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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."
Bull. Shit. 24 6990s = about 8.5kW, you're not pulling that through that wimpy plug.
You are making bitcoin into something important and noteworthy and it is not.
No wonder taco left.
Have you actually made any money yet? When I looked into it I wasn't too thrilled at how easy it was for people to scam you out of bitcoins by contesting Paypal payments etc
which is totally what she said
First of all, taking electricity from the hallway is obviously theft.
But more importantly you are trolling because each 6990 consumes at least 300 watts during mining, which means you need 7.2kw for your whole setup. This far exceeds what a single outlet can provide.
That doesn't look like a standard 115AC outlet. Maybe it's 220 or European? I'm surprised that his landlord hasn't said anything about it.
Sig: I stole this sig.
Qualifying Krugman as a "prominent Keynesian economist" is like calling Stephen Hawking a "prominent Einsteinian physicist". I call shenanigans.
That's why you don't sell uncounterfeitable, undisputable, unrevocable, instantly transferrable Bitcoins for Paypal payments, which can be disputed, paid with stolen credit cards, accounts frozen, etc. Don't blame Bitcoin for PayPal suckage.
Not only that, but now you have 7.2kw of heat that may need to be pumped out. Running an AC compressor isn't cheap either.
Life is not for the lazy.
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
Getting paid for being actively harmful (using electricity) is precisely why Bitcoin will never amount to anything.
Ah, so you're a thieve too.
I wouldn't take it off, I would call the cops and the landlord.
Yes, I guess someone with your talents would be perfectly suited for the financing world.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
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?
It is fixed in that it becomes exponentially harder to print more of it as coins are mined.
how easy it was for people to scam you out of bitcoins by contesting Paypal payments
1. Scammer buys bitcoins on ebay.
2. Seller sends the bitcoins
3. Scammer pretends he never received them, and reports this as a fraudulent transaction to Paypal
4. Paypal asks the seller for evidence that he has sent the goods (i.e. a tracking number)
5. Sellers explains what bitcoins is, digital revolution, bring back the gold standard, Ron Paul 2012 et cetera
6. Instead of a tracking number, Paypal gets a bunch gibberish, so it rules in the scammer's favor
7. Rinse and repeat
This applies to pretty much all virtual goods on eBay, so it's not really a bitcoin problem as much as it is a Paypal problem.
This whole digression is moot in the end because there are dozens of bitcoin exchanges out there now, so there's no need to rely on Paypal. Admittedly it was a problem in the early days before exchanges were established, so that's no longer the case.
RTFA again. Nowhere does Krugman say bitcoins are a "lottery ticket" whose value might soar - their value has soared. His point is that this is problematic - massive deflation leads to hoarding, rather than spending, a currency.
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that's the problem. The entire fiscal policy of USA destroys the value of savings by inflation
Thats not a bug, its a feature. You don't seem to understand what the purpose of money is. It is not an investment.
I never said money is investment. You seem to misunderstand me completely.
Money is savings, it's not an investment. Real money is gold, it's not an investment. It is NOT an investment. Investment is a business. Business that makes money. Be it your own business or somebody else's business that you invest in.
Money is store of value, medium of exchange and unit of account. USD doesn't work as a store of value, here is the proof:
sugar Dec 2003: 20.40 cents/pound, Apr 2011: 36.97 cents/pound, price up by over 81%
Beef Dec 2003: 105.40 cents/pound, Apr 2011: 193.00 cents/pound, price up by over 83%
Barley Dec 2003: 100.77 USD/Metric Ton, Apr 2011: 208.70 USD/Metric Ton, price up by over 107%
Rice Dec 2003: 197.00 USD/Metric Ton, Apr 2011: 500.57 USD/Metric Ton, price up by over 154%
Cocoa Beans Dec 2003: 1,646.58 USD/Metric Ton, Apr 2011: 3,113.52 USD/Metric Ton, price up by over 89%
Tea Dec 2003: 205.22 cents/KG, Apr 2011: 325.33 cents/KG, price up by over 58%
Rubber Dec 2003: 57.31cents/pound, Apr 2011: 265.49cents/pound, price up by over 363%
Corn Dec 2003: 111.98 USD/Metric Ton, Apr 2011: 318.45 USD/Metric Ton, price up by over 184%
Bananas Dec 2003: 371.43 USD/Metric Ton, Apr 2011: 1,013.47 USD/Metric Ton, price up by over 172%
Propane Dec 2003: 0.63 USD/Gallon, Apr 2011: 1.45 USD/Gallon, price up by over 130%
Wheat Dec 2003: 165.57 USD/Metric Ton, Apr 2011: 336.30 USD/Metric Ton, price up by over 103%
Oranges Dec 2003: 583.00 USD/Metric Ton, Apr 2011: 881.00 USD/Metric Ton, price up by over 51%
Salmon Dec 2003: 3.12 USD/Kg, Apr 2011: 7.86 USD/Kg, price up by over 151%
Chicken Dec 2003: 68.98 cents/pound, Apr 2011: 86.42 cents/pound, price up by over 25%
Pork Dec 2003: 48.68 cents/pound, Apr 2011: 92.06 cents/pound, price up by over 89%
Silver Dec 2003: 565.33 cents/Troy ounce, Apr 2011: 4,279.79 cents/Troy ounce, price up by over 657%
Alluminum Dec 2003: 1,557.78 USD/Metric Ton, Apr 2011: 2,667.44 USD/Metric Ton, price up by over 71%
Uranium Dec 2003: 13.35 USD/pound, Apr 2011: 57.84 USD/pound, price up by over 333%
Iron Ore Dec 2003: 13.82 cents/dry Metric Ton, Apr 2011L: 179.26 cents/dry Metric Ton, price up by over 1197% (yeah, almost 1200%)
Gasoline Dec 2003
You can't handle the truth.
Since we have adopted leaves as legal tender, we have all become immensely rich, but due to high leaf availability we have run across a slight inflation problem meaning it will take three deciduous forests to buy one ship's peanut. Therefore, we are about to embark on a leaf revaluation project... ...and burn down the forest.
(--HHGTTG)
Okay, I'll bite. He's a Keynesian. Nothing he says has anything to do with reality so why take him seriously?
. I don't have electricity costs as I take it from the hallway
There ain't no free lunch. Either you're still paying for that electricity indirectly, or someone else is bearing that cost. If the latter - which seems to be more likely - then it's about as moral as tapping that electricity and reselling it directly, then pocketing the profit.
Just because something is provided to you "for free" (really, at the expense of your community) doesn't mean that you should feel free to abuse it for your own sake.
With that kind of power, I do wonder if bitcoin mining is the most profitable application for it.
http://www.aaronrogier.net
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.
Let's put it this way: I think the odds of me growing a new orrafice that poops out mutliple currencies AND a pair of wings are greater.
These posts express my own personal views, not those of my employer
implying that Krugman advocates war or tragedy either illustrates profound stupidity or an intentional misinterpretation of the concepts he was trying to illustrate. Maybe you've been mislabeled a troll simply because your posts are unbelievably naive?
Jeremy
Before the Fed, the US economy would fluctuate between booms and panics.
Whereas now it fluctuates between booms and decade-long depressions and economic collapse.
Oh, and they've decreased the dollar's value by 99% in the meantime too.
I can buy things in USD not in rice, so I disagree. Money can lose or gain value and still be a store of value. Gold is a commodity. It is not money anymore than uranium is money.
You'd think the retard selling the bitcoins would just use a block explorer to point to the number of the block containing the transaction and show that as proof that the coins were sent and credited to the buyer's address instead of going through all that bullshit you listed in step 5.
If PayPal wants some kind of "tracking number" for the bitcoins, the block number containing the to/from addresses is as good as you're gonna get.
Let q be a radix > 1. I am in ur base-q, killing 10 d00ds.
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.
Slow down there, we figure you were stupid after the second paragraph you didn't need to keep pounding it home.
Moving money form the wealthy and into circulation is good for the economy.
