Paul Singer is the manager of the $23 billion Elliott Management hedge fund. In a recent letter to investors in the fund, he expressed bearish sentiments on bitcoin, while remaining bullish on gold despite its recent fall in price. Wrote Singer:
There is no more reason to believe that bitcoin will stand the test of time than that governments will protect the value of government-created money, although bitcoin is newer and we always look at babies with hope. If you want an alternative currency, check out gold. It has stood the test of thousands of years as a store of value and medium of exchange. Better yet, it is not just a computer entry in the ether somewhere, and it is currently available at a good price. Bitcoin and its relatives represent an understandable impulse (anti-big-government, pro-freedom, pro-modernity), but we do not see how it actually survives. . . . We think that gold is a unique investment asset, the only real money that has stood the test of time throughout recorded history. With its durability, finite and difficult-to-extract supply and natural allure, it is a store of value that should be particularly attractive at a time when monetary debasement is the major policy practiced by most developed countries to keep their economies afloat.
Whether or not Bitcoin survives and whether gold returns to favor among investors and, eventually, to its traditional monetary role are, of course, purely empirical questions, which cannot be solved by theoretical arguments. At the moment both are valuable commodities and neither one can be considered as money. Thus, tedious arguments on the blogosphere which invoke Ludwig von Mises’s regression theorem, are completely irrelevant to the issue. Both items are scarce commodities which are valued by consumers and command a price on the market. As such, the regression theorem does not prevent bitcoin from being monetized or gold from being re-monetized in the event or anticipation of a fiat-money breakdown. Rather, it is a matter of human valuations and volition which are not determined by economic law. In this matter, our only guides are historical experience and what Mises called “thymological” insight into people’s likely choices under varying circumstances. Will the general public trust and routinely accept a commodity embodied in lines of computer code or a tangible commodity that has served for millennia as the general medium of exchange? Hmmm, I wonder.
