. A meal at a restaurant is both a product and a service, and it contains a range of raw materials. Since the restaurant needs to pay real estate costs it also reflects the housing market.
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Slightly downmarket, but that's the thinking behind this [economist.com]
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Sounds like you need to look up the word 'unpretentious' in a dictionary.
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I think you're confused. You buy Facebook credits with real money, you don't earn them. They're a secondary medium of exchange, like Microsoft points on Xbox. You spend real money on them. You can't give them to friends, or use them to buy soda, etc. They're just a convenient way of not realizing that you're spending dollars.
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So basically Facebook credits are a free loan that the unaware provide to Facebook. So does Facebook ever pay them back or are they a one way thing?
Re:Cash out early (Score:5, Interesting)
Facebook credits are like the old Soviet-block currencies. If you were an American visiting the USSR, you could exchange your dollars for rubles when you arrived. But there was no way to exchange them back. And rubles were worthless outside the USSR.
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It is the same as gift cards. They get the money upfront to invest, which is preferable because USD now is worth more than USD later. Plus many people will probably not spend all of their credits.
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Points aren't necessarily free, points take time to earn and time is money. Spend a day earning points could be of equivalent value as spending a day at a job earning real money with just a difference in currency (& currency value) . You are right though this is nothing new with facebook you can make this comparison to almost any other online venture, warcraft being one of the most popular where there are people exchanging virtual for physical currency. I imagine one day we will not even distingui
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I've always thought of it more like Microsoft Points. Less a reward and more of a micro-currency for buying things. I imagine any points awarded to players by games is paid for *directly* by Mafia Wars. Similarly Halo could theoretically give you MS points but it would come out of their sales.
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I'm still holding onto Beenz until I can find someone who will give me a good deal for Flooz. So far, Whoopi Goldberg hasn't returned my calls.
You could always cash it all in and get some slood.
Assuming you can find a civilisation advanced enough to have discovered it by now
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You don't have to be an advanced civilization to have discovered slood. It's easier to discover than fire, and only marginally harder to discover than water.
Bits are almost free (Score:2, Interesting)
Interesting point that the main cost of music or movie is the "first copy"... duplication costs very little in the digital world. Seems like the movie industry are offering sequels to drive up interest in future movies.
Re:Bits are almost free (Score:4, Insightful)
No, they do sequels because they don't generally have to sell them. The industry knows who's going to go to see a sequel and how large that audience is and as a result is able to much more accurately gauge the prospects. They won't know whom it is precisely that will go or precisely how many, but they'll have it down pretty good in general.
That being said the studios are always looking for new ideas the big problem they tend to have is that only a fraction of a percent of the ideas they receive are actually worth filming and of those only a fraction of them are going to be memorable.
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That logic does not explain Police Academy Six: We Can't Stop Making These Fucking Movies.
Your model does not fit the data. Try again.
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It's funny you bring that up.
The first Rambo kicked ass. The last Rambo was fucking hard core. The stuff in the middle you don't even have to keep.
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I think LostCluster was suggesting a reason why the movie companies were offering those particular movies on facebook, rather than a more general motive for the creation of sequels of movies.
Not a true currency. (Score:5, Informative)
The mark of a true currency is that it can be used to pay U.S tax liabilities. For Americans at least, anything else is just, at best, a commodity subject to capital gains taxes. For example, if you buy gold coins, or facebook credits, and then sell them after their value has doubled you'll have to pay capital gains tax on the amount they appreciated against the dollar. if you barter the gold coins, or facebook credits, for services or goods you will have to pay taxes on that barter transaction in dollars. If the dollar appreciates in value against other currencies though, there is no capital gains tax to pay, even though your dollar might buy more.
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Not quite, I can't pay my US tax bill in RMB, AUD, Euros or CAD, but I can pay them with USD. It doesn't mean that those other currencies aren't any good, it means that to do something interesting with them I probably have to either convert them or move.
Things like MS' points are basically a way to get you to pay for something with fewer protections so that they have your money and you can't get it back.
Re:Not a true currency. (Score:5, Insightful)
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Heh, just like that "use" tax you have been paying, in lieu of "sales tax" on those online purchases you make, you hav
Can I interest you into a trade? (Score:2)
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Yes.
