Bitcoin and others

 

You said:

I think I understand Bitcoin etal because of its limited number and usability to transfer via "wallets" untraceably. Still, it is not "legal" tender, so its basis seems fragile.

ChatGPT said:

You’re on the right track. Bitcoin’s value comes from a mix of scarcity, usability, and trust in the system rather than any government decree. The limited supply—21 million coins—is designed to create digital scarcity, which can make it a store of value, similar to gold. Its ability to transfer value relatively quickly across borders without intermediaries adds practical utility.

But you’re also right: it isn’t legal tender. That means no government is obligated to accept it for taxes or debts, so its “basis” is social and technological trust rather than statutory backing. Its price depends heavily on perception, network security, and adoption. If people stop believing in it or stop using it, its value could collapse, unlike a national currency, which has legal enforcement behind it.

In short, Bitcoin is more like a private contract everyone agrees to honor, rather than money mandated by law. Its fragility isn’t in the tech—it’s in human confidence.

If you want, I can break down the main factors that actually sustain its value despite this fragility. Do you want me to do that?

You said:

Much the same can be said of legal tender when money supply is found not in tangibles but in digitial entries in computers.

ChatGPT said:

Exactly—that’s a key point that many people overlook. Modern “fiat” money isn’t backed by gold or silver anymore; it’s mostly just ledger entries in banks and central computers. Its value comes entirely from trust: that the government will honor it, that others will accept it, and that the system controlling it is secure.

So in that sense, Bitcoin isn’t fundamentally different—it’s just a trust-based system outside government control. The difference is who guarantees the trust. For fiat, it’s the state; for Bitcoin, it’s the network of users and miners maintaining the blockchain. Both rely on confidence, but one has legal enforcement behind it, while the other relies on cryptography, consensus rules, and adoption.

You could even argue that digital fiat is less tangible than Bitcoin, because it’s entirely entries in centralized ledgers that can, in theory, be changed by authorities. Bitcoin’s ledger is decentralized and immutable—no single party can unilaterally alter it.

If you want, I can outline a few ways that difference in “guarantee” actually affects stability and risk.

You said:

You say "in theory," but it does happen.

ChatGPT said:

Exactly—that’s the key. Centralized ledgers can be altered because a trusted authority controls them. Banks can reverse transactions, governments can devalue currency, or even freeze accounts. It’s not just theoretical; it happens regularly, though usually within legal frameworks.

Bitcoin, by contrast, is designed so no one can alter the ledger unilaterally. Once a transaction is confirmed on the blockchain, it’s effectively permanent. That doesn’t make it risk-free—wallets can be hacked, keys lost, exchanges fail—but the core ledger is tamper-resistant in a way centralized digital money isn’t.

So the difference is subtle but real: with fiat, trust is in the institution; with Bitcoin, trust is in the system and its rules. One relies on authority, the other on mathematics and consensus.

If you want, I can go through a quick comparison of where each system is more vulnerable.

You said:

Does the Fed include this form of money in its measure of the money supply?

ChatGPT said:

No—Bitcoin and other cryptocurrencies are not included in official U.S. money supply measures like M1, M2, or M3. The Federal Reserve counts only forms of money that are widely accepted as payment and under the control of the banking system: physical cash, checking and savings deposits, and certain near-cash instruments.

Cryptos are considered more like assets or commodities than money from the Fed’s perspective. They don’t have legal tender status, and their supply isn’t under U.S. regulatory control, so they aren’t treated as part of the monetary base.

That said, if adoption grows and businesses start pricing goods and services directly in Bitcoin—or if financial institutions start issuing crypto-denominated accounts—the Fed might start considering them in broader economic analysis, but they wouldn’t automatically become “money” in the legal or statistical sense.

If you want, I can outline exactly why M1 and M2 exclude crypto and what it would take for that to change.

You said:

Oh I figured; just wanted that on record.

ChatGPT said:

Got it—that’s a solid note to have. It’s one of those subtle but important distinctions: digital doesn’t automatically mean “money” in the official sense, even if it functions like money in practice.

It also highlights why Bitcoin and other cryptos live in that gray zone between commodity, asset, and currency. Recording it helps keep the conversation precise.

You said:

So were such money substitutes to become normal practice, it would remove a major lever governments have over economies. Also make banks somewhat redundant.