And we should pay more for Gas. Seriously. It's a dwindling resource. A critical resource, I might add.
"- RELATIVE TO WHAT, YOU DUMBO? "
The fact that you don't understand what he is talking about means you should research, not fall to as homs.
There is some real issues t discuss about what he says, but you clearly don't understand what he is talking about. Take time tom understand what he talks about, and then refute some of his claims. Until then, you look like another ignorant person waving their dick around calling it a banana.
I saw a guy doing that in Down town Portland today, can't get the image out of my head.
The Kruger Dunning explains most post on
Business don't make money, they collect money. There is a huge difference.
The Kruger Dunning explains most post on
Unfortunately for you and Paul, Bitcoin is undergoing monetary inflation, not deflation. This little fact was conveniently left out of his blog post. New Bitcoins are created every day, at about a 30% annual rate, which actually meets the International Accounting Standards Board definition of hyperinflation. So, for the moment, if you'd like to compare Bitcoin to anything, compare it to Zimbabwe or to the Weimar Republic or to what we will soon see here in the US thanks to Keynesian money-printers like Krugman.
"I assumed blithely that there were no elves out there in the darkness"
I don't think you understand what a "store of value" is. You can put dollars into a bank, take them out again, and spend them just as you could before.
Also keep in mind that the current inflation rate is 3.6%, not 1200%. By your definition, there wouldn't be any "stores of value" left in the world.
DATABASE WOW WOW
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?)
It soared, then soured. Bitcoin's tulips have come home to roost.
Linux is not a religion. It is a collection of logic. Stop being stupid.
is the digital implementation of the 1800 con with the same name.
The Kruger Dunning explains most post on
Money is store of value, medium of exchange and unit of account. USD doesn't work as a store of value, here is the proof [long list of commodity price increases, snip]
The "store of value" function isn't boolean. Without some incentive to spend or invest, the money fails. In particular, it fails as a medium of exchange since there is no incentive to spend or invest. Now note, I used the abstract "incentive" without referring to inflation. Inflation is simply the most convenient incentive we've found to compel people to spend or invest their money. Yes, it does gradually erode the store of value function. It's not a bug. It's a feature.
Aside from that, there is a large range of increases in your commodity prices. If it were all due to dollar devaluation, they shoulud be roughly the same. Iron ore is up the most, I suspect, because of China's massive construction boom. You've also chosen a timeframe during which the Fed has engaged in some controversial policies that have driven commodity speculation. If Slashdot existed in 1988, and you chose 1980 as your baseline, this would be a very different discussion.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
Yep, he should be growing weed.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
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.
I know that "billionaire" part is just a figure of speech, but let's find out how large the bitcoin jackpot really is, for curiosity's sake.
Suppose miraculously bitcoin manage to completely replace both the USD and the Euro tomorrow. There are currently:
980 billion USD in circulation
863 billion Euros in circulation (~1.2 trillion USD)
7.2 million bitcoins in circulation
Thus each bitcoin would be worth approximately 300k USD. Hardly makes you a millionaire, let alone a billionaire.
Disclaimer: I have never taken an economics course in my life and I have been repeatedly characterized as "terminally retarded" in Internet discussions. The above calculations might not land in the right sport, let alone the right ballpark.
Inflation is about a currency's value, not its quantity. At least according to TFA, bitcoin has been undergoing deflation, which makes sense given that there's an upper limit to how many bitcoins there will ever be, and producing new ones gets exponentially harder as time goes on.
DATABASE WOW WOW
Keep in mind the government lies about the true inflation rate, and the Federal Reserve increased their balance sheet by 100% in 2008 alone.
"I assumed blithely that there were no elves out there in the darkness"
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.
There is nothing to imply, here are the facts. Now hold me.
Really? Nothing to do with reality? His predictions have been far better than most. http://tinyurl.com/3bqefxx In particular, the WSJ was saying years ago that rampant inflation was just around the corner. When again?
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The fact is "blockexplorer", "block chain", "bitcoin address" are complete gibberish to Paypal (more accurately the minimal wage drone in India working for Paypal). They are trained to either take a USPS, Fedex, or UPS tracking number and verify whether that shipment matches the buyer's and seller's address. That's all they know how to do. No matter how much you explain bitcoins to them they will not understand.
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.
the government doesn't lie about the inflation rate. It is caculated by a multitude of different organizations, both private and public. The reason prices haven't risen despite a 300% rise in monetary base is that we're stuck in a liquidity trap. A bit of inflation would actually be a good thing, because the current malaise is a result of debt (both private and public), and inflation lowers the value of said debt, prompting people and corporations to spend again.
Jeremy
"Inflation" describes a currency's value, not how much is in circulation.
Besides, TFA points out that inflation was negative from 2008 to 2009. The fact that you didn't lose half of your wealth over that time frame should tell you that the rate of inflation wasn't 100%.
DATABASE WOW WOW
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.
Nobel has lost all credibility as a prize in economics because Krugman got it. Almost any economist who made predictions which have been verified as having come true considers him a charlatan.
Any guest worker system is indistinguishable from indentured servitude.
Exactly! Krugman is just a Keynesian, not an economist like Keynes. It's just like Christians to Christ (the famous Gandhi quote). Plus, Krugman won his Nobel prize for what? Model building in macro( international trading, in fact), the voodooist field in an already voodoo study like economy.
"Inflation" describes a currency's value, not how much is in circulation.
I see you keep saying that, so I guess that means you think there is no connection between the two?
"I assumed blithely that there were no elves out there in the darkness"
According to this profitability calculator with the current difficulty and market value, miners are now making a negative profit.
Citation on the 2002 bit please. And he didn't say the alien invasion thing is the right solution, but that it would be a solution to our current crisis.
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Krugman's work on modern trade theory was worthy of a Nobel Prize.
The stuff he spouts in his column is another story...
Well obviously there is price deflation. That's sort of a requirement for any new currency. But you're welcome to print up twenty million of your own dollars with your face on them and see how much demand you get. Something tells me it wouldn't be nearly as successful.
Frankly, I don't have the time right now to correct every wrong assertion that Krugman makes about Bitcoin right now. At first glance, though, it's as though he did absolutely no research whatsoever. He read the main page and saw "limited quantity of Bitcoins" and then went off on another ridiculous aspie rant spouting his usual nonsense.
Here is a list of Bitcoin merchants in wiki form. You can look back through the history and see that real "gross Bitcoin product" has risen significantly, not fallen as he claims. Total "market cap" has risen as well. The value of a Bitcoin in terms of Dollars has only fallen due to the aforementioned 30% inflation rate.
"I assumed blithely that there were no elves out there in the darkness"
the government doesn't lie about the inflation rate. It is caculated by a multitude of different organizations, both private and public.
Uh-huh. And if you calculate it the same way it was calculated thirty years ago, before the government changed the formula for some mysterious reason, you'll see that the real rate is actually much higher than the official number.
"I assumed blithely that there were no elves out there in the darkness"
While voltage may change the wiring still has a similar max wattage handling.
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.
Spending money is literally what drives the economy. Saving money in a bank does make it available for other people to borrow so that they may spend it. The "redistribution of wealth" is the benefit here, though, not the saving itself.
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.
Relative to the purchasing power of the dollar a few years ago. A Big Mac, or a loaf of bread, or a new car costs about as many USD today as it did a few years ago. The dollar is stable. A Big Mac costs a wildly different number of BitCoins today than it did a month ago. The BitCoin is unstable.
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.
Good for those who hold Bitcoins without spending them. Bad for those who spent them. Pretty soon, people will realize that it makes more sense to hold onto Bitcoins than spend them, so no one will spend Bitcoins - they'll hoard them, and spend, say, Dollars instead. This weakens the Bitcoin economy, because no one is spending Bitcoins.
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.
Absolutely. He wants you to have to pay $15 per gallon in 50 years. He also wants minimum wage to be $45 in 50 years. He wants inflation - the purchasing power of $1 to decrease - and for people to have more dollars. This is good for the economy, because it means that spending money is more sensible than hoarding it. This means that people have to keep on working to get more money, and more economic product is produced.
