@IanBlas
edited
Mises Regression Theorem - Bitcoin and Bitcoin Cash
According to Mises's regression theorem, the value of money goes back in time to its value as a bartered commodity. Mises said this is the only way money can have value. At first sight it would seem that #Bitcoin is bad money because it is digital, it no longer has a merchandise value like gold in jewelry. However, the decentralized payment system (blockchain) is the source of value, while the accounting unit simply expresses that value in terms of price. Bitcoin's value proposition is tied to its native payments network, an accounting tool that absorbs and transports the value of the network through time and space. But what if the Bitcoin payment system is limited? (1mb block size limit). The usefulness of the network is simply limited to use in large transactions due to high fees and waiting times. So we could say that limiting the size of the blocks is limiting the regression value of #Bitcoin. Many could say that for small payments there is #LightningNetwork, however that is using #Bitcoin by means of another way that is not the one that initially gave it regression value, it is to separate the chain of blocks from the small transactions. So what are the options #Bitcoin has to give it regression value in small transactions as it was during its first years? Let's say you can increase the size of the blocks, or resign to delegating that regression value in small transactions to other faster and cheaper currencies to use like #BitcoinCash. We could say that #BitcoinCash has all the characteristics that Bitcoin originally had, therefore it is closer to its original regression value.
3 comments
In my humble opinion, this is the least interesting lesson from Mises, who was a giant otherwise and well worth reading. I think the theory is wrong. The reason is firstly, if conditions change and people are confused of the right price of something, they don't have to look to yesterdays price for a clue, the only thing needed is for one brave individual to offer something for a price, or offer a price for something, then see what happens. Also it has been proven wrong by bitcoin, which was money from day one in the minds of the few holders and the few others who knew about it. Even if the coin value took some time to be discovered. If that is a problem, at least it was not used for some other purpose in the period from inception until the value was established.
I understand your point, I personally feel closer to Menger than Mises about money, although I appreciate that mises breaks the circular thinking problem that money is worth because they simply demand it (Mises tries to show reasons for their demand for money). However I think Mises's problem was that he believed that gold was commodity money because it is consumed as jewelry (an error repeated by Peter Schiff tirelessly), but Menger a gold coin or bullion is a commodity precisely because it is not consumed.
I agree totally with your points. Schiff believes it is the future consumption of gold that gives it its present value, which is nonsense