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Krugman On Bitcoin and the Gold Standard
twoallbeefpatties writes "Prominent Keynesian economist Paul Krugman has left a note on his blog at NYTimes about his view of Bitcoin, discussing its similarity to the gold standard and suggesting a drop in 'real gross Bitcoin product' as its users hoard the currency rather than spend it."
I know I'm a little late to the game, but last month I decided to invest in Bitcoin mining. It works pretty well if you join one of the largest pools. You get payments every day. There's no sense to mine alone, but with a pool it works well. CPU mining is a thing in the past too - you need AMD graphics card to do it.
I'm currently profiting around $100 a day, depending on that days exchange rate. My setup is 24x AMD 6990 gfx cards on 8 computers. The overall cost to build them was around $20 000. They don't really have any good processor or other parts yet, but I plan to add those later. I don't have electricity costs as I take it from the hallway. I had to buy UPS and set up an alarm system tho, as sometimes neighbors are just being dicks and take it off, but it's enough to keep it running for ~5 mins and that's enough time for me to put it back in.
So overall I think Bitcoin is great. I make nice cash that I turn pure profit soon, I got good amount of awesome computers and it's an interesting thing to follow. It also made me more interested about Forex and stock trading and other financial stuff, which I think I will move onto when Bitcoin mining gets too hard.
This oughtta be good for at least 50 Libertarian ragers ragging on Keynesian economics, and 100 or so knock-on posts of rebuttald and counter-rebuttals. Throw in another 50 "bitcoin slashvertisement" complaints and carefully crafted trolls. You've got yourself 200 posts or so, not including this one, and some nice pageviews. Keep the ad revs rollin' in.
You are making bitcoin into something important and noteworthy and it is not.
No wonder taco left.
In the one-in-a-billion chance that 20 years from now the entire world's economy is being transacted in bitcoins, you'll be a multibillionaire.
If you think the odds of Bitcoin taking over the world (or even replacing PayPal for ecommerce) are one-in-a-million, owning one whole bitcoin is a lottery with a 1000:1 payoff. If you think it's a one-in-a-billion event, it's a coin flip. If you think it's a one-in-a-trillion event, buy a Big Mac instead.
With CmdrTaco gone and Slashdot linking to Paul Krugman I suspect the end is nigh for this once might weblog.
Qualifying Krugman as a "prominent Keynesian economist" is like calling Stephen Hawking a "prominent Einsteinian physicist". I call shenanigans.
Because for what is more or less a scam, they get waaaaay more than their expected share of advert... err, stories here.
Glen Beck likes Goldline Gold
By "discussing its similarity to the gold standard" the summary means "he points out one way Bitcoin is flawed." Specifically, that people hoard it instead of spending it (creating an unstable monetary system). Fewer transactions actually means less value, since the whole point of a monetary system that lacks intrinsic value (gold at least had that) is that it gets spent. Since the amount of Bitcoins is limited, and as time goes on the early adopters get "richer" (since less is being mined), they have an incentive not to spend. But the system will only succeed if they do spend and create a thriving system.
This is a massive gaping flaw in Bitcoin that I haven't seen pointed out yet. It means that Bitcoin will nearly always be a deflationary system. It also requires people to keep investing computing time, while their return on investment only gets less and less over time, and early adopters have no reason to spend, creating fewer transactions to be verified. And this can't be fixed: the limit to the number of Bitcoins is builtin to the system and cannot be changed.
So to everyone going "not another Bitcoin story!": read it. It actually points out a way that Bitcoin is (possibly) flawed (unlike so many of the stories on /.) And from a real economist, too.
"None can love freedom heartily, but good men; the rest love not freedom, but license." --John Milton
So at the beginning of the article he says, "In effect, Bitcoin has created its own private gold standard world, in which the money supply is fixed rather than subject to increase via the printing press."
Which is seriously wrong. The money supply is nowhere near fixed. How can his opinion on this be valid when he doesn't have an understanding of what he's criticizing in the first place?
Why do people care about what Krugman has to say? This is the guy who believes that destruction of wealth is the necessary stimulus that USA needs and that it would be great to have destruction even if by wars or natural disasters?