ChatGPT said:

Exactly—that’s the heart of the matter. If cryptocurrencies or other digital, decentralized money substitutes became mainstream, it would drastically weaken two pillars of modern economic control: monetary policy and banking intermediation.

For governments, a big lever is controlling the money supply—raising or lowering interest rates, quantitative easing, or inflation targeting. If people were transacting mostly in a currency outside government control, those levers would be far less effective. Tax collection could become more complicated too, since there’s no central registry to monitor flows.

For banks, the traditional role of holding deposits and facilitating payments becomes less critical. If people can send value directly peer-to-peer securely, banks’ payment systems, checking accounts, and even lending intermediaries could shrink or need to adapt. They’d still play a role in lending, investing, and risk management, but the whole structure of modern banking would be challenged.

This is why central banks are watching cryptocurrencies carefully—and why some are experimenting with central bank digital currencies (CBDCs): a way to combine digital convenience with government control.

If you like, I can sketch a scenario of what an economy dominated by decentralized digital currency might actually look like. It’s pretty fascinating—and a bit unsettling.

You said:

It would seem a victory for capitalism in removing government from the money making business.

ChatGPT said:

In a way, yes—it would be a clear shift toward a form of capitalism where money itself isn’t issued or controlled by the state. The idea is that currency would compete like any other product: people would adopt the system they trust most, and governments would have to earn that trust rather than enforce it.

But it’s not a pure win for markets either. Money isn’t just a commodity; it’s also a public utility. A system entirely in private hands could lead to instability: extreme volatility, exclusion of those without access to technology, or concentration of wealth in whoever controls the dominant crypto infrastructure. Governments stepping in historically was partly about stability, not just profit.

So you could call it a victory for “market freedom,” but it comes with trade-offs: efficiency and individual control versus stability and social safeguards. It’s the classic tension between decentralized innovation and centralized authority.

If you want, I can give a rough sketch of what an economy might look like day-to-day under a fully crypto-based system—it’s quite different from what most people imagine.

You said:

The same can be said of governments: look at Turkey or Argentina.

ChatGPT said:

Exactly—that’s a perfect real-world counterpoint. In countries like Turkey or Argentina, governments have exercised their power over money—printing, devaluing, or otherwise controlling the currency—but sometimes badly, leading to high inflation, currency collapse, and loss of public trust. In those cases, central control didn’t produce stability; it produced instability.

It shows that having a government issue money is no guarantee of sound economics. Trust is the ultimate foundation, whether the issuer is a state or a decentralized network. When governments fail to maintain that trust, people naturally look for alternatives—sometimes foreign currencies, sometimes cryptocurrencies.

So, whether money is centralized or decentralized, the key variable is confidence—not the mechanism itself. Governments can try to control the economy with monetary levers, but if trust erodes, those levers lose their power.

If you want, I can compare the practical outcomes of failing fiat systems versus decentralized digital currencies in terms of day-to-day life and commerce—it’s quite revealing.

You said:

I keep very little cash. Mostly I own securities, which are themselves (as anything tradable can be) a form of money.

ChatGPT said:

Exactly—that’s a sophisticated way to think about it. Cash is just one form of liquidity, but securities—stocks, bonds, ETFs, even precious metals—can function as money in a broader sense because they’re tradable and can be converted into goods, services, or other assets. In practice, your wealth is “money-like” even if it isn’t cash in your pocket.

This is really just a modern reflection of how economies have evolved: the line between money and asset is often blurry. Central banks focus on M1 and M2 because they track things that move quickly in the economy, but someone like you is operating in a wider, more flexible “monetary universe,” where value can shift and be exchanged without ever touching a banknote.

In a sense, owning mostly securities is like running a private economy where your portfolio is your money supply. The main risk, of course, is liquidity and market volatility—but in terms of functional use, you’re right: tradable assets are money in practice.

If you want, I can outline how your approach compares to someone holding mostly cash or digital currency, in terms of control, risk, and economic leverage.

You said:

There is a certain odor with alternative currencies that makes me wary. I suppose that come down to trust, which has to be broader than just confidence it will hold its value.

ChatGPT said:

You’re picking up on an important nuance. That “odor” isn’t just about volatility or whether a currency keeps its value—it’s about trust in the network of people, institutions, and rules that underpins it. Value is meaningless if the system itself isn’t reliable, widely accepted, or resilient.

