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Bitcoin The Almighty Buck

Rand Paul Suggests Backing Bitcoin With Stocks 404

SonicSpike writes: "In a recent interview, Senator Rand Paul said there's one thing he would change about Bitcoin: it should be backed by something with intrinsic value, like stocks. He said, 'I was looking more at it until that recent thing [sic]. And actually my theory, if I were setting it up, I'd make it exchangeable for stock. And then it'd have real value. And I'd have it pegged, and I'd have a basket of 10 big retailers I think it would work, but I think, because I'm sort of a believer in currency having value, if you're going to create a currency, have it backed up by — you know, Hayek used to talk about a basket of commodities? You could have a basket of stocks, and have some exchangeability, because it's hard for people like me who are a bit tangible. But you could have an average of stocks, I'm wondering if that's the next permutation.'"
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Rand Paul Suggests Backing Bitcoin With Stocks

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  • History (Score:5, Funny)

    by recoiledsnake ( 879048 ) on Friday May 02, 2014 @08:52AM (#46898225)

    Those who fail to learn history are doomed to repeat it

    • Re:History (Score:5, Insightful)

      by gl4ss ( 559668 ) on Friday May 02, 2014 @09:11AM (#46898351) Homepage Journal

      I don't own bitcoin nor have I ever used bitcoin for anything.

      but this Rand guy seriously misunderstands the whole fucking concept. stock? ? just sell your bitcoin and buy some stock with that money. if the stocks value was tied to bitcoin, you might just as well just own bitcoin instead of the stock. if the stock presented some other value(in dollars or bananas) that would be a direct tie in to something else.

      backing it up with gold or other valuables or anything that would need some company to adhere to some arbitrary value for the bits would destroy the whole concept(or at the very least transform it to some airline miles system bs) and you might just as well dig egold out of the grave...

      so what the guy would like would be a centrally deployed currency, you know, like bus card money. beats me why he thinks that would be better or more novel - of course then there would be a company to shut down to shut down the use.

      • He doesn't just misunderstand bitcoin: Guy wants something 'tangible' so he picks stock... And stock in retailers? Those things that basically live and die by 'consumer confidence', which moves around according to some mixture of actual economic conditions and pure animal spirits.
  • by jeffb (2.718) ( 1189693 ) on Friday May 02, 2014 @08:55AM (#46898243)

    ...the concept of the "mutual fund".

    I can almost smell his clutch burning as he mentally shifts back and forth between "currency must be free of government intervention" and "currency must be backed by gold or silver"...

    • by Anonymous Coward on Friday May 02, 2014 @09:05AM (#46898321)

      ... and "colored coins"? Please correct me if I'm wrong.

      • by dmbasso ( 1052166 ) on Friday May 02, 2014 @10:06AM (#46898767)

        To whomever modded the AC troll: you're fucking ignorant.

        Colored coins are a method to track the origin of bitcoins, so that a certain set of coins can be set aside and conserved, allowing a party to acknowledge them in various ways. Such coins can be used to represent arbitrary digital tokens, such as stocks, bonds, smart property and so on

        Source [].

        Really, if you don't know about the subject, what about you refrain from moderating?

  • Stocks? (Score:3, Insightful)

    by KermodeBear ( 738243 ) on Friday May 02, 2014 @08:56AM (#46898253) Homepage

    something with intrinsic value, like stocks

    Stocks have no more intrinsic value than our paper currency.

    • Re:Stocks? (Score:5, Informative)

      by Eunuchswear ( 210685 ) on Friday May 02, 2014 @09:04AM (#46898313) Journal

      Nothing has "intrinsic value". Stuff is worth stuff to people depending on what they are prepared to pay for it.

      • Nothing has "intrinsic value".

        Other than fresh water, oxygen, shelter, and sustenance, anyway.

        • Re:Stocks? (Score:5, Insightful)

          by CreatureComfort ( 741652 ) on Friday May 02, 2014 @09:29AM (#46898469)
          Um...those don't have "intrinsic value" either. That's not to say that they aren't valuable or necessary, but you'll find the value of ice in January in Siberia is very much different than the value of the same ice in Arizona in June. So while each of the things you list may have values at a certain times and places, it is still entirely "subjective" value.
        • Violence. (Score:5, Interesting)

          by Ihlosi ( 895663 ) on Friday May 02, 2014 @09:33AM (#46898493)
          Other than fresh water, oxygen, shelter, and sustenance, anyway.

          Violence (and any means increasing the potential violence an actor has at his disposal) has intrinsic value.

          In fact, in any system with potentially malicious actors, a currency must be backed by some degree of violence. Otherwise, the malicious actor can just take the currency by force (if he considers it valuable).

