I'm not an economic historian, but one of the things I remember from medieval and early-modern economic history is that as European economies converted to cash economies, inflation and ultimately bubbles appeared on the scene.
Before that, only the vagaries of weather really changed things. In other words, if your rent is 200 bushels of barley on your 25 acres of land, all that matters is the productivity of your land.
Once you go to cash, anything can get overvalued, whether gold, real estate or tulips. I would think of common and useful commodities, like copper, as safest, meaning that it can't go to zero, but just in the last five years we've seen prices as low as about $1.50/lb and as high as $4.50/lb
But the value of a currency is ultimately like a stock, so its current value is a measure of confidence in its future value and I would think that would be true of government sanctioned currencies as well as alternative currencies.
So, if it's not too convoluted to say it this way, I guess the question would be how confident are you in the confidence that others will have in the future of bitcoin?
Me, I think this stuff will be jetisoned like Confederate dollars if things go bad, but like you, it blows me away that Second Life even exists, so what the hell do I know.
