The Money Regression and Emergence of Money from the Barter Economy
The entire purpose of the regression theorem was to help explain an apparent paradox of money: how does money have value as a medium of exchange if it is valued because it serves as a medium of exchange? Menger and Mises helped break this apparent circularity by explaining the essential time component missing from the phrasing of the paradox.
Hello,
Menger did not detect any circularity at all. That circular question is falacious because it would apply to any economic good, for example: How does bread have value as food if it is valued because it serves as food?
Regression theorem was a missused Menger´s origin of money to develop his regression theorem, and he developed the regression theorem because he could not tolerate how fiat money was defeating commodity based money.
But the truth is that monetary utility is valuable enough by itself. There is no need to any previous link. Bitcoins are money because they have good monetary properties and because they are present goods (i.e. they are not anyone else´s liability).
I´ve written a short post about this:
http://eleconomistaprudente.wordpress.com/2011/06/06/bitcoins-and-mises%C2%B4s-regression-theorem/