Wired article from a few years ago (Score:2)
Predicted all of this, and explained very clearly why as soon as there's some traction, and the ability to move/take cash out, the existing banks/authorities will be down on their heads like a weight of very heavy things.
Why Bitcoin was so scary for a time.
These things offer wonderful room for money laundering.
Re:Wired article from a few years ago (Score:4, Insightful)
Predicted all of this, and explained very clearly why as soon as there's some traction, and the ability to move/take cash out, the existing banks/authorities will be down on their heads like a weight of very heavy things.
Why Bitcoin was so scary for a time.
These things offer wonderful room for money laundering.
I dunno. I see PayPal and eBay as a cartel which should be broken up, but nodbody has done anything about it, yet. All right out there in the open.
! It appears you are attempting to receive payment by means other than PayPal which is not allowed, please correct your listing so we get an even bigger cut of your sale
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Bitcoin is bigger than ever right now. It is just that it has moved beyond creating bubbles by getting stories on slashdot. Recently there was a "The Good Wife" episode with the goal of doing that.
http://tvrecaps.ew.com/recap/the-good-wife-season-three-episode-13/ [ew.com]
This guy is flogging his own product (Score:5, Insightful)
From the article:
Peter Vogel is co-founder of Plink, a Facebook Credits-based loyalty program that rewards Facebook members for dining and making purchases at their favorite restaurants and stores.
"Facebook credits" are just another gift card scheme. You can't cash them out. You can't invest them. You can't convert them to another currency. You can't transfer them to another individual. And Facebook takes a 30% cut off the top.
The only virtual currency that comes close to behaving like a currency is Linden Dollars, the monetary unit of Second Life. Those, you can transfer and convert.
Bitcoin had potential, but it turned into a pyramid scheme.
Re:This guy is flogging his own product (Score:5, Informative)
BitCoin is not a pyramid scheme, technically it is a pump and dump.
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USD appears to be a pump and dump as well.
Re:This guy is flogging his own product (Score:5, Insightful)
Players love Bitcoin because deposits *and withdrawals* are instant, unlike all other online casinos. I know that some of my players also play poker at Seals With Clubs [sealswithclubs.com], a Bitcoin-only poker site. They may have a win at Dragon's Tale, shoot the money over to Seals, shoot their winnings back to DT, or into their Silk Road account to buy some goodies, or into their desktop wallet. If Bitcoin were never to go beyond gambling, it will be a success: it allows all Bitcoin-based casinos to function as one huge meta-casino.
Sorry but that's not "functioning beautifully" (Score:3, Insightful)
If it works for you, that's fine, I won't tell you not to use it. However that your tiny game (one I've never heard of, and I'm rather in to games) uses it means jack and shit. I can buy -nothing- I want with bitcoins, not a single thing. Anything I can think of that I'd desire which is sold by someone who takes bitcoins as payment.
Also are your players really using it as a currency? I doubt it, they are using it as chips just like at any other casino. As in they buy them as needed, play with them, and then
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I don't like giving my info to some online poker site (who would?). If they accept bitcoin I don't have to.
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So they're the ideal thing if I want to give a gift to myself?
Re:This guy is flogging his own product (Score:5, Interesting)
Agreed. I purchased web hosting for a year (out of the US), and a domain name. I'm considering a Parisienne firm for some minor website artwork. The number of businesses / services that accept BitCoins are growing.
The only people shouting Pyramid Scheme as those who are butt-hurt from trying to 'get in' at the wrong time; many of those people were more invested in turning a magical short-term profit by reselling their coins to 'suckas' who would buy in later. Surprise, surprise, the same kind of mentality seen with the flipping of homes on the real estate market, and just like with that market, it backfires -> absolutely no understanding of market fundamentals or finance, but the people involved think they've found a path to Easy Street. Probably bought in at $14 / coin, and sold out at $3 / coin, only to watch the market rebound, as of late, back to $7 / coin. Guys, if you want to turn a major profit, do two things -> 1.) read up on some finance / economics (the heavy stuff that you special order online, not the stuff B&N stocks in the "Investing" aisle), and 2.) long-term investing (not everyone is cut out to be a day trader, and long term tends to be quite profitable).