He believes there is a real difference in economics between 'micro' and 'macro', which is same nonsense as when the same differences are applied to evolution, so if you ask him - would he like his own house to be destroyed by a tsunami/tornado/flood, I am sure he'd answer - no. It's not good when done to a particular person. Only entire nations need to suffer altogether in wars and alien invasions.
This is guy is a Keynesian charlattan, he has nothing to do with economics, but his type of 'economics' is pervasive, because the politicians love these guys. The politicians invite these sort of 'economists' to be in the white house to help with policy, and this is the kind of help you get, while the universities then decide to have only these kinds of 'economists' propagate this nonsense further, so you end up with only Keynesian ideology in higher education. Thus all the underlying problems in the economy - because politicians use this charlatanism to give excuse for their only real agenda - stealing your money.
OK, from TFA:
What we want from a monetary system isn't to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that's not at all what is happening in Bitcoin.
- that's the problem. The entire fiscal policy of USA destroys the value of savings by inflation and this is what destroys the economy.
Bear in mind that dollar prices have been relatively stable over the past few years â" yes, some deflation in 2008-2009,
- RELATIVE TO WHAT, YOU DUMBO? Relative to other flawed currencies? :) Well, not to Swiss Franc. Not to Canadian dollar. Not to NZ dollar. Not to Australian Dollar.
Besides, 2008-2009 is a TERRIBLE time to compare, as too many people completely misunderstood what was happening in the real economy and plunged head first into the dollars, which was the absolute wrong thing to do (and it is wrong thing to do now too, but now people understand it. Look at kitco.com) Too many people actually think that Keynesian charlatanism is economics, so they fall in this trap of following completely wrong ideas.
Anyway, yes, it's deflation of assets in real terms, so in terms of gold/silver assets are falling in price. It's cheapest gasoline ever today - under 10cents for a gallon, but those are silver cents.
But the inflation is in dollars, which is why real money is going up.
then some inflation as commodity prices rebounded, but overall consumer prices are only slightly higher than they were three years ago. What that means is that if you measure prices in Bitcoins, they have plunged; the Bitcoin economy has in effect experienced massive deflation.
- GOOD. Good for those who hold Bitcoins. Bad for those who hold dollars.
And because of that, there has been an incentive to hoard the virtual currency rather than spending it. The actual value of transactions in Bitcoins has fallen rather than rising. In effect, real gross Bitcoin product has fallen sharply.
- This Keynesian wants you to be poor, do you understand that?
He wants you to pay 3.50USD for your gas, and BTW, he doesn't think it's high enough. They have a target to make it much higher. But he doesn't want you to pay 10 cents for that gallon.
So to the extent that the experiment tells us anything about monetary regimes, it reinforces the case against anything like a new gold standard â" because it shows just how vulnerable such a standard would
You can't handle the truth.
While bitcoin is quite interesting from a cryptography point of view, it totally fails to address human nature.
In particular, GREED.
2 years ago it was trivially easy to mine 100s of bitcoins. Hell, you could by 1000 for less than a happy meal. Now people sit on those coins, hoping that bitcoin will become a mainstream currency, in which case the value of a bitcoin would need to rise by many orders of magnitudes. If it reached a capitalization compareable to the USD, that bigmac would become equivalent of $25M.
And there are people around with a much much larger fraction of possible bitcoins than there were ever for any real currency. And the deflationary nature of it will mean that the value of those horders (and thus their economical power) WILL have to grow in case of a success of bitcoin.
HI O WISE PRINCE. WHT TOOK U SO DAM LONG?
Trust me (and I know this sounds funny coming from an AC), this particular story is totally worth reading at -1 moderation, because that's where the best comments will be.
However, they try to do so with a bit more subtlety than Adams' imagined Golgafrinchan macroeconomists.
And immensely more subtlety than our friend the OP, whom is utterly delusional. Encouraging currency hoarding rates roughly up there with Caucescu's "export everything" policy as the silliest economic policy idea of all time.
Any sufficiently advanced technology is indistinguishable from a rigged demo
--Andy Finkel (J. Klass?)
is the digital implementation of the 1800 con with the same name.
The Kruger Dunning explains most post on
Paul Krugman?
