A Comparison of Monies

by Carl Watner and Dave Scotese1
From Issue 174 – 3rd Quarter, 2017

 

Real Money        Counterfeit Note2   Federal Reserve      Note  Bitcoin        
What is it?    Coins of gold or silver    Piece of paper  Piece of paper  Generated by computer  software
What is its essence?    A specific weight and purity of  precious metal    Paper with ink  Paper with ink  sanctioned by  government  

A cryptographic credit  for  protecting transaction  data

How is it  made?  Made from a metallic element      found in nature  Fabricated from a  man-made product  without government  sanction  Fabricated from a  man-made product at  government-approved  printing facilities  Generated by computer    algorithms within            predetermined limits
 

What non-monetary uses does it have?

 Industrial and ornamental uses  make it valuable to people  Has no use except      as  paper  Has no use except         as  paper    None
 

How do multiples compare to   the original unit?

 

 Multiples have proportionally  greater weight than originals  Multiples have  different numbers  printed on the same  amount of paper  Multiples have  different numbers  printed on the same  amount of paper  Multiples are generated  by the same method as  originals
Is acceptance forced or voluntary?  Voluntary: historically a medium    of exchange for at least  5,000   years  

Functions as a  medium of exchange  until its false nature    is  discovered

 

 Functions as a      medium of exchange    by  government edict    (legal tender laws)  Voluntary: trading began  in 2009 after the creation  of the computer software
On what      does its exchange   value     depend?  Exchange value depends on supply  – as determined by the amount  mined, and demand. Its exchange  value has exhibited a remarkable  stability over centuries.  Presumed exchange  value decreases with  amounts created at  the whim of the  counterfeiter  Presumed exchange  value decreases with  amounts created  by  the  Federal Reserve  

Exchange value is    determined by the market  participants with reliance  on the creation schedule  of its finite supply

What special requirements must be met    to use or accept it?  Accepted by many millions of  people all over the world,    generally  without hesitation  Accepted until its  counterfeit nature      is  discovered  Accepted until    confidence in the  issuing government  evaporates  

Must have appropriate  internet connection and  computer software or  trust someone who does

 

Is there           risk of counterfeit?  Yes, but harder to counterfeit than  paper notes. See footnote 2.    100% risk  Cannot be  distinguished from a  perfect counterfeit  Computer    authentication makes it  impossible to spend  attempted counterfeits

 

1An expansion of “A Comparison,” first published in Issue 115 (4 th Quarter 2002), page 8.
2This comparison only includes counterfeit paper notes, not attempted fakes of metallic coins. During the heyday of real money, numerous devices, described as counterfeit or fake money detectors, existed. In the United States the “Gold Prohibition Act of 1934 calling for the confiscation of all gold coins, except those considered ‘rare,’ marked the disappearance of the fake coin detector.” Their modern counterpart is available through Fisch Instruments. See www.thefisch.com and THE FISCH PRECIOUS METAL BUYERS GUIDE, 6th Edition, July 2012, page 5
.