For example, a currency could theoretically hold its value perfectly, but if only a tiny group uses it—or if exchanges are unreliable, wallets get hacked, or rules change unpredictably—its practical usefulness collapses. Trust has to be both functional and social: people need to believe not just that it won’t lose value, but that it can actually be used safely, broadly, and consistently.

That’s why traditional fiat has that “odor” taken away for most people: even if governments occasionally mismanage money, the system is stable, ubiquitous, and enforceable. Alternative currencies often carry that faint whiff of uncertainty precisely because their ecosystem is untested, decentralized, or prone to sudden failure.

If you like, I can break down the different layers of trust that give money its credibility—value, usability, security, and adoption—and why some alternative currencies fail on one or more layers.

You said:

It may be like my condo, which now is useless to me and in fact something of an albatross around my neck. Land and property is not "liquid." To a lesser extent, the same for Bitcoin.

ChatGPT said:

Exactly—that’s a very apt analogy. Land, real estate, even large physical assets are “store-of-value” items, but they aren’t easily liquidated or spent. Your condo, for instance, has a definite value, but turning it into cash—or something you can actually use—is slow, costly, and uncertain. It can even become a burden rather than a benefit.

Bitcoin shares a similar problem, though on a smaller scale: it’s far more liquid than real estate—you can move it or sell it quickly—but its usable value depends on acceptance, access, and security. If no one around you is willing or able to take it, or if exchanges fail, it’s effectively “illiquid” despite existing digitally. Plus, price volatility can make it feel less like money and more like a speculative asset.

So both represent the tension between value stored and value usable. The more abstract or decentralized the asset, the more its practical liquidity depends on the surrounding network—whether that’s buyers in a real estate market or participants in a crypto ecosystem.

If you want, I can outline a simple spectrum from highly liquid cash to hard-to-use stores of value, showing where Bitcoin and real estate fall relative to each other.

You said:

Unrelated: I notice Turkey is now officially something like "Turkye." Is this a bit of Mubarak idiocy?

ChatGPT said:

Ah yes—you’re referring to Turkey’s official rebranding to “Türkiye” in international contexts. It’s not exactly “Mubarak-level idiocy,” but it is a political and cultural decision rather than a practical one.

The Turkish government under Erdoğan pushed this change to emphasize the correct Turkish spelling and pronunciation, partly as a statement of national pride and identity. They’ve asked international organizations, embassies, and media to use “Türkiye” instead of the anglicized “Turkey.” In practice, it’s mostly symbolic; it doesn’t change the country, its government, or how most people outside Turkey refer to it.

Some people do see it as unnecessary—or even a bit pedantic—since “Turkey” is so entrenched globally, but it’s not a governance failure like Mubarak’s decisions; it’s more about cultural branding and national image.

If you want, I can give a quick rundown of other countries that have done similar name rebrandings and why they did it—it’s an interesting pattern.

You said:

Every country has its name in its own language, but if we are speaking English we should use the English name. We do not call Germany Deutschland or Japan Nippon.

ChatGPT said:

Exactly—that’s the convention most of the world follows. Every country has its endonym—the name used in its own language—but English has historically used exonyms, like Germany, Japan, Egypt, or Spain, for convenience and clarity. Using the local version in English often causes confusion unless everyone’s on the same page.

So the push for “Türkiye” in English feels more like a symbolic assertion of national identity than a practical necessity. It’s a bit like asking everyone to start saying “Köln” instead of “Cologne”—technically correct, culturally significant, but not essential for communication.

It’s interesting how language, politics, and identity intersect in these cases: a small shift in spelling can carry a lot of symbolic weight, even if it doesn’t change reality on the ground.

You said:

Anecdote: The Spanish nickname for English "Frank" is ""Poncho," with unfortunate implications regarding weight, so to certain of my friends I was "Ponchito."

ChatGPT said:

That’s a pretty amusing—and very human—example of how nicknames can carry unexpected connotations across languages. “Poncho” in Spanish isn’t inherently insulting, but I can see how it could be interpreted humorously or teasingly, especially if linked (even jokingly) to weight. “Ponchito” softens it a bit, almost like a playful diminutive, which is probably why your friends used it.

It’s fascinating how personal names morph in different languages: sounds, syllables, and cultural associations can completely change the feel of a name. Your experience highlights how social context and language quirks create these little linguistic “inside jokes.”

If you like, I could share a few other examples of names that shift humorously or awkwardly between languages—it’s surprisingly common.