Is this the same guy that said we should fake an alien invasion in order to fix the US Economy?
Is this the same guy that in 2002 that the federal government should create a housing bubble in order to recover from the dot com bubble?
If any one still thinks this guy isn't a lunatic, I have a bridge in Brooklyn I'd like to sell you.
History also shows that Keynesian policies can fail to address an economic crisis. This led some Keynesian advocates to rethink things, including the often ignored "future" costs and unintended consequences of "today's" Keynesian stimulus, and develop the approach of Monetarism.
http://en.wikipedia.org/wiki/Monetarism
Is Keynesian theory wrong, not quite, just incomplete. Not a universal solution. Its like physicists moving from Newton to Einstein. Its not that Newton was "wrong", he just had an incomplete understanding and methods that were often useful but universally applicable.
At the current difficulty (you know what that means if you mine bitcoins) and the current rates of kW-hours in the US, it would take about $0.35 of electricity to generate $0.02 of bitcoins. The cost of power if the main cost of generating. There has been a steady decline in the exchange rate of bitcoins in the past month and at the same time a steady decline in the difficulty. These two are supposed to be inversely proportional. The only conclusion I reached was that the proportion of bitcoins generated with stolen cycles or stolen power is rising. Not coincidentally, there was recently a report of increasing use of botnets for bitcoin generation (that would be the increased number of stolen cycles). Apparently, people with access to electricity paid through commons are contributing to the generation of bitcoins from stolen electricity.
Any guest worker system is indistinguishable from indentured servitude.
Qualifying Krugman as a "prominent Keynesian economist" is like calling Stephen Hawking a "prominent Einsteinian physicist".
I call shenanigans.
That analogy would make sense only if the theories of John Maynard Keynes were as universally accepted as those of Einstein. Economics never has been and probably never will be as testable a science (if it's a science at all) as physics.
Actually Keynesian theory would be more akin to Newton's. Sometimes useful, but it can fail under some circumstances. As Newton's followers went on to refine things with Einstein's theories, some of Keynes' followers went on to refine things and came up with Monetarism.
http://en.wikipedia.org/wiki/Monetarism
Bitcoin is the equivalent of a nations currency that has been printed by individuals by permission.
This fact alone is its undoing.
Your GPU's do not constitute value. Nobody will accept the fact that you are a bitcoin millionaire simply because you let a few unused computers run for a few months.
I am very small, utmostly microscopic.
Krugman strikes me as a man with two personalities.
There's "Dr." Krugman, the man that won awards for his work showing the importance of free trade. And then there's "Mr." Krugman, who is a democratic party partisan and has, over time, put forth views that are near opposite of Dr. on his NY Times column and blog.
Sadly, in this column on gold and bitcoin, it is Mr. Krugman doing the talking. Dr, please come back, those of us that like reason and try to think outside of the current gangland Blood/Crip political spectrum miss you, and we're tired of Mr's claptrap.
So can we please stop calling neo-Marxists "Keynesian?" Keynes' theory predicted that expansion could be accomplished by government disposing of excess collections through spending. He never proposed or advocated deficit spending as a way to expand economy. Even Keynesian economics predicts that long-term deficit spending would cause a contraction.
Any guest worker system is indistinguishable from indentured servitude.
Let me recast Paul Krugman argument by using this 1930’s example:
The Monetary Supply is fixed
BitCoin: By design – 21 million is the max.
1930: Currency is tied to gold, and no major gold strikes in the 1920s
The demand for money increases.
BitCoin: More people get interested
1930: The economy grows in 1920s high productivity, population growth, move away from agrarian society, etc.
Supply and Demand
If the supply is fixed and the demand increases, the value of money goes up.
Krugman point – If people perceive that money is going to be more valuable tomorrow then today – why would they spend it either on investments (think the practical kind – plant & equipment - not stocks) or consumption? One can make a good risk free investment by hoarding the currency. Which pulls more money out of the economy, which leads to a downward spiral.
BitCoin is only going to work as a currency if people transact with it – which they are not.