That's the paper money, that's no where near the size of the money supply, which is much different. You want M2 from the tables, which is something like $9.5T. Still only 10x more though, so 1 bitcoin would net you $3 mill.
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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.
You may want to have your economics unconnected to politics, but that is unrealistic. Economic theories can imply political actions, and political actions can alter how economies function.
> In particular, the WSJ was saying years ago that rampant inflation was just around the corner. When again?
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. Same for unemployment, when you can't apply for another extension you aren't considered 'unemployed' anymore, which is the only way the rate is staying under 10%. But Bushitler isn't president anymore so the media play along. Remember when 6% unemployment was 'a jobless recovery?'
As for Krugman, if that idiot said the sky was blue I'd look up from the TV and peek out the window half expecting cavorting unicorns and rainbows under a pink sky. He deserved his Nobel Prize less than Obama deserved his, if that is possible. Most Nobels these days are political trophies for being a socialist or terrorist (Arafat).
Might as well go for the gold and trash bitcoin as well while I'm in snark mode. Remember e-gold? That will be bitcoin's fate. The only people who will be doing anything with it will be criminals laundering their ill-gotten gains. And once a service gets that taint on it there is very little that can be done to attract enough reputable business to get rid of it since nobody wants to associate with a criminal enterprise. Paypal succeeded because of a symbiotic relationship with eBay, which is why they were bought out. Unless bitcoin quickly finds a legitimate source of commerce to own they are toast. And that is making the assumption for the sake of argument that the tech isn't bogus. Which it almost certainly is. They talk out both sides of their mouth. On the one hand it is anonymous enough for money laundering but on the other they promise accountability.
Democrat delenda est
A hilarious comment from the source shows how pathetic your trolling attempt is:
Not to mention that the door hinges on the side away from the plug, so you have to unplug the door to open it.
No, bitcoin is precisely the equivalent of M0.
If the fractional reserve banking system can make $980 billion physical USD bills into $9.5 trillion dollars, then the very same system will make 7.2 million bitcoins into 72 million bitcoin credits. Don't confuse the actual currency in circulation with whatever the money multiplier produces.
Or ship a bitcoin wallet on a thumb drive?
If he were in the US, the DEA would have kicked in his door after a week.
I agree, though, that he would make an excellent hedge fund manager; greedy, solipsistic and anti-social. Here's an idea: get together with your pals and sell derivatives based on your awesome income stream. You can lie about it -- nobody cares. You can bribe Moody's to give your crap AAA ratings. Then buy default insurance on your own crap. When your neighbors, landlord or the law pull the plug, collect!
Sent from the iPad I found in your car.
http://en.wikipedia.org/wiki/Cost-push_inflation
Also since gold is a commodity there is tremendous amount of risk like any other commodity. Gold has not recovered from the massive loss of the early 80s. 30 years latter it's still not a the price of $2395/ounce. Had we had a gold standard the US would have suffered a massive loss.
http://en.wikipedia.org/wiki/File:Gold_price_in_USD.png
Unless bitcoin quickly finds a legitimate source of commerce to own they are toast. And that is making the assumption for the sake of argument that the tech isn't bogus.
You can decide for yourself if the "tech" if legit or not, but as for using it for "legitimate commerce", I'd have to agree as well. I said as much numerous times on the official bitcoin forums and even tried to come up with some ways to make that happen. I still am doing that.... sort of.
I have a few problems with the way Bitcoin itself is set up, even if the concept of an electronic currency protected through encryption might be a good idea. My issues are down in the gritty details and some of the presumptions that were arbitrarily decided upon by "Satoshi" that I simply don't agree with. The core idea, that a currency base protected through encryption was as strong as the majority of the CPU power of the network is a pretty sound idea. Still, if a majority of the network is engaged in illegal activity, you have to wonder about those CPU cycles too.
But the link is not immediate, nor trivial.
The nominal number of bills with dead presidents may double without more money circulating. This is what we see now.
The reason is simple: although more money was printed, most of it went to bank coffers to prop up their capital reserves. It was not lent and therefore never got to be used for buying goods and services.
Thus inflation stayed flat.
The other poster was right: inflation describes the value of currency, and its value is entirely determined by how much people think it is (same for gold, BTW). This is related to the amount of currency passing through everyone's hands. Not to the amount there is, somewhere, in a vault.
The issue you are addressing here is a known issue, and something that anybody holding Bitcoins should be well aware of. Sadly, you don't mention that this "inflation" is kept in check by the fact that the growth in the number of Bitcoins is fixed by definition. Unlike the U.S. Dollar which can have Ben Bernanke type a few keys on the computer in his office and produce several trillion dollars, Bitcoins can't be "minted" enmass by any one person at once. Their rate of production is fixed and limited... where the "Bitcoin economy" more than takes that rate of production into stride.
This "30% annual rate" of growth is not a geometric progression, but an arithmetic increase of a fixed amount. Furthermore, the number of new coins "minted" is built into the software to gradually decrease to become practically non-existent. In other words, over time this growth diminishes. The philosophy here is that the growth of the economy in terms of adopters would be larger than the rate of increase in the money supply.... which generally has been true for the past year or so. As to if that growth in the number of users is sustainable is another question entirely.
Pretty soon, people will realize that it makes more sense to hold onto Bitcoins than spend them, so no one will spend Bitcoins - they'll hoard them, and spend, say, Dollars instead.This weakens the Bitcoin economy, because no one is spending Bitcoins.
The thing is: there's no Bitcoin economy. Almost all the transactions are simply buying and selling dollars, nothing else. Hoarders are mostly irrelevant because there's nothing to weaken.
Dilbert RSS feed
Of course it's fixed, it's fixed by design. The rate of bitcoin creation was decided when the scheme kicked off, and is pretty much immutable.
The only thing that changes is that the more people mine it, the harder it gets, giving out less per miner, but keeping the overall creation rate and eventual total exactly the same.
Can we please stop re-naming economists you don't agree with "neo-Marxists" (or the more popular "socialist"). The question of deficit vs. excess spending is orthogonal to the effect the spending itself has on the economy. The point is where to apply the force-- at the bottom or the top. Reaganomics advocated extreme deficit spending while cutting the top earners' taxes in the theory that they'd create jobs. It didn't work, and he was forced to raise taxes again for several years in a row. (When they say this unemployment is "the worst since 1983" you know what they're talking about.) Anyway, the question of tax-and-spend (i.e. "liberal") versus borrow-and-spend (ie. "conservative") isn't really relevant here.
E pluribus unum
so the only way to make bank is to not pay for power?
I once bought an item on eBay and the buyer sent me the wrong product. The listing clearly said it was for an audio CD and I got a key chain instead. When I filed a dispute with PayPal, they didn't do anything because there was a tracking number.
So yeah, sending an empty box just for the tracking number will probably get the disputes closed (fraudulent or not).
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
money doesn't fail. There is always reason to invest, as 19 century USA has clearly shown - there was monetary deflation and prices were falling and yet USA was extremely productive and competitive and innovative
OK, much as the "store of value" function isn't boolean, the "medium of exchange" function isn't boolean either. Perhaps it's my bad to say "fail" and not qualify it, although this is beginning to look like one of those threads where you'd have to specify the entire unbounded set of qualifiers in order to "win".
Anyway, the medium of exchange function has indeed begun to show signs of failure under the kinds of systems that Austrian (economists) favor. In fact, one of the more famous examples of a currrency failing and being successfully replaced by a local currency took place in Austria during the Great Depression. (pure coincidence that this happened in Austria). Googling around it seems that Austria had already abandoned the gold standard at that point; although it's unclear from my quick search as to whether or not they attempted Keynesian stimulus. The incident is a strong argument for free banking; but since it's just a small town it's hard to say if it argues for or against Keynesian stimulus at the national level.
