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The reason to back a currency with gold or some other commodity is that the commodity has other utility aside from being used as money. This sets a floor on the price, making it a store of value.
Utility is not a necessary aspect of money. Only 5-10% of gold's value is tied to its industrial use (https://www.statista.com/statistics/299609/gold-demand-by-industry-sectorshare/#:~:text=The%20jewelry%20industry%20accounted%20for,China%2C%20Russia%2C%20and%20Australia). Another 40% is used for jewellery.
This floor is not so reassuring if the asset were to plummet 50%. Other commodities, such as silver, have a greater industrial utility. That makes it less suitable as money since its value becomes tied to commodity cycles.
The reason to back a currency with gold or some other commodity is mainly due to its scarcity, which puts a limit on money creation (done through fractional reserve banking).
Are you asking if there can be correspondence between two abstractions? Or between a physical object and an abstraction?
Only 5-10% of gold's value is tied to its industrial use (per chatgpt).
ChatGPT is notoriously unreliable and known for making stuff up. I recommend using a different, human-made source. Should be easy to find one using your search engine of choice.
Superseded by #2414. This comment was generated automatically.
In a gold standard society, gold doesn't need to be backed by anything. The same would be true for Bitcoin and Zcash. The US Federal Reserve Notes used to be backed by gold to prevent excessive money creation, gold itself, Bitcoin and ZCash won't need to be backed by anything due to their inherent scarcity.
The reason to back a currency with gold or some other commodity is that the commodity has other utility aside from being used as money. This sets a floor on the price, making it a store of value.
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The reason to back a currency with gold or some other commodity is that the commodity has other utility aside from being used as money. This sets a floor on the price, making it a store of value.
- Utility is not a necessary aspect of money. Only 5-10% of gold's value is tied to its industrial use (per chatgpt). This floor is not so reassuring then if the asset would plummet 90-95%. Other commodities, such as silver, have a greater industrial utility. That makes it less suitable as money since its value becomes tied to commodity cycles.
The reason to back a currency with gold or some other commodity is mainly due to its scarcity, which puts a limit on money creation (done through fractional reserve bankning).
The reason to back a currency with gold or some other commodity is that the commodity has other utility aside from being used as money. This sets a floor on the price, making it a store of value.
Bitcoin and Zcash have no utility beyond their transferability. The only way either would ever be money is if a government made it their legal tender, forcing transactions to be done with it exclusively.
To use US Dollar as an example again, the only reason it is money is that it has the alternative utility function of being the only thing the government will accept for tax payments. In that sense it is the only currency that keeps you out jail if you use it in its designated geographical area (!). If that weren’t the case then people would quickly swap to using something else—something that isn’t being manipulated by the government.
(To prevent any confusion, please understand that I believe governments should be completely agnostic to how people carry out their transactions, including allowing them to use any currency and even old-school barter if they wish.)
TL;DR The only way for the US Dollar, or Bitcoin, or Zcash (or any other unbacked currencies) to be useful as money is if a government makes them legal tender, and prohibits anything else being used in transactions.
You misunderstood my criticism. I said the US Federal Reserve Notes used to be backed by gold, not that the gold itself was backed by something.
Thanks. Do you think there's correspondence for abstractions as well (such as mathematics, as DD seems to suggest)? As I understood, you only think we need it to explain progress in science.
In a gold standard society, gold doesn't need to be backed by anything. The same would be true for Bitcoin and Zcash.
See here. Lucas had asked:
Can you say more about why we need correspondence to make sense of the concept of self-similarity? I don't see why. And it seems to me that self-similarity is all we need to make sense of the universality of computation.
My response below. For others reading this, Erik has also since started a dedicated discussion on the topic of correspondence: https://veritula.com/discussions/is-correspondence-true-in-cr
The FoR glossary entry on self-similarity from chapter 4 reads:
self-similarity Some parts of physical reality (such as symbols, pictures or human thoughts) resemble other parts. The resemblance may be concrete, as when the images in a planetarium resemble the night sky; more importantly, it may be abstract, as when a statement in quantum theory printed in a book correctly explains an aspect of the structure of the multiverse.
The way I read that, it means the images in the planetarium correspond to the night sky. Otherwise we wouldn’t consider them similar.
From chapter 6, on the universality of computation and how “various parts of reality can resemble one another”:
The set of all behaviours and responses of that one object exactly mirrors the set of all behaviours and responses of all other physically possible objects and processes.
That means there is one-to-one correspondence between the behaviors and responses of the first object and those of all the other objects. This is basically another way to describe the self-similarity property of the universe.
From chapter 10, in the context of mathematics (italics mine):
… the physical behaviour of the symbols corresponds to the behaviour of the abstractions they denote.
(The same is true of the physical parts of a Turing machine harnessing the self-similarity property of the universe to correspond to other physical objects.)
From chapter 14, in the context of the creation of scientific knowledge (which, AFAIK, DD views as increasing correspondence):
The creation of useful knowledge by science … must be understood as the emergence of the self-similarity that is mandated by a principle of physics, the Turing principle.
It’s been ages since I read FoR so I’m relying on word searches in the ebook but it’s full of these links between self-similarity and correspondence.
a knowledge
I don’t think it’s correct to use the word ‘knowledge’ with an indeterminate article (meaning ‘a’ or ‘an’).
You could say ‘Finding problems that some knowledge addresses…’
At the same time, there is a notion that I want to address that flows from fallibilism, and the reason decentralized 'things' tend to be more truth seeking. Even though a given knowledge has solved problems we haven't yet discovered, we still got that solution by solving a problem we encountered, and we can't solve problems we haven't encountered. When we try to solve a problem, we might find out that we've already solved it, but that only happens after we have looked at the problem.
Presumably, Zelalem wanted to delete the idea. Veritula purposely doesn’t have that functionality. In the future, Zelalem, just leave the idea and criticize it for being outdated or superseded or whatever reason you have for rejecting it.
When we try to solve a problem, we might find out that we've already solved it, but that only happens after we have looked at the problem.
That still means we solved the problem before we encountered it.
I understand you want to stress that we usually solve a problem after we identify it. Your text already covers that. So I’d still just remove the sentence “We can't solve a problem we haven't encountered yet.” because it’s not true.
Finding problems that a knowledge addresses is a form of new knowledge.
Maybe not. Figured that out as I was typing. The knowledge isn't new.
Finding problems that a knowledge addresses is a form of new knowledge.
Maybe not. Figured that out as I was typing. The knowledge isn't new.
Superseded by #2396. This comment was generated automatically.
At the same time, there is a notion that I want to address that flows from fallibilism, and the reason decentralized 'things' tend to be more truth seeking. Even though a given knowledge has solved problems we haven't yet discovered, we still got that solution by solving a problem we encountered, and we can't solve problems we haven't encountered. When we try to solve a problem, we might find out that we've already solved it, but that only happens after we have looked at the problem.
At the same time, there is a notion that I want to address that flows from fallibilism, and the reason decentralized 'things' tend to be more truth seeking. Even though a given knowledge has solved problems we haven't yet discovered, we still got that solution by solving a problem we encountered, and we can't solve problems we haven't encountered. When we try to solve a problem, we might find out that we've already solved it, but that only happens after we have looked at the problem.