My Point – Deflation. Yeah, I know that in theory people should be o.k. with inflation – but their not. There is something hardware in our reptilian brains. Give a worker a 10% raise when inflation is 10% and they can work things out – and they are happy. Give a worker a 5% cut with 10% deflation and they can’t work things out. Nor can Harvard MBA students. There is something about seeing the number of dollars shrink – even if there value is increasing – which throws people. And – also – not many banks offer negative interest rates on loans.
Any mainstream economists will point out similar flaws with bit coin.
The supply of Bitcoins can't keep up with the demand which leads to deflation and hoarding, which will stagnant the economic activity. Countries used to have similar problems when they were on the gold standard, which is why all modern economies have a fiat money system.
But if you are really think the modern banking system is a scam, gold is a much better investment. Gold has thousands of years of tradition behind it and there will always be people who value it so the prices will be relatively more stable.
Krugman should recognize GDP for what it is, a convenient and available metric, but not an end goal.
It is common to fixate on measures that are available, in particular in economics. But satisfaction and value are subjective and cannot be measured. Many things that are improvements in standards of living actually decrease GDP (leisure and social activities for example).
Also, the fixation on GDP leads Krugman to despise hoarding, when it is clear that hoarding produces value for the hoarder (and produces value for the spender too, as the circulating dollars now have greater purchasing power).
I don't quite understand why saving is considered so evil in the United States. I guess it explains why the country is getting sucked into a debt vortex.
How about we meet in the middle and develop a monetary system that features stable prices? Ooops, the Federal Reserve is supposed to do that as part of it's "dual mandate" yet fails miserably.
The question is, do we need to do *anything* to "get us out of a recession" - Here's the last big example where we did absolutely nothing on a governmental level to "stimulate" in any way, shape or form (only measures passed were tarriffs response to european tarriff, which of course exacerbated the situation)
Ever hear of the depression of 1920? No? Thats because it was over very fast and followed by a period of sharp growth.
http://en.wikipedia.org/wiki/Depression_of_1920%E2%80%9321
The problem with Krugman's argument is that he is taking the price increase in bitcoins due to massive speculation and applying it to a case of deflation that occurs when there is a decrease in the ratio of gold to goods in an economy. They are two separate things and no conclusions can be drawn from one and applied to the other, especially if you are not going to discuss the elasticity between present and future consumption. The problem with the Keynesian critiques of deflationary currencies is that they look for the most extreme cases of deflation and assume that all deflation will set off a deflationary spiral.
The argument that Krugman is making is that because people hoard money when deflation is 50% or more then its obvious they will completely hoard all their money when its 2%-3%. Its not a fair comparison at all and assumes an unreasonably high rate of intertemporal consumption elasticity. To believe this would mean that people are not willing to pay the 2% opportunity cost of consuming in the present which is almost identical to saying that people will not substitute future consumption for present consumption they face an opportunity cost of 2% or more, ie they would not take out a loan if the interest they are paying is 2% or more. Obviously no one is going to use a credit card that charges 50% but I am pretty sure that a 2% charge on present consumption is not going to stop a lot of people from thinking twice about consuming in the present.
What Krugman is really critiquing is that a deflationary currency is going to prevent people from being incentivized to drastically reduce their savings rate. As we can see in this quote: "What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich."
We dont want hoarders (aka savers) from making risk free profits? Why not? When people pull their money out of the economy it doesnt prevent others from making transactions as long as the currency is divisible, which is completely effortless with bitcoin and only faces a modest cost under the gold standard. Luckily for us these evil hoarders will eventually dis-hoard their money in retirement and provide an even flow of savings and consumption over their lifetime. What Krugman wants is for our current generation to get the benefits of past savings while at the same time preventing future generations from having the same priviledge that we do. It works for a while and has been in operation for the past 20 years but we are quickly coming to a period in time when there will be no more dis-hoarding of savings and no hoarding to divert into present consumption. The shell game that Krugman constantly promotes on his blog is quickly coming to an end and we are soon going to have to figure out how to run an economy through a deflationary recession without recourse to inflation or borrowing.
In addition it has been shown empirically that times of mild deflation have not been the catastrophe that Krugman claims they would be. See: Milton Friedman's Monetary History of the United States.
so the only way to make bank is to not pay for power?
See the Cross of Gold speech by William Jennings Bryan. Deflationary currencies facilitate concentration of wealth in fewer pockets.