Anyway, money can fail. As for the US during the 19th century, we were exploiting natural resources at unchecked rates, taking Indian lands, exploiting cheap labor from Irish and other immigrants, and (during the first half) exploiting slave labor. It's an apples and oranges sort of comparison, loaded with externalities, measured with meters and sold for miles. I've grown tired of this, and don't care to debate the other points...
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
Then your neighbors aren't just being "jerks" for unplugging your rig. They're seeing you abusing the system and putting a stop to it. They need to start taking more permanent steps.
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."
I don't quite understand why saving is considered so evil in the United States.
It's only considered so by those who believe that inflation is a good thing. That is to say, bankers, apparatchiki, and ivory-tower cretins like Krugman.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Citation on the 2002 bit please.
Here you go.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
http://www.indexmundi.com/commodities/?commodity=beef&months=360&commodity=beef.
If you look at rate of change it has stayed within a constant margin. Picking dates and comparing cost on market adds little value in this debate. For example on gasoline you state Dec 2003: 0.89 and Apr 2011: 3.18 USD/Gallon, however I could just have easily picked Dec 2008 when it was 0.96, 5.6% change. In fact run these numbers from Dec 2003 to Dec 2008 and see what you get. Supply and demand play the major role here not the currency involved.
Except he's not Keynesian. Neo-Keynesian, sure. Keynes would never have used the stimulus for public works projects in the first place, and in the second, he would have expected debt to gdp to be a fuckload lower than it is. Keynes expected the .gov to run a surplus on purpose and put the money away(something the US government is legally prohibited from doing) precisely to inject the 'slack' into the economy during a depression. Thirdly, he sure as fuck wouldn't have expected for a government to inflate it's currency by a trillion dollars in addition to the stimulus projects. Now, I still think Keynes was full of shit, but at least it was sweeter smelling shit than what Krugman's passing off as Keynesian economics.
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.
> rampant inflation was just around the corner
The technical definition of inflation is an increase in the money supply. And as it turns out, that was indeed just around the corner.
Rising prices are really just a symptom (money supply goes up, money value goes down, you need more money to buy stuff).
You misunderstand what money is supposed to be. It's supposed to be a store of value.
While voltage may change the wiring still has a similar max wattage handling.
The wiring, outlets, and circuit has maximum current rating, not wattage. The higher the voltage you put through the wires, the more wattage they can handle because you get more power with the same amount of current.
But even if it's 240V at 7.2kW, that's still 30A which I highly doubt a hallway circuit would be rated for.
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.
There are mature bitcoin exchanges like Mt Gox where other users can't scam you.
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
http://en.wikipedia.org/wiki/File:Components_of_US_Money_supply.svg
Where was the inflation during the past 30 years?
Japan's debt-to-gdp of 200% and a currency they consider too high is proof that inflation does not depend on debt or money supply.
But it, nonetheless, discredits the prize when a prize holder spouts such provable nonsense. I mean it's almost as if a winner of a prize in medicine started doubting existence of DNA. It would undermine the prize itself.
Any guest worker system is indistinguishable from indentured servitude.
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
The question of deficit vs. excess spending is orthogonal to the effect the spending itself has on the economy.
That is absolutely categorically untrue.
Any guest worker system is indistinguishable from indentured servitude.
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
Regardless of whether we may reach the economy of abundance through technological progress eventually (which I think we will), TANSTAAFL is the reality today, and what GP is doing amounts to abusing (=stealing) a common resource for his own private gains.
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.
Who cares if a currency is hoarded? That is the point of currency--to allow people to save as much as they like without taking real goods out of the economy and sitting on them.
All sitting on currency does is drive down prices, which sets up an equilibrium that makes people spend (ie "look how cheap that is! I'm going to use some of my savings to buy that and let it improve my life"). The currency itself is worthless. All it is is a placeholder, telling society how much you have contributed. What is IMPORTANT is the good or service you fed into the economy to get your currency. The economy will either consume the fruits of your labor immediately, squandering them (low interest rate environment), or it will invest them in capital intensive projects with a high likelihood of payoff (high interest rate environment), or somewhere between, based on society's preference. Of course, when you have an arbitrary authority like a central bank setting interest rates (pushing on a string), things go AWRY. As we have seen.
Not exactly. Bitcoins buy more now than they used to. Why? Because the user base has expanded. Monetary base can expand rapidly without hyperinflation IF the number of users of said currency is increasing. In this case, it is best to look at the average amount of bitcoins per bitcoin owner. In the case of hyperinflation in national currencies, the number of users of said currencies were either static or falling rapidly (as users fled the falling currency and began using other alternatives like gold backed dollars in Weimar, or gold in Zimbabwe).
But yes, we will see hyperinflation in the US, and likely around the world as competitive devaluation proceeds. Look to gold and commodities to see the effects of this truly genocidal policy.
It is limited. But the supply is not fixed. New Bitcoins enter circulation every day.
"I assumed blithely that there were no elves out there in the darkness"
Nope, not quite right (except the part about higher voltages needing less thick wires.). How thick a wire must be to handle a given load depends mainly on amperage. Since this is a heat dissipation issue, where you put the wire also matters: in a wall means less heat dissipation than outdoor use which means a thicker gauge. Voltage means nothing. The only thing that voltage matters for is insulation. The higher the voltage, the better able electricity is at jumping gaps in the circuit, and so you need thicker insulation to prevent this. To give you an example, in my brother's car, one of his amplifiers uses 6AWG wiring, and runs at 60A at 12V. An overhead transmission line that uses 6AWG aluminum wire will typically carry 69kV with a maximum capacity of something like 300A. The reason it can use higher amps is because of the cooling effect of having the wire exposed to air and not near anything, and that we have increased safety tolerances for wires in areas where humans are likely to be present (buildings, cars, etc.). The insulation difference is massive. The car wiring's insulation is like 1mm plastic, whereas the transmission line uses literally meters of air between the wires and ceramic insulating suspenders that are several feet tall.
To give another example, let's take house wiring. If I have a 20A 120V circuit, I'll need to use 12AWG wire. If I have a 20A 208V circuit, I'll need to use 12AWG wire. If I have a 20A 240V circuit, again, I'll need to use 12AWG. Now you might be tempted to say, "But, there are three wire in the 208V and 240V circuits." But then I'll remind you that all the electricity, no matter the configuration*, flows back through the neutral.
* Yes, I know that's simplistic and 3-phase is even weirder and 208V is the potential between the hots and we don't touch the neutral with 208V, but it doesn't really affect my point, so fuck it.
You're right that the gold standard doesn't solve the problem of banking, since gold is not easily stored and used. But Bitcoin has solved the problem of lending by banks. Most of those dumb enough to put their Bitcoins in a bank have lost at least half to theft in the last few months.
"I assumed blithely that there were no elves out there in the darkness"
Your idea of "economics" has no relevance to what happens in actual economies.
That Made me laugh out loud.
Some drink at the fountain of knowledge. Others just gargle.
Can we please stop re-naming economists you don't agree with "neo-Marxists" (or the more popular "socialist")
Ok. But can, please, please, still call everyone who is "Keynesian" by the proper name "neo-Marxist"? Or at least just plain "Marxist?" They do believe in the labor-driven theory of production. That's the basis of the Marxist view, so can we call them by the proper name? Even though I disagree with them? Or do we have to invent some name that would be less honest in order to make sure they are not laughed out of the room?
Any guest worker system is indistinguishable from indentured servitude.
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.
RL chicks have intriguing potential as a porn substitute
Hm, that's intriguing. How many gigabytes is each one worth? (let's take full HD, for an apples-to-apples comparison)
You have a very bad understanding of the purpose of currency.
Currency does not exist solely as a store of wealth, that is only one purpose, and not even the most important one.
The most important purpose of currency is in providing liquidity to allow for greater freedom in making economic transactions.
False. The reduction of currency in circulation due to hoarding also inhibits production, as producers realize that holding on to cash is better than producing goods. This leads to a deflationary spiral, with disastrous results. We've been through this. It sucked. It's the primary reason we have managed currencies.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
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
Please remind me again; what is the value of a Bitcoin?
I know people are willing to pay real money for it, but what value does it actually represent?