      • by idji ( 984038 )
        Energy and matter have intrinsic value. If I had at my disposal 65 TJ of energy that is very valuable - in anyone's eyes.
    • by davek ( 18465 )

      something with intrinsic value, like stocks

      Stocks have no more intrinsic value than our paper currency.

      Incorrect. If I buy a share in PepsiCo, I then receive a tiny fraction of the profit of EVERY single Pepsi sold on earth. That's work. That's economic production. The share has "intrinsic value" because it gives me access to their profits. This is also why, at it's core, the stock market is not a casino (although government regulation and crony capitalism make stock purchases much more like a "bet").

      I think the whole crypto currency thing will evolve into more of a stock market type of thing, with comp

    • This is what makes what he was saying seem actually 'crazy'... He doesn't seem to understand how the stock market works at its most absolute basic level (much less dark pool arbitrage.)

      Scary, because when you listen to him he tends to seem much smarter than the average congressman (certainly a backhanded compliment if ever there was one...)

      • >Scary, because when you listen to him he tends to seem much smarter than the average congressman

        Maybe if you only let him run his mouth for a minute or two. Give him 5 minutes, and he'll say something crazy every time. The nut didn't fall far from the tree.
    • I'm surprised that I haven't yet seen that oft-(ab)used quote, even though it fits perfectly here.

      "Intrinsic": I do not think it means what he thinks it means.
    • Stocks have no more intrinsic value than our paper currency.

      A stock means that you own part of a company. The company itself may own land, computers, factories, etc. (It could even own guns and gold! yeehaw!) Those have intrinsic value, so the stock does also.

      This is why stocks are recommended for people concerned about inflation. A fall in the value of paper money typically does not affect stocks as much as most other instruments.

    • I still want a pork-belly-backed currency.
    • by bmajik ( 96670 )

      This is critically important, and, frankly, given the books that Ron Paul (and invariably, Rand Paul) have read and worked on, I'm not sure why he'd say something like this.

      Nobody in modern libertarian/an-cap thought thinks there is intrinsic value to any currency or any commodity

      So, I'm not sure what he's doing here. He's quoting Hayek.. but the later writers made it pretty clear that intrinsic value was a non-concept... maybe saying "intrinsic value" was a mental gaffe on the part of Rand Paul...and he m

  • by Anonymous Coward on Friday May 02, 2014 @08:57AM (#46898261)

    At least ones that don't pay dividends.

  • Huh? (Score:5, Interesting)

    by nine-times ( 778537 ) <> on Friday May 02, 2014 @08:57AM (#46898263) Homepage

    Can someone explain how this isn't silly? He wants it backed by intrinsic value, which I think may be missing the point of Bitcoin, and his example of the perfect thing with intrinsic value is "stocks"?

    I'm sure this guy has some fans who can explain why this makes sense, but it just seems like more evidence that he's completely out of touch and doesn't know what he's talking about.

    • by Greyfox ( 87712 )
      Why should bitcoin have any more or less value than our paper currency? US Dollars are only worth what people think they are, and have a whole lot less effort put into their design than bitcoin does.
      • The only difference being that the US Gov will only accept taxes in US dollars, which means that along with being worth what people think they are worth, they are also worth your tax liability.

        Bitcoin is only worth what people trading it think it is worth.

    • Can someone explain how this isn't silly? He wants it backed by intrinsic value, which I think may be missing the point of Bitcoin, and his example of the perfect thing with intrinsic value is "stocks"?

      Stocks do have intrinsic value because owning a stock is equivalent to owning a company, and all the company owns (factories, farmland, guns, whatever). Bitcoin, on the other hand, has no intrinsic value.

      Partly because of this, stocks are also much less volatile than bitcoin and are better at being a store o

    • Re:Huh? (Score:5, Insightful)