Six days out of seven, I agree with the vengency and ridicule of /. commentary on bitcoin. But I find that most of the ridicule is automatic, and automatic criticism of gold is better than knee-jerk opine of bitcoin. Knowing how gold mining works (14/15 USA Superfund sites), I know how randomly awful digging into rain-forested-mines can be. If this "derivative" of bitcoin, pinned to other currencies, weens humans off the tit of OK Tedi Mining, it's a derivative which at least beats the Digger. http://en.wikipedia.org/wiki/Ok_Tedi_environmental_disaster
Gently reply
Krugman once again demonstrates the Keynesian confusion about the role of savings in the economy. A miser is a good neighbor: instead of consuming all that he could consume in exchange for his production, he holds onto his money, thus making everyone else's money buy more in the market. The profligate spender who consumes all he earns, and the borrows more and consumes all of that (like the federal government) is the one to despise.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Inflationary currencies guarantee concentration of wealth in the pockets of the Bankers. Seehttp://mises.org/resources/614/Mystery-of-Banking-The Deflation like you're talking about only occurs after the inevitable monetary contraction which follows cascading debt defaults.
Wiring to connect silicon wafers to the chip leads, radiation shielding on spacecraft, super thin metal foil, gold plating on cards/pins, super low resistance wire.
this is a good read:
The End of Dollar Hegemony
excerpt:
William Jennings Bryan is a perfect example of most "populists". He advocated an approach to government that involved people like him making decisions for people like you and me (rather than leaving us with the freedom to make the decisions that we wanted to make).
The truth is that all men having power ought to be mistrusted. James Madison
This works and is how the US got out of the great depression with help from the New Deal and WW2.
It also helped to have a huge industrial base that wasn't being bombed to bits - jobs for everyone (in the military and in industry) and a lot of customers.
"When the going gets weird, the weird turn pro" -- HST
Sorry but in this case the link is immediate. You just don't recognize it. And the results are certainly not trivial. The result of money printing since 2008, even without it being in circulation, is that we avoided the rational outcome of a couple of big banks going under due to their risky mortgage lending, the dimwits who invested in flipping houses on margin and buying houses they couldn't afford having to lose said houses, the price of housing falling, and everyone else's standard of living rising as a result. What we got instead was everyone else's standard of living falling as savers are forced to bail out bankrupt banks and dimwit house-flippers.
Money sitting in a bank's vault directly determines the amount of real assets in the real world that that bank is able to control. This entire "money printing doesn't affect anything if it sits in banks" talking-point is a total bullshit lie.
"I assumed blithely that there were no elves out there in the darkness"
People have wanted gold for thousands of years and that is not likely to change.. A lot of the intrinsic value of gold is a means to store wealth. There are problems with this, but there are problems with any way of storing wealth.
"When the going gets weird, the weird turn pro" -- HST
It's a pyramid scheme - do you really think the participents that want the advantage of early adoption in the pyramid really care about the morality of theft?
The model is artificial inflation of value of a virtual ponzi and the hope that later marks will swap real goods of dramaticly greater value for the virutal ponzis, giving those involved early in the scam an advantage when they buy out of a scheme that is nothing but a drain on resources and currency.
It's got cool geeky elements to catch the interest of the marks but the technology is really just window dressing on an age old scam. Bitcoin is a really cool concept but becomes just another form of pointless low grade evil once it gets implemented in reality.
RL chicks have intriguing potential as a porn substitute, much like how sleep has intriguing potential as a caffeine substitute.
Your idea of "economics" has no relevance to what happens in actual economies.
The initial bit-coin spike was mostly an artifact of it's promise for anonymous transactions. Anonymity caused sites like the silkroad to appear, as the value of anonymous transactions began to become apparent, the demand for bitcoins began to rise rapidly enough that speculators decided to get involved. Tack on a few mainstream news articles and the lack of other resource based options at a time when most of the worlds economies are printing money to pay off debts, and people who wouldn't otherwise be as speculative become so.