The CPU mining; does it generate something of value?
Slashdot social media options: AIM, ICQ, Yahoo, Jabber and Mobile Text. Why no MySpace?
No they don't. Stop making things up.
Well, Islam, Judaism, and Muslims are all Abrahamic faiths. So should be able to call all Muslims Jews, since they share the same basis?
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
If it's for all people to use, you can't complain if somebody unplugs your cable to use it for their own appliances.
Usually these buildings have rules regarding the use of shared resources; most likely being allowed to keep it plugged in all the time to power stuff inside your house isn't one of them.
Slashdot social media options: AIM, ICQ, Yahoo, Jabber and Mobile Text. Why no MySpace?
The issue is that there are two realities of the purpose of currency.
On one hand there is the natural way that most people use it and understand it; as a means for transactions and a store of value.
On the other hand there is the way that certain economic schools want to use it, some for personal gain, some for misguided theories.
The trouble comes when the first group understand what the second group intend, because the first group actually do want a store of value and they are going to get it even if that means hoarding limited real-world resources instead of pieces of organic fibre. Which ends up with the pieces of fibre being worth their actual resource value as the faith in them is lost.
The idea that deflation itself leads to hoarding is flawed. Many economic sectors suffer constant deflation; computing and electronics are a good example. When people know that prices will fall, people invest in products as they are needed instead of before they are needed. That is not a disaster, that is a basis for a stable real economy.
Having people buy things before they are needed (to 'stimulate' and create non-existent jobs) means they are constantly undermining future demand. As soon as a dip comes it's magnified as purchases are not actually needed, they have already been made to get rid of unstable currency, so there is already a large overcapacity and a store of products that will easily let the consuming side forego purchases for a long time.
Buyers for Bitcoins probably compare the amount they buy to the possible maximum of Bitcoins, not the currently mined ones. Who cares that the active money supply is increasing when everybody knows what the final money supply will be? The mining of new Bitcoins will stop at some point and can never be continued past that point so people aren't worried about Weimar-style hyperinflation where the money supply grows at an exponential rate for who knows how long.
If the pool of possible Bitcoins were to increase suddenly then the value of Bitcoins would drop massively.
Justice is the sheep getting arrested while an impartial judge declares the vote void.
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.
That's exactly the point. Speculators don't care, because they can buy and hold until the (monetary) inflation ends and deflation kicks in. People who just wish to use the currency for trade, however, can't hoard and don't want to use a currency that fluctuates in value over the short term.
Contrary to this information warfare you hear from propagandists like Krugman, speculators and hoarders actually help to stabilize a currency, which makes it more attractive to use for trade. In order to support vastly more trade, Bitcoin needs more hoarders, not fewer.
If you conservatively value the Bitcoin network as equivalent to a company like Paypal, the long term price trend is much, much higher than where it is now. Unfortunately not enough people are willing to make this bet and so there aren't enough buyers to keep the price stable in the face of 30%+ inflation.
"I assumed blithely that there were no elves out there in the darkness"
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.
The technical definition of inflation is an increase in the money supply. And as it turns out, that was indeed just around the corner.
Rising prices are really just a symptom (money supply goes up, money value goes down, you need more money to buy stuff).
You have it backwards, unfortunately. Inflation is defined to be an increase in price levels. This increase in price levels can indeed cause the money supply to grow, but more on that in two paragraphs.
The longer story is that your definition of inflation is simply outdated. It used to be used for gold standard currencies, where "inflating the money supply" was something that a government actively chose to do, and so it was reasonable to talk about it. In our modern monetary systems, the size of the money supply is endogenous, i.e. it is not determined by the government, and therefore defining inflation in terms of the money supply is simply pointless.
The size of the money supply is mostly determined by the credit creation of banks. When a bank makes a loan, the money supply increases. When the loan is retired, the money supply shrinks. There are really two big classes of loans in our society: mortgages, and loans to cover production costs of firms. The first class grows when house prices rise: increasing prices in houses causes the size of mortgages to go up, which expands the money supply. The second class grows when general price levels increase: firms have larger production costs, which means they're taking out larger loans, which grows the money supply.
Of course there are other factors driving the money supply as well, such as Minsky-type cycles in how banks assess the credit-worthiness of their customers, but there is certainly a causal link from price levels to the size of money supply that people don't seem to be aware of.
No, bitcoin is precisely the equivalent of M0.
If the fractional reserve banking system can make $980 billion physical USD bills into $9.5 trillion dollars, then the very same system will make 7.2 million bitcoins into 72 million bitcoin credits. Don't confuse the actual currency in circulation with whatever the money multiplier produces.
This is only true if people replicate the existing system of bank money on top of Bitcoin (besides, you are misrepresenting the way the USD system works; it does not turn physical USD into a larger amount; instead, it turns reserves at the Fed into a larger amount of cash deposits at commercial banks; physical money is an irrelevant implementation detail). M0 is reserves at the central bank, and nobody except banks trades with reserves, because nobody except banks has accounts at the central bank. Instead, people have bank accounts and paper money.
So for your statement to hold, the future Bitcoin-based economy would have to have a banking sector where the majority of the population actually does not use Bitcoins at all, or only in very small quantities. Personally, I find that unlikely given the way Bitcoin is marketed.
On the other hand, it would be very ironic to see a complete repeat of the history of money: banks built on Bitcoin, terrible bank runs and crashes due to lack of regulation, the re-introduction of regulation and Bitcoin central banks, and finally, when even that becomes untenable again, a removal of the Bitcoin standard. Those who don't know history are doomed to repeat it, and all that.
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.
Ah, the lying liars of mises.org lying some more. To quote from Krugman's 2002 editorial:
" And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."
Now that obviously gets twisted into "Krugman called for a housing bubble." Right. Sorry, do the Austrian voodoo priests have any argument at all? All I get is lies and propaganda.
Ubi solitudinem faciunt, pacem appellant.
I suggest you read Marx first, before calling people that don't fit your world view "Marxist", no?
Ubi solitudinem faciunt, pacem appellant.
"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.
Deleted
Thats why you transfer the bitcoins not to the buyers address but to a new created own address.
Save the wallet file of that one on a floppy disk and mail that with UPS.
That way you can hope the floppy gets lost ;D or destroyed and you still have a copy of the sent wallet file.
Cost free eBook I read (by iBook/Kobo/Amazon/ObookO/Gutenberg etc.): "The Green Odyssey" by Philip Jose Farmer.
A simple example:
In a town live 3 people, and together they have 10 gold pices.
A has 9 gold pieces.
B has 1 gold piece.
C has nothing, but works once every 14 days for A and earns one gold piece.
The only way that he can buy a bread from B is by promising him he will pay in 15 days after he has worked for A.
Obviously As hording is not only a pain for C but prevents B making business, unless B risks not to get payed.
Cost free eBook I read (by iBook/Kobo/Amazon/ObookO/Gutenberg etc.): "The Green Odyssey" by Philip Jose Farmer.
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.
Read the original article in the NYT you dolt! He is clearly saying that he agrees with Paul McCulley's suggestion.
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
The CPU mining; does it generate something of value?
No and that is the really peculiar part of it. People are using real resources (computers and electricity) and paying for that with real money to produce a digital puff of smoke called a bitcoin, in which they then place more trust than the money issued by the government they elected themselves.
Bitcoin isn't even close to the gold standard. Just because a person has wasted real, physical resources in a convoluted proces to produce a string of ones and zeros, doesn't mean that string carries value (above the fairytale belief that it actually does). When a virtual currency is backed by gold, there is actual, physical gold in a repository to imbue the virtual representation of it with real value. Handing over that virtual representation can get you the physical gold. Even if you don't value gold for its own properties, at least it has industrial applications that are valuable.
Bitcoin on the other hand is backed by unnecessary environmental pollution, which you can't even physically claim by handing over that bitcoin. Not that I think people are waiting to physically get their waste CO2 handed back to them for their folly.