One of the larger things harming BitCoin is the constant f*ckups the various exchanges and online wallet sites keep experiencing. Mt. Gox kept screwing the market with their repeatedly hacked accounts (ah yes, PHP, the epitome of secure languages), followed by Dwolla and their API nonsense (has anyone seen my head? it appears located inside my rectum), and that one online BitCoin wallet service whose owners took everyone's wallet and cashed out (why yes, everyone, why doesn't you store your unencrypted wallet with me for a while? wink wink). In all seriousness, I myself am surprised that BitCoin is still around -> it's based on a sound design, but the growing pains it has experienced from every goober who has come along since have been synonymous with a 90 lbs geek trying out for the high-school football team.
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It is a good idea. There is a "pump and dump" aspect to it due to the speculators treating it as a penny stock, but it is useful regardless of the exchange value for dollars. Whether or not the bitcoin project fails, the idea of a decentralized cryptocurrency is here to stay. It is just another example of people engineering a way around a problem. I am still confused by the hostile attitude of slashdotters towards it.
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The difference is that no matter how hungry you get, you can't eat bitcoins.
Contra effect (Score:2)
If Facebook told me to buy something then I'd be more skeptical than ever about it. Could be a good thing or bad thing, but I don't see Facebook as my consumer advocate or advisor.
More like an idiotic social networking site which constantly nags me about things and notices and I try adblocking the pop-ups, which invariably makes it all worse, but I don't really care.
don't let the IRS find out (Score:3)
Facebook will have to send a 1099 to everyone who earned credits this year and we'll have to pay taxes. My bank sent me one saying I earned $17 in interest. If I earned enough credits to buy 2 movies they'd probably be worth more than that and I'm sure the IRS would want their cut.
No, and here's why. (Score:5, Insightful)
Betteridge's Law of Headlines is an adage that states, "Any headline which ends in a question mark can be answered by the word 'no'". [wikipedia.org]
Are they paying tax? (Score:2)
Is someone paying tax on these transactions?
Lately Credits have become more intriguing. Warner Brothers this summer offered movie-goers a chance to watch Harry Potter and The Dark Knight for 30 Credits apiece. Miramax and Paramount countered with film-viewing offers, too
This sounds like a barter transaction:
http://www.irs.gov/businesses/small/article/0,,id=215975,00.html [irs.gov]
Exchanges occurring through a barter exchange are reported to IRS on Form 1099-B and show the value of cash, property, services, credits or scrip added to your account by the barter exchange.
IPO imminent (Score:5, Insightful)
I clicked through to TFA. I know, what was I thinking...
So, a co-founder of a business based on Facebook Credits thinks they're super-important and could be equivalent to actual money. Right. Next ridiculous story, please.
I expect more stories inflating Facebook's perceived worth to be pushed to the mainstream media in the coming months as Facebook's IPO is imminent.
Comment removed (Score:4, Insightful)
Facebook has been a central bank... (Score:2)
Wait wait people give REAL money for credits??? (Score:2)
Before I get into a a snark-guffaw endless loop, this is so? Zuckerberg is printing funny money at will and separating douchebags from real money in exchange?
Surely no one is that stupid.
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Wow.
And I don't mean World of Warcraft.
Ya, right (Score:4, Insightful)
When people start accepting Facebook dollars as part of their salary then it will be a real currency. Until then it will be a promotional gimmick, just a bit more complicated than Marlboro boxes.
of all the sites.. (Score:2)
I would NOT trust with my money, it would be Facebook.
law covering currency / giftcards / scrip / truck (Score:2)
law covering currency / gift cards / scrip / truck may apply to this.
And facebook trying to act like paypal may end up badly + there may be some irs audits / back taxes as well.
Credits? How mundane... (Score:2)
That will go well (Score:2)
Mark can print up as many credits as he wants for himelf and friends = inflation
The government isn't going to allow that crap, they want people using dollars (which are taxed). They don't like competition.
There is value in credits (Score:2)
That is why I don't like credits, MS points, etc. I wish people would avoid them.
Moot... (Score:2)
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Except it's not. It's controlled by a single entity, which can "print" all it wants and even revogate someone's credits.
It's much more like dollars than Bitcoins.
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Exactly. Facebook Credits = Flooz.
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But not all single entities are created equal. One of them could revoke a lot more than your credits, and yet I'd trust that one more than I would Facebook.
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Also, WHY would another private company be willing to trade goods/services in exchange for your faerie's gold?