Despite the conclusions one might draw from Krugman's article, the number of Bitcoins is actually designed to inflate relative to the output of society (based on the relative amount of available processing power) unlike traditional resource backed currencies. Thus, the current boom and horde should not be attributed to a failure of the Bitcoin currency, but instead a failure of confidence in the fiat model. For instance, imagine you are an Argentinean during their finical collapse. Now imagine there being a small and limited amount of stable US dollars available to convert your hyper-inflating Argentinian currency into. One can reasonably assume we would see exactly the same effect with dollars as we do in bit-coins if more dollars are not created out of thin air.
Realistically, current monetary policy has us print more dollars as demand increases in order to stabilize prices. This works until the stressed market stabilizes again and people let go of their dollar holdings to go back to their native currency thereby creating inflation. All said, it's probably the lesser of two evils, which is why I would argue that another bitcoin like currency could be the appropriate way to buffer the demand. Yet it seems that the current instance of bitcoin hyper-valuation is likely only a blip and will continue for a short period of time relative to the current world economic decline. Further, there are already signs that the speculation and volatility is beginning to end: http://bitcoincharts.com/charts/mtgoxUSD#rg180zvztgSzm1g10zm2g25
In summary, the point I'm trying to make here is 2 fold. First, if we all had access to a stable currency (like bitcoin), there would not be any incentive to horde bit-coins. Second, if the appropriate response to overwhelming demand for a currency is to make more of it, then there is actually a way to create more bitcoin like currency. Yet since more currency isn't actually necessarily as no one currently trades exclusively in bitcoin, and because the rest of the world is working with a fiat system, the hyper-valuation of the currency is to be expected, but cannot be pointed to as a failing of the bitcoin system.
(Also, it's interesting to not that most sites that take bicoin haven't been chaining their prices to match the hyper inflation, which is why I refuse to use the term deflation in terms of the bit coin market.)
-JHF
I've checked with Wikipedia too, he's born in NY and nationality is listed as United States. Why are you saying he's Keynesian? Did you confuse it with Obama's biography?
Democracy is for the people; you only vote once per season and we'll do the rest of the work for you don't have to.
No, that's the only supply-side cause of deflation. There is also deflation caused by growth concomitant with a steady money supply (or a money supply growing slower than economic activity).
In addition, there is deflation caused by a reduction in circulating money supply (decreased money velocity) caused by hoarding. This particular form of deflation is dangerous, because hoarding results in greater deflation, resulting in even more hoarding... you get the picture. A deflationary spiral that ends up contracting the economy.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
Anyone wanting to save themselves some trouble when evaluating the Austrian School of Economics should research its epistemology (I wish I had, before wasting hundreds of hours reading that tripe). Its founders categorically discount empirical data in favour or arguments made from first principles. They're basically philosophers, which is fine, but highly suspect in the world of science, as Aristotle showed when he wrote about physics. Despite being a genius, he assumed that heavier weights would fall faster. He never bothered to verify his assertion. His argument was logically sound, but his assumptions were flawed (in this case, that mass is proportional to acceleration -- they're inversely proportional -- F=ma -- Thanks, Newton!).
The Austrians state that economic activity is too complex to be empirically studied. They prefer to choose axioms that sound reasonable, and derive predictions from them. It's like doing math without bothering to go to the lab.
I'll never understand how they get so much play on /., given the science/tech orientation of the site, but then again pure science articles have been neglected more than usual over the past 8 years or so.
Shame, really.
In Paul "Fake Alien Invasion Would End Economic Slump" Krugman's Keynesian world the fact that the technology sector is hyper deflationary (prices for the same thing falls constantly) should make it a tremendous drain on our economy, nobody would ever buy a computer because a better one is going to come out later for less money. You can't watch cat videos by staring at dollar bills. Because value and utility isn't considered, only how well the hedges are doing we get things like cash for clunkers. Here's a plan, let's borrow money from the Chinese to pay people for their old computers if they buy a new one, then we will destroy the old computers. Dell and by extension America wins. Right?
Many of you compared BitCoins to national currencies, but they are not. This is quite an important factor: at the moment people can afford to "stash" bitcoins because there's no real need to spend them: we still rely on national currencies for buying most of what we need.
