WASHINGTON, D.C. — There was a great piece in the satirical news source the Onion a few years ago in which it "reported" that Fed Chairman Ben Bernanke experienced a moment of existential panic during a congressional hearing as he paused, shook his head and said, "It's just an illusion. Just look at it: meaningless pieces of paper with numbers printed on them. Worthless."
Sayeth the Onion headline: "U.S. Economy Grinds to Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion."
Which brings us to bitcoin. It is a digital currency, which a certain variety of techno-utopian futurists view as a form of money unencumbered by the shackles of privacy-reducing international anti-money-laundering laws and inflation-tolerant central banks. Its value has been extraordinarily volatile over the past several weeks, rising from $20 a couple of months back, to over $250, back to around $60 on Friday, with a couple of trading halts in between.
Bitcoin really is a tiny market in the scheme of things, and its recent gyrations mean that the dollar, euro and yen have nothing to fear from the competition. If a currency can lose 75 percent of its buying power in two days, it may not be the best store of value. But it's also an important window into the strange and uncomfortable mystery of "What is money," which is a harder question to answer than one might think.
We can all agree that the dollar bills in my wallet are money, as are the quarters and dimes in the jar on my dresser. So are the funds deposited in my checking account. The investment I have in a money market mutual fund probably counts, too; after all, I can write a check from that account and use it to buy things. Gold isn't money, but it can be readily traded for money, so it can be a reasonable substitute. My refrigerator is definitely not money; even though it has value, it would be a lot harder than gold to convert it into money if I fell on hard times.