My guess is that, at some point in time, all those geeks will realize they wasted numerous hours and real money costing resources to produce exactly nothing and that it ultimately was only their own misguided belief that gave it a shine of value.
The only ones laughing are those who produced a lot of bitcoin when they were easy to create. For some inexplicable reason these digital puffs of smoke can now be traded for real money.
How do you print money? Get gullible saps believing that your magic beans are worth real world money.
# touch universe # chmod +rwx universe #
Inflation depends on perceived value of the money supply. Japan's debt is held almost entirely by it's citizens, and the Japanese work ethic is perceived as legendary, both of which have a strong mitigating effect upon how everyone else treats their currency.
> it is not determined by the government, and therefore
> defining inflation in terms of the money supply is
> simply pointless.
I don't follow. Why does it matter who inflates the supply?
Either way, supply/demand still works: supply of money goes up, price of money goes down.
> There are really two big classes of loans in
> our society:
I believe you are leaving out the federal debt, which at 14 trillion dollars accounts for somewhere in the neighborhood of 100% of the money supply.
Erm...
People are using real resources (computers and electricity) and paying for that with real money to produce a digital puff of smoke called a bitcoin,
I also use real resources (computers, electricity, and time) and I both pay for and am paid for these things with real money, in order to produce a digital puff of smoke called software.
in which they then place more trust than the money issued by the government they elected themselves.
This may be your most relevant argument, if you actually fleshed it out. But the rest of it...
Bitcoin isn't even close to the gold standard.
It's actually very close to the gold standard. People use real resources and real money to dig up a metal whose only real use is that it's kind of shiny, so people place value on it...
When a virtual currency is backed by gold, there is actual, physical gold in a repository to imbue the virtual representation of it with real value.
Only as much value as the actual gold contains. So let's see...
Even if you don't value gold for its own properties, at least it has industrial applications that are valuable.
Oh, bullshit. How much would it actually be worth if we only valued it for its industrial applications? By that logic, silicon should be our currency.
For that matter, what's the industrial application of any "real money", like the dollar? Unless people value it for its intrinsic properties, or for what it will buy, it's not like you're going to take those bills and build something out of them. Not that it would really matter, since more dollars these days are digital anyway than physical.
Bitcoin on the other hand is backed by unnecessary environmental pollution,
Which is again pretty much like the gold standard. I can't imagine that if we started distributing the gold in Fort Knox to industry, that we would actually need any mining for the next few decades, if not centuries.
For that matter, we need to be switching to alternative energy anyway. Electricity is possible to generate cleanly. Gold isn't.
My guess is that, at some point in time, all those geeks will realize they wasted numerous hours and real money costing resources to produce exactly nothing and that it ultimately was only their own misguided belief that gave it a shine of value.
And you could say the same thing about any other currency, except that we have collectively decided that these other currencies have value, but Bitcoin doesn't.
Most of your argument amounts to an argument against characteristics Bitcoin has in common with other currencies, and particularly with the gold standard. I'm not saying you're wrong, and it's true that Bitcoin will have no value if no one values it -- which is much more likely to happen to Bitcoin than to other forms of currency -- but to say that it isn't even close to the gold standard, and then enumerate a list of complaints about it that apply as easily to gold, makes no sense.
Don't thank God, thank a doctor!
Unemployment benefits have no relationship to the unemployment rate.
If you don't have a job and are looking for work, you are 'unemployed'.
So people are actually giving you cash money for your bitcoins?
No, I never bought in to it. I should have though, when it was still easy to grab these intrinsically worthless pieces.
To see that there are people working their ass off to exchange acceptable money for digital nothingness, just look here:
https://mtgox.com/trade/buy
You can actually plonk down real money to get these silly signed computer files.
# touch universe # chmod +rwx universe #
No, absolutely wrong.
To put it simply: too much inflation is bad, deflation is always bad, and a little bit of inflation is good. Money isn't anything special, it's subject to the laws of demand and supply like anything else, and inflation is just a reflection of the supply and demand for money. Inflation boils down to "too much money seeking too few goods" (or services). Deflation therefore can be defined as "too little money seeking too many goods", in other words, an oversupply of goods in the economy.
The thing is with inflation is people are encouraged to spend rather than hoard, because if you hoard your wealth slowly falls. With deflation the opposite happens. It doesn't work as you state at all, once you have deflation people think "why spend now when I can spend tomorrow and get it for less" reducing demand for goods in the economy, which leads to more deflation, which leads to more "why spend now..." and so on, the deflationary spiral which is incredibly hard to break. So everyone's hoarding money and no one's spending, which is no more fun than not actually having the money in the first place. Even those who *want* to spend the money can't because goods producers have deduced it's more profitable just to hoard money instead of making goods. And thus the cycle sustains.
This is why when it looked like a deflationary spiral was going to start up in the UK in 2008/2009, the Bank of England embarked on a programme of "quantitative easing", or in English, printing money, to make sure we didn't get into this deflationary spiral and stagnation.
Oolite: Elite-like game. For Mac, Linux and Windows
> it is not determined by the government, and therefore
> defining inflation in terms of the money supply is
> simply pointless.
I don't follow. Why does it matter who inflates the supply?
It matters for policy discussions. In the gold standard world, expanding the money supply (and base) is something that governments did. Inflation, in the gold standard sense, was something that governments did. So it made sense to argue for or against certain government action.
In our modern world, money supply changes and inflation are things that are almost entirely done by the private sector. The implication for policy debates is huge.
Either way, supply/demand still works: supply of money goes up, price of money goes down.
Uh, no. The term "money supply" is really very misleading. Just because the "money supply" (i.e. M2) increases, that doesn't mean that money somehow "becomes cheaper". There is not a market like for commodities. In fact, there is no robust causality from a growth of the money supply to anything else. The only causalities there are is that some third type of event causes both the money supply to grow and something else to happen.
For example, increasing consumer credit can cause the money supply to grow and also aggregate demand to grow, which in turn can grow the economy, or, if the economy hits supply side constraints, cause inflation. So in the latter case, it is not the growth of money supply that causes inflation; instead, it is a third event (more consumer credit) that simultaneously causes inflation and a growth of the money supply. Similarly, in the first case it is not the growth of money supply that causes growth of the economy; instead, it is a third event that simultaneously causes growth of the economy and of the money supply.
Sorting out those causalities is kind of important.
> There are really two big classes of loans in
> our society:
I believe you are leaving out the federal debt, which at 14 trillion dollars accounts for somewhere in the neighborhood of 100% of the money supply.
I was talking about private sector loan activities, which are what really affects the money supply the most. Also, don't delude yourself: outstanding mortgage debt is on the same order of magnitude as total government debt, and that's just one type of private debt.
Besides, it's not like government needs you to loan it money. Government debt is really a tool of monetary policy. Read about how our monetary systems actually work.
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Nowhere does he call for building a bubble. He calls for easing off on interest to increase household spending - quite logically, if you got a trade deficit like the US and have to fuel your economy by internal spending. He cites someone calling somewhat ironically for a fresh bubble in his argument for finally stopping to strangle the internal economy. But reading comprehension - especially when it comes to comprehending rhetorical subtlety - was never the strength of the faithful apprentices of the Austrian propaganda masters.
Ubi solitudinem faciunt, pacem appellant.
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To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that,... Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
You cannot possibly continue to claim that "nowhere does he call for building a bubble". To do so is to deny reality and claim that what he wrote is not what he meant - but something more "subtle".
I'd agree that Krugman thought that a housing bubble was going to be necessary to replace the slump in business investment following the dot-com bubble. I don't think he expected the insane level of fraud and leverage that we got though. So I think even his detractors should be willing to accept that there was a lot of difference between what he was calling for and we got...