      by fermion ( 181285 ) on Friday May 02, 2014 @10:37AM (#46899047) Homepage Journal
      It makes sense in a world where one assigns values corporations and does not believe in the US. This comes from the same place that the gold standard comes from. In the world as it currently exists, the United States is a meaningful and important place made up of people who select a governement. As an expression of our value, faith, and worth we put out a currency. The currency reflects the innovation of our country by expanding as the capacity of our country expands. In fact the currency expands a bit faster which puts a pressure on the people of the country to innovate, and a negative incentive to save excessively, but rather to invest in innovation. OTOH, as stated, the gold standard ties a country to existing resources. There is an existing amount of gold, and short of governement regulation to set the value, does not reflect the innovation of a country. The gold standard insures that those with resources, in this case gold, are always going to better of than those who merely can innovate. Likewise, the Bitcoin is independent of incumbent forces and is free to increase and decrease in value based on those who value it. By backing it with incumbent retailers, you are limiting it the values of existing commodities, rather than seeing growth in future innovation. This is very bad because future innovation almost guarantees that the value of incumbent retailers will fall, in the same way that Walmart almost put Kmart and Sears out of busines. I do give him credit for trying to slip this by using stocks, which at least appreciate in value with innovation, instead of Gold like his father would have. The Gold Standard people just want to have King George come in a steal our stuff again.
  • The second your backed by something, there is an authority. Gold? Who own/store the gold, what if the gold get stolen or seize? Backed by stocks? Who own the stocks, on what market? What about stock owning regulation? No! The idea is to having something you can trade without the paperwork, anywhere to anywhere for anything, from a phone instantly & borderless. If you like a backed currency, try your own and let the Bitcoin experient goes... time will tell!
    • Every trade done with Bitcoins has a publicly available paper trail as the transfer of the Bitcoin must be public otherwise you could just copy your coin and respend it.
  • Is he really that stupid?
    • Yes.

      Next question?

    • Re:What the hell? (Score:5, Insightful)

      by jythie ( 914043 ) on Friday May 02, 2014 @09:24AM (#46898439)
      The better question is, are his supporters stupid? Generally one does not get to be that powerful by being stupid, while we mock them politicians are usually quite intelligent, but that tends to be hidden behind closed doors. What the public generally sees is a carefully crafted image designed to appeal to certain voter blocks, a persona if you like. Ran Paul's stupidity is just a role he plays based off analysis of people who vote for him.
  • Problem... (Score:4, Insightful)

    by MickyTheIdiot ( 1032226 ) on Friday May 02, 2014 @09:00AM (#46898277) Homepage Journal

    The problem is that this is a classic "inside the corporate bubble" reaction to bitcoin. One of the supposed ideas of bitcoin is to not link money to governments. Since corporations are super-important to mindless bots like Rand Paul, the solution is, of course, to link them to corporations. If there is anything worse than linking the monetary system to governments, if you would be linking them the corporations that even worse about selfishness and tilting the playing field towards themselves at all costs.

    • Re:Problem... (Score:4, Insightful)

      by pla ( 258480 ) on Friday May 02, 2014 @11:26AM (#46899551) Journal
      If there is anything worse than linking the monetary system to governments, if you would be linking them the corporations that even worse about selfishness and tilting the playing field towards themselves at all costs.

      As the bigger problem here, Paul's solution to this "problem" would effectively allow third parties to create equity in a company out of thin air. Something tells me Walmart/IBM/whomever wouldn't take kindly to every Bitcoin miner on the planet diluting their stock value.

      This would only work if it functioned essentially like corporate scrip, where Walmart alone could create Bitcoins, and they could then give customers their change in BTC. Even then, they probably wouldn't want to do so, because again, it directly dilutes their stock - Or put another way, it makes "giving change" roughly equivalent to paying a microdividend (albeit in the form of a liability whose value they have some influence over, equity in themselves).
  • Bitcoin has more intrinsic value than stocks because because it's a limited resource whereas stocks can split and reverse split and are available at the whim of the company offering them. The Bitcoin supply is less volatile. The demand may be volatile, but the supply is quite predictable. Trying to back bitcoin with stocks and peg it to something sounds like nonsense to me. How do you peg something that's already pegged to a pre-determined supply. Bitcoin is every bit as "pegged" as gold as far as I can see
    • You've described price stability, not value.

      • Well, in the context of having something to "back the value" of a currency, that seems to be what's important because "the gold standard" is the gold standard of backing value, and I don't see how gold has any value that bitcoin doesn't in this regard. It's the limited quantity that gives it value (the ability to use something as a currency makes it valuable as a currency). The only thing that bitcoin is missing that gold has is the ability to melt it and wear it on your finger or neck. That might be the "v
  • by nimbius ( 983462 ) on Friday May 02, 2014 @09:11AM (#46898357) Homepage
    People forget that bitcoin became popular during the advent of wikileaks, lulsec and the activism of Aaron Schwartz. Tying bitcoin to an exchange means the minute you start a website that publishes sensitive government secrets like warrantless wiretapping, Anone who feels compelled to help your efforts is just as vulnerable to government detention and surveillance as you. The point of bitcoin, dogecoin, and other cryptocurrency is to prevent the government from quietly telling banks to refuse your transactions on the basis of your dissent, and ferrying you off to some resort in cuba for waterboarding and lemon pepper fish.