Same reason that any other company is willing to trade good/services for pieces of green paper-there's an implied idea that there is some wealth behind that paper that makes it worth taking. Facebook credits, AFAIK, are backed by real money (the money that the user spent to acquire them), and I imagine if a user spends them on a game or something the developer of said game pockets some money for that transaction.
You use money that is a number in a database to buy more fake money that is another number in
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Re:No. No, no, no, no, no, no. (Score:5, Insightful)
You're half right. Money hasn't been worth anything since before the gold standard was dropped. Even gold is fiat currency. Money, including precious metal coinage, is just tokens meant to simplify complex barter arrangements. It only has value based on people's faith in its value.
Re:No. No, no, no, no, no, no. (Score:5, Insightful)
Or, more precisely, by their willingness to accept it as payment. Recursively. Acceptance all the way down.
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That's a pretty good way of putting it.
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Historically, it has tended to be the commodity with the best combination of
1) Fungiblity
2) Ease of transfer
3) Ease of storage
4) Durability
5) Right combination of divisibility and rarity
6) Few alternative uses
So, as a currency, tobacco is preferable to cattle, paper is preferable to tobacco (until the entity creating the paper messes up #5, which it seems is inevitable). I think it is all an attempt to objectively quantify social capital.
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Actually, gold has real value. It has valuable chemical properties, and is used in catalysis, electronics, and medicine among other things. Even if the world lost its "faith" in gold, electronics manufacturers would be willing to trade goods for it.
However, gold is currently overpriced, compared to, for example, platinum. A small amount of platinum can replace a large amount of gold in many catalysis applications. So "faith" probably accounts for a part of the price of gold, but not all of it.
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Yes it's valuable as a commodity. That always confounds these discussions. Copper has value as a commodity too and has a long history of use in currencies as well, but people don't obsess over it they way they do over gold. The point I was making is just that there's nothing special about gold that requires that currency be backed by stacks of it sitting in a vault somewhere. If currency has to be backed by a commodity, then it can be backed by any precious metal, or by non-metallic elements, or by land, or
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Copper has more uses than gold...therefore it would be a poorer choice.
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Pretty much every element in the periodic table does.
They'd have to do the same for all their inputs if they wanted to stay in business.
In any case, the electronics industry only uses a tiny proportion of gold produced.
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Gold is not fiat. Gold is jewelry, and jewelry has intrinsic value. Intrinsic value doesn't mean you can eat it btw, you can't eat an iPhone but no one would argue that it doesn't have intrinsic value.
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"Intrinsic value" isn't intrinsic, it is subjective and dependent on context.
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Why?
So what does it mean?
That's redundant, you already mentioned jewelry.
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Gold at the moment, and throughout history, is a valuable commodity. At the moment people would probably accept gold bullion because the value is going up. It's gone up ridiculously in the last few years, even compared to other precious metals. At the moment, I believe it's higher than rhodium. Anyone who has paid any attention to the price history of gold can see that there's currently a gold bubble. When the price of gold breaks, the only people who will want to be paid in gold will be people operating in
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Gold certificates are clearly a scam. If there is a collapse of the USD, big investors who have friends with guns will get the real gold while average person #3,004,390 will be left with nothing. There are good reasons people have defaulted to using gold as a currency in the past though.
Why do you think laws setting the value of gold vs silver were necessary? I didn't really follow your reasoning. Shouldn't the value of gold vs silver vary according to supply and demand? If not, why not?
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I hate to break it to you, but privately owned banks do this in almost every country in the world, every single minute of every single day.
All banks are licensed, by government, to create credit out of thin air. This is subject to very loose restrictions about reserves, but in reality, frat-house rules apply across the board and you can do almost anything you like as long as you've got e
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Once you start looking into it you realize you are staring into the void and see the evidence all around you.
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It's not realistic to expect us to be able to BUY movies with facebook credits. They'd make much more money by charging a lower "per view" fee.
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slashcode is free
Someone should start something anew. Run it themselves, like Taco used to do.
I don't have the energy or time or personality to run the thing, but I'd be a happy viewer and contributor.
There's enough of a market for it it to pay for the running costs. Someone just has to step up.
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Uhm, Hot grits and the horse you road in on, you Emac on windows viewing AOL using poopy pants!
Is that better?
Unfortunately I only troll at a 2nd grade level.
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We're borrowing money to make our hammer payments. That's not "backing," it's recursion.