Awesome furniture, accessories and cabinetry in Santa Rosa, CA: http://humanity-home.com/
Err, you don't touch the neutral with 240Volt (this is assuming US wiring) either. 120V, 240V, and 3-Phase 208V systems have 1, 2, or 3 hot wires. All of the hot's have a 120VAC potential relative to neutral/ground. For a 240V setup, it's two hots that are 180 degrees out of phase with each other. 208 volts is 3 hots which are 120 degrees out of phase. If you build a 240 volt device that uses two 20 amps at 120V circuits and sends back through neutral, the neutral will carry between 0 and 20 amps depending on how balanced your load is between the two phases, which is why you need a neutral that is sized to carry the same maximum load as the hots.
Go Badgers! -- #include "std/disclaimer.h"
So basically, the only way you're "making money" off this thing is that you're stealing electricity? Yeah, that sounds like a great plan.
So are you sharing your profits with them? I mean, they are helping to pay for your endeavors.
It's actually very close to the gold standard.
No, it's not. Under the Gold Standard, I could take my currency and trade it in for an equivalent amount of gold. What can I trade a set of Bitcoins for?
Oh, bullshit. How much would it actually be worth if we only valued it for its industrial applications?
Nowhere near what it's worth now. Which makes the whole "Gold is better than US Dollars" thing kinda silly. In the collapse of civilization, US Dollars might be worthless, but odds are your gold will be too. You can eat it, you can't make weapons out of it. What can you do with gold? Make jewelry? Yeah, there's not gonna be a big market for that.
For that matter, what's the industrial application of any "real money", like the dollar?
Facilitating trade.
He's a Economist . Nothing he says has anything to do with reality so why take him seriously?
FTFY. It's not like any of the other schools of Economics have anything to do with reality either.
I think the problem with Bitcoin is the way it's set up. Its a currency designed to encourage people to hoard it, rather than spend it. There's only going to be a finite number of them, so for a while, it will be more valuable to hoard them rather than spend them to exchange goods. Why buy something today if your currency will be worth more tomorrow?
Look at the design of Bitcoin, though. It's designed so that there will only ever be X amount in existence. After that, then no more. As more and more people us it (assuming they do), then that will cause mass deflation, and increase in the value, to the point where it will be far better to hoard the bitcoins rather than spend them.
WSJ is Keynesian.
Krugmans predictions have sucked:
Krugman said the borrow and spend and print and spend stimulus packages would help the US economy. They did not.
He said that inflating the bubble over the past decade would be good. It was not.
The people who predicted the housing bubble burst, the tech bubble burst, and just about every recession and depression since 1913 are the Austrians like FA Hayek, Ludwig von Mises, Murry Rothbard, and Ron Paul, all of whom are (or were until their deaths) firm believers in the gold standard. Generally, if all the politicians who take bribes...I mean "campaign contributions", from our corporate overlords, are strongly in favor of an economic policy (like Keynesianism), it's not going to be good for the rest of us.
Comparing bitcoin to gold is absolutely moronic! Bitcoin has far more in common with the US dollar (or other fiat currencies) than with gold.
The gold supply is limited to the amount that exists in the universe and our ability to extract it efficiently. Bitcoin (like the Federal Reserve) can change the amount in circulation by entering numbers on a computer.
Gold has real, concrete value. It is useful in dozens of industries, not just jewelry and ornamentation. Bitcoins (like the USD since 1971) are backed by nothing of value, and are therefore inherently valueless. There is a reason that gold has been the de facto wealth storage medium for over 6000 years now. Successful cultures become successful on a gold standard, then turn to empire, inflate the currency, and collapse. (The US empire is currently shifting from step 3 to step 4).
Krugman hates the gold standard, like all Keynesians, because it would eliminate the ability of the Fed to print and spend, a policy Krugman loves.
Contrary to this information warfare you hear from propagandists like Krugman, speculators and hoarders actually help to stabilize a currency, which makes it more attractive to use for trade. In order to support vastly more trade, Bitcoin needs more hoarders, not fewer.
So wait, in order to facilitate trade, you need more people who are unwilling to part with their coins? Yeah, I'm sure that'll cause the bitcoins to just fly.
Forgive me if I place more stock in the thoughts of a Nobel laureate Economist than you.
Who cares if a currency is hoarded?
Those who wish to use the currency for trade.
That is the point of currency--to allow people to save as much as they like without taking real goods out of the economy and sitting on them.
No, the point of currency is to facilitate trade; to have something of fixed value that can be exchanged instead of having to rely on the barter system.
I think you're assuming that fractional reserve banking will actually work in Bitcoin. From what I remember about it, there can only be about 21 million bitcoins, ever.
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!
The term "inflation" originally referred to increases in the amount of money in circulation, and some economists still use the word in this way.
Generally in economic circles, non-Keynesians will use the term price inflation when referring to rising prices, and inflation to refer to an increase in the currency in circulation. Keynesians will use the the term inflation to mean price inflation, and completely ignore the concept of currency supply inflation, because acknowledging it would require admitting the fundamental flaw of Keynesianism: that printing fiat currency funnels money from the lower and middle classes to the politically connected elites.
Yes, you should. It is called freedom of association.
The truth is that all men having power ought to be mistrusted. James Madison
I actually pointed this original use of the term out myself. It's just that most economists have moved on. The causal link between money supply and price increases is actually non-existent. As I've written in a sibling post, the only links that exist are when there is a third event (such as increase in consumer credit leading to excessive consumption) that increases both the money supply and the price level at the same time. But this is not a causal link from money supply to price increases. And the empirics support this. It's one of those things where everybody "knows" that there is a causal link, but when people actually try looking for it, they can't find it. Yet for some strange reason, they just "know" that it "must" be true, empirical studies be damned.
This leads to fun stuff like economists predicting three years ago that the actions of the Fed would lead to massive inflation. Strangely, this inflation still hasn't shown up. Even of the relatively modest inflation we're having right now, almost everything can be attributed to energy prices. Not a sign of monetary policy-caused inflation is in sight.
Besides, the outdated definition of inflation is simply useless. Nobody's life is directly affected by the size of the money supply, and the size of the money supply is not a policy variable, i.e. the government does not set the size of the money supply. On the other hand, the definition of inflation in terms of price increases is useful, because people's lives are directly affected by changes in the price level.
printing fiat currency funnels money from the lower and middle classes to the politically connected elites.
Oh please. Any funneling of money towards politically connected elites has nothing to do with whether one has the fiat money or not. Political systems before 1971 were perfectly capable of funneling money towards the connected elites. This has more to do with societal attitudes towards corruption etc. than anything else. If you let your politicians run over you, that's what you get. Whether you have fiat money or not just doesn't matter.
besides, you are misrepresenting the way the USD system works; it does not turn physical USD into a larger amount
I chose my words very carefully. I never implied that physical USD can be turned into larger amount. Please read what I said again.
If the fractional reserve banking system can make $980 billion physical USD bills into $9.5 trillion dollars, then the very same system will make 7.2 million bitcoins into 72 million bitcoin credits.
Obviously physical USD bills != USD dollars, and in the same sense, bitcoins != bitcoin credits. I made the distinction very clear by my choice of words.
This is only true if people replicate the existing system of bank money on top of Bitcoin
Sorry but that's not my assumption. Fractional reserve banking is not just a property of the current banking system. It's a fact of life.
It's really unfortunate that the economists branded the "money multiplier" as an economic phenomenon, even though it is not exclusive to the field of economics. Please allow me to illiterate my point with a few examples:
1) Bob opens a car rental company in a town of 100. He is hugely optimistic and fills his lot with 100 cars. He then sends fliers to each resident promising that there will be a car waiting for them at all times. Unfortunately for Bob, 90 of his cars ends up never being used. John opens a competing car rental company in the same town with only 10 cars, and he makes the exact same promise to each resident. Needless to say, Bob's company cannot compete and goes into bankruptcy.
2) Bob opens a hosting company with 100 servers. 100 clients signs up each renting a server. Only 10% of the CPU, memory, and bandwidth ends up getting utilized at each server. John opens a hosting company with 10 servers and sells 100 virtualized servers. All of Bob's customers switch over to John because he is 90% cheaper. All of John's servers end up being utilized at 100%, and the clients are all happy because they saved 90% of the cost while getting the same thing.