    And unrelated: Bitcoin is dead, for all intents and purposes. a combination of shit-tier security and unaccountable exchanges made it what it is today. switch to doge or something else, keep your wallet encrypted, and make frequent withdrawals.
  • Looks like as far as Rand is concerned, the technology of Bitcoin has been accepted... double spend problems etc... now he is worried about 'intrinsic value'.
    While tying it to stocks is only one idea, tying it to something 'may' reduce volatility in pricing... but what?

    I like Bitcoin as it is. But a second new coin tied to 'something' could be an interesting spin-off... The new IPO coins are usually tied to Bitcoins themselves...

    I always wanted to do a 'Just-Dice' investment coin. Your coin purchase becomes

  • by koan ( 80826 )

    Maybe something proven like mortgage-backed securities (MBS) and collateralized debt obligations (CDO) then we can all don our black tennis shoes and board the mother ship.

  • by Anonymous Coward

    Bitcoin is a joke at this point and trying to fix it with anything risks the anything, but even if it wasn't, Rand Paul may be completely, diametrically wrong with this idea. I found this article to be well worth a read, almost ten years ago:

    Good fun read, but it takes on the nearest equivalent economic situation involving a currency under siege.

  • Why does this sound like an absolutely horrible idea? It feels like the same thinking that went into creating CDOs.
  • ... that stocks have any intrinsic value?

    • Well, stocks have value, they say you now own a small part of the company in proportion to the value written on the paper. The only problem on this is if the written value (price you want to sell) actually matches the real value (price that others are willing to pay).
  • Given how QE has pumped up asset prices, backing e-currency with stocks is little better than fait.

    I suggest backing Bitcoin with dog shit. At least it's worth something -- at worst, you can compost dog shit and use it to grow things, unlike electronically-traded (and soon to be worthless) stocks.

  • The more people like Rand Paul show they do not understand BTC the more likely BTC will be a success. :)

  • I'd back it up with the rack, or the guillotine.

  • He thinks bitcoin is something like a fiat currency, backed up by something. He does not realize, bitcoin is simply a public, open digest of transactions, sort of like a public bank ledger.

    The best way to describe bitcoin in the stocks world is like the thirdparty stock registrars. Most people do not take possession of stock certificates or even bond certificates when they buy those instruments. Typically a thirdparty company maintains a register where it takes "possession" of the stocks on your behalf, a

    • by tomhath ( 637240 )

      No, you missed his point.

      His argument is that a programmer can't make up something of value out of nothing, only Obama can print money. So he suggests using bitcoin as a proxy for some other asset, e.g. stock. But you need to purchase the stock first and offer to trade the asset-backed proxy afterward; then the transactions you describe make sense.

      And those who say stock doesn't have intrinsic value are stuck in the dot com bubble. Many companies tried to claim huge book value by claiming "good will" as an

  • I cant trade them in for pieces of the company, they are as worthless as the paper they are printed on. Want proof? See what happened to all the money people had in stocks during the last crash. Hell I have framed on my wall a Certificate for Pan American Airlines Stock that is 100% worthless.

    You want your currency to actually have worth, you back it with Gold.

    • I cant trade them in for pieces of the company...

      That's because stock shares ARE pieces of the company. It is literally a share in ownership and a claim to a portion of the assets controlled by that company including future free cash flows.

      Hell I have framed on my wall a Certificate for Pan American Airlines Stock that is 100% worthless.

      But you seem to completely misunderstand why it is worthless. The stock certificate holds no value just like the paper in a dollar bill has no significant value. It's the assets it gives you claim to that have value. Companies most certainly have value while they exist and are generating cash flows. Think of owning

  • Dear Rand Paul,

    Maybe we should back gold with a basket of stocks too?


  • Rand Paul invents new currency called the SPIDERCOIN. It will be pegged to the S&P 500's value..... and wait am minute this already exists. (See stock symbol SPY.) Why would I buy crypto currency that is just a stock pool sounds like an awfully complicated way to set up an ETF.

  • [quote]should be backed by something with intrinsic value, like stocks[/quote]

    According to the Austrian school of economics, there is no such thing as intrinsic value. This starting from Carl Menger, on his book "The origins of Money" []

    Naming Hayec (another Austrian economist) and intrinsic value in the same breath is an oxymoron, and actually if you look at Rand Paul's quote, he does not mention intrinsic value either.

    Value is subjective, it exists _only_ in the mind o

  • Are there any major currencies that are actually back by assets with so-called intrinsic value? Doubtful. And even one would want to do that, the ideal asset would have as low risk as possible which stocks clearly are not. Also, he could easily set up Paulcoin to try for himself.
  • Not to be critical, but how would this be different from the bearer bond investing instrument. It went away because it was notorious for money laundering.

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