However, the fact that it's getting more and more difficult to mine them also means that the 21M limit is getting closer. Once reached, the impossibility to mine new bitcoins will inevitable affect their value and I'm quite confident that bitcoin trades will rapidly increase, as that will be the main way to "earn" bitcoins (vs exchanging them for other currencies).
Honestly I think that having an exchange market has been a bad idea, as well as making bitcoins to last forever. If they'd been granted a maximum lifetime, people would have been forced to trade them as quickly as possible. What happened instead is that many guys mined bitcoins just to have a try, and will never use their stash, so those bitcoins are lost forever.
How's that for an incentive to spend the coins: Everyone has to pay me taxes (or else goes to jail) and I only accept bitcoins.
And I know where you live and where your kids go to school...
Gold has internal value because it encompasses the incredibly large amounts of energy ancient exploding supernova stars spent creating it. Without expending similarly huge amounts of energy, gold cannot be created (i.e. reciting alchemical matras does not work) and that gives safety to investment gold owners. Nor can you create gold or platinum out of tin air via confidence scam or faking SSL certs.
In contrast, Bitcoin is essentially an alchemical mantra: people make their computers recite variable strings over and over billions of times and manipulate them according to complex methodology, hoping gold will come out of it in the end. One would hope people have gotten smarter than that in the 400 years that lapsed since Emperor Rudolf wasted his life on alchemical ventures in his Prague castle.
Futhermore, if you trust your wealth on an algorythm that can be written on the back of a napkin, rather than a star 1000x more energetic than our Sun, then you are plain stupid and deserve to be laughed at when NSA nixes the algorythm and discarded useless bitcoins are collected by brooms on the streets. Even paper money has more value, because those are backed by a massive entity, e.g. countires have government, military, police, industry, agriculture. It is not something that can fall in a day, while algorythms are mobile (as in women).
Been to Walmart lately? Everything except tech is going up. The government is suppressing the official inflation figures with a lot of smoke and mirrors but for an ordinary person wages are pretty flat and the price of everything is going up.
You're labeled a troll, who knows if fairly or unfairly, but for you and for others who come across this I would just like to mention that the subjective perception of inflation is still subject of research.
At least one group of economists (sorry, I don't have the link handy) is trying to address exactly what you're saying. The disconnect between official CPIs and what people perceive exists in many countries, at the same time as independent economists confirm official CPI computations, so to believe in government conspiracies everywhere is at least a bit crazy.
So they tried to figure out why individual perception is different. The summary of their result was something like: CPIs are computed to represent people's spending in an objective way, but in people's perceptions, some classes of goods have a much higher impact on how they feel about the price level. Since inflation is never equal across the board (there are always some classes of goods whose price increase is higher, and others whose price increase is significantly lower than average), the individual perception can become distorted depending on which classes of goods have particularly strong price increases.
Well how many recessions have been caused from over extension of debt? Sounds like your theory is missing some sample data.
The sample data strongly suggests that it is in fact government surpluses that cause depressions. I quote from here:
Since 1776 there have been exactly seven periods of substantial budget surpluses and significant reduction of the debt. From 1817 to 1821 the national debt fell by 29 percent; from 1823 to 1836 it was eliminated (Jackson’s efforts); from 1852 to 1857 it fell by 59 percent, from 1867 to 1873 by 27 percent, from 1880 to 1893 by more than 50 percent, and from 1920 to 1930 by about a third. Of course, the last time we ran a budget surplus was during the Clinton years. (...)
3. The United States has also experienced six periods of depression. The depressions began in 1819, 1837, 1857, 1873, 1893, and 1929. (Do you see any pattern? Take a look at the dates listed above.) With the exception of the Clinton surpluses, every significant reduction of the outstanding debt has been followed by a depression, and every depression has been preceded by significant debt reduction. (...)
Obviously, correlation does not imply causation, but if data as strong and suggestive as this doesn't at least make you stop and think and reexamine the conventional wisdom of the austerity fanatics, then you aren't being rational or reasonable, you're simply being a religious zealot.
People should not be free to hoard the money they earn!
People should be told what to do with their money, because they are not prepared to spend it, only government(and Krugman) can.
Next time you want to hold your money, think twice, Krugman is looking and could denounce you to the authorities for not being a good citizen.
Now, stop reading slashdot and continue working, or our leaders wont love you.
"The over extension of debt can be corrected by devaluing the the currency."
Yay! World War 3 Here we come!
Think about what you are saying.
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Krugman is a mad man, he said that faking an alien invasion would revive the economy, as we would produce a massive amount of weapons to protect ourselves against the invasion.
Booms and crashes are caused by credit expansion and contraction. Not the underlying money.
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> The essence of intrinsic value is that you can estimate it in a vacuum for a specific asset, without any information on how the market is pricing other assets
and
> Only assets that are expected to generate cash flows can have intrinsic values.
from Aswath Damodaran who, literally, wrote the book on valuation.
Therefore, neither gold nor oil have an intrinsic value because a specific quantity of either does not generate a cash flow. An asset that can be used as capital (in production) would have an intrinsic value.
http://www.stern.nyu.edu/experience-stern/faculty-research/UAT_025578
Its main advantage was obviously to traffic illegal goods (Silkroad). The other advantages are only theoretical in nature and so entangled in bias that it's best stepping away and getting back to looking at the main advantage. As far as that goes, volume of available product has not appreciably increased since the introduction earlier this year.
The only really interesting comments are at -1 Troll as they normally are on such stories.
MY OTHER COMMENTS
A government can't print more of it.
Mansa Musa, an African ruler, went to Mecca on the Hajj with a huge caravan carrying tons of gold. He spent so much during his visit to Cairo and other cities on the way that it depressed the value of gold and caused massive inflation. Realizing this, he borrowed a bunch of gold to drive the value back up. But the market didn't stabilize for years.
I'd rather have more stupid Apple stories than one more article about fucking bitcoins.
To have a right to do a thing is not at all the same as to be right in doing it
Keynesians are not "real economists".
Bitcoin is just point accumulation for geeks/nerds. No different than the slashdot karma system, RPGs, folding at home scores, etc. When you have nothing fulfilling in your life, you accumulate points to define yourself. Fucking sad.
The most interesting comments are at -1 Troll on this story, like on any story that deals with economics and politics.
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You're right! I totally should be given the "freedom" to be fired because of the color of my skin, because of my religion, or because of my sexual orientation!
Yes, you should. It is called freedom of association.
The truth is that all men having power ought to be mistrusted. James Madison
No, I shouldn't. That is not "freedom of association". It's discrimination, pure and simple. And it's disgusting.
Tell me, why should your "freedom of association" be able to trump my requirement that I be able to work? Or buy food?
Plenty of hoarders will attempt to buy them, thereby creating demand for them. There will always be some people who want to hoard bitcoins and not generate the bitcoins personally. They will want to buy them at market prices. This constant demand will ensure transactions keep occuring. Look at any bitcoin exchange and you'll see that there is no shortage of transactions and the "hoarding" isn't bringing bitcoin transactions to a standstill by any means. My advice is put in a few hundred dollars on bitcoins.
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The remaining crude is heavier, in deeper places. Needs more energy to extract, and refine, and its market price is lower than the lighter ones. One of the last places with good amounts of light crude oil is... Libya.
Fossil fuels are not going to run out anytime soon, they are simply getting less profitable, more expensive to get. It is one of the effects of "peaking", after more than a century of extracting the best (and even burning away perfectly good but then less valued natural gas).
Eventually the private companies will give up or reduce their size drastically and mostly State owned operations will remain. See the refining business? Of course you can't sue your country for a spill in the ocean or a national park they will drill into... Might even subcontract scapegoats to blame into oblivion for any mistakes.
Opec might even be reaching production limits, but this can never be disclosed to prevent market panic. In the meantime other powers are literally destroying Opec members one by one, only to leave the places unstable and unable to even reach previous Opec production levels.
ALSO country population and economies grow, and that needs more energy, period. China and India to name the biggest 2. Right now US & friends are having a field day bombing whomever they want, but soon enough those powers are going to act to protect their suppliers, and perhaps a bit of world balance will be restored (by way of tensions, sadly).
The US will have to learn from Europe to live with expensive energy and become more efficient, even if that means the collapse of suburbia, give up SUVs and live closer to work; not to mention relearn to produce their own stuff (including food) again.
Artix
Your Linux, your init.