In both examples, the "money multiplier" was 10, even though no money and no banks are involved. In both examples Bob lost the competition because he does not understand the principle that people don't need a service 100% of the time. People don't rent cars 24/7. People don't visit websites 24/7. People don't buy things 24/7. It's physically impossible. People need to eat, sleep, relax.
3) Bob holds 100 bitcoins in his wallet. John puts 100 bitcoins into a bitcoin bank to collect interest. The bank keeps only 10% of the deposits in house, and lends out the other 90%. 50 years later both men retire. Bob has exactly 100 bitcoins, while John has 1000 bitcoins due to compounding interest.
By holding 100 bitcoins in his wallet ready to spend at any time, Bob is assuming that he does not need to sleep, eat, or do anything else other than spend his bitcoins. This assumption is obviously wrong, and it has cost him greatly. The entire opportunity cost of those 100 bitcoins over 50 years were lost because Bob assumed he will be spending them 24/7 when that's obviously impossible. John on the other hand, correctly assumed that he only needs his bitcoins at particular instances, i.e. when he's actually buying something. At any other time the bitcoins are useless to him, so he can profit from this idle period by lending them out via banks.
Regardless of how bitcoins are marketed or how it works, a bitcoin banking sector will develop, and everyone will start using it because the people who boycott the banking system will not be able to compete with those who do. The market will eventually weed them out just like how it weeded out Bob's two inefficient businesses in the above examples.
How do you think they count the number of unemployed people for official figures?
I'm using all of my mod points to mod ancient memes down. Please join me.
Sorry, dude. You have no clue of what you're writing about. I'm not gonna do line-by-line, as it'd be a waste of my time, I'll only mention a couple things.
Computing and electronics suffer from price deflation. But they are commodities, not currencies. Currency deflation and commodity price deflation are two very different beasts.
And I have no idea what your misguided view is on what "most people" vs "certain economic schools" view currency as. You say most people view it as a means for transactions and a store of value. That's exactly what I wrote in my post -- liquidity == fluid mean of transactions. Just because you don't understand the vocabulary used doesn't mean that I'm wrong... it just means that you lack sufficient education to discuss the subject at a high level without wasting extraordinary amounts of time on defining terms and sorting out misunderstandings due to misunderstood terms.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
nothing mysterious - there is no conspiracy here. Economists moved to "core inflation" because things like energy and food are extremely volatile. Inflation should refer to sticky prices, ie things that tend to resist going down again once they go up (or vice versa). Wages are extremely sticky, then things like cars and houses.
Wages are currently flat or even decreasing, while housing prices have clearly decreased. Car prices are pretty flat. There is no significant inflation going on here.
Jeremy
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?
Ironically, I knew that and meant to put that in my asterisk as well, but submitted too quickly.
besides, you are misrepresenting the way the USD system works; it does not turn physical USD into a larger amount
I chose my words very carefully. I never implied that physical USD can be turned into larger amount. Please read what I said again.
If the fractional reserve banking system can make $980 billion physical USD bills into $9.5 trillion dollars, then the very same system will make 7.2 million bitcoins into 72 million bitcoin credits.
Obviously physical USD bills != USD dollars, and in the same sense, bitcoins != bitcoin credits. I made the distinction very clear by my choice of words.
Right back to you ;)
The banking system does not turn an amount of physical bills into a larger amount of dollars. This view of the banking system is shared by nobody. Most economists would say you are wrong because s/physical bills/reserves/. But that's a distortion of the truth, too ;)
In fact, as Modern Monetary Theory clearly illustrates, it would be more accurate to say that the banking system maintains a very large amount of dollars in deposits, most of which originated in loans, which in turn are backed by the regulatorily mandated amount of bank capital (as per the Basel accords). In addition, the system keeps a significantly smaller amount of reserves at the central bank as part of the payment settlement system. In most countries, the regulatory rules demand that the amount of reserves is somehow tied to the amount of deposits, so that an increase in deposits also causes an increase in reserves. However, not all countries have such a rule. In those latter countries, the amount of reserves is determined entirely by the liquidity preferences of banks.
This is only true if people replicate the existing system of bank money on top of Bitcoin
Sorry but that's not my assumption. Fractional reserve banking is not just a property of the current banking system. It's a fact of life.
(...)
Regardless of how bitcoins are marketed or how it works, a bitcoin banking sector will develop, and everyone will start using it because the people who boycott the banking system will not be able to compete with those who do. The market will eventually weed them out just like how it weeded out Bob's two inefficient businesses in the above examples.
Ah yes. You're right: if bitcoins were widely adopted, then such a banking sector would develop. Still, it's ironic, don't you think? People who have an ideological distaste for the existing system invent something to replace it. Then, assuming they win, they will proceed to reinvent (over time, of course) the existing system on top of their replacement.
It's the old "Those who don't know history ..." thing all over again.
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.
Krugman's got a point - the real value of bitcoin is that it's a lottery ticket. To buy one bitcoin, you pay about the price of a fast food meal. Then you back it up and forget about it for a few years. 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.
Oh, so it's a Ponzi Scheme?
The cause of deflation isn't the lack of money printing. The cause is physical reality. Using a monetary system that, instead, attempts to deny physical reality will end in a much larger failure down the road. All money printing can do is delay this inevitability.
Look, deflation isn't a bad thing. Deflation is just the price of things going down, as technology improves and resources become more abundant. Why would you complain about that? That's the entire reason that people invest their time and energy into creating new technologies in the first place: to make life better. Hell, it's the only reason people do any work at all.
What monetary inflation does instead, is it robs those people of the fruits of their labor, and uses it to subsidize government mouth-pieces or pointless fraudulent warfare, or misallocation of resources by central planners or the staging of fake alien invasions. Can you see why Paul Krugman would be in favor of that?
You're making the mistake of assuming that hoarding Bitcoins prevents trade. It doesn't. Bitcoins can be infinitely divided. You can trade with 0.0000001 Bitcoin just as easily as you can with 5. The important thing is that price changes should follow as closely as possible the change in productive capacity of the entire economy. And the way to accomplish this is to let the market decide how much a Bitcoin is really worth, free of central planning.
"I assumed blithely that there were no elves out there in the darkness"
Money does not fail.
Gold is money, anything else that is printed is a promise note - currency. Currencies fail.
Currencies fail, money does not.
Here is a clue by 4 - this is what US 10 year bonds have been doing since the 60s. Note how the yield is now lowest ever? The price for that bond is highest ever, while the currency is being printed out of existence, which is given to banks and by doing currency swaps it's also given to foreign national banks, all while foreign national banks also hoard US currency?
All of this currency goes into buying T-bills, so this is the clear indicator of where inflation is taking T-bills and thus where the reverse is going (interest rates on the 10 year bonds.)
This is the destruction path that I am talking about, this is going to burst and explode, and when it does, you are going to be stuck with nothing if you do not have real money.
Oh, and I wrote a couple of journal entries, one on HFT and the reasons as to why people don't understand it and don't understand what is causing it, and the other on this entire broken /. moderation system.
Enjoy
You can't handle the truth.
People often get a bit crazy after winning the Nobel Prize. Look at Linus Pauling, who won for determining the nature of the chemical bond linking atoms into molecules, including his key work on the alpha helix of protein structure. Then he started spouting off crazy (unsupported) stuff about vitamin C and cancer.
And there was Einstein and the cosmological constant...
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Funny I was growing indoors for more then a decade (until market forces made it not worth my while, CA though).
Now it's just four in the backyard.
He should/is scam whatever welfare is available. Bitcoin/pot income would be hard to track, so he can suck on the government tit until it goes dry. I assume he already is. Very typical for parasites to work under the table.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
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.
No, it's not. Under the Gold Standard, I could take my currency and trade it in for an equivalent amount of gold. What can I trade a set of Bitcoins for?
Missing the point. Bitcoins are the otherwise-useless item which we all agree has value. With the Gold Standard, it'd be gold. If Bitcoin were to somehow take over (which seems unlikely), you'd likely have things like paper currency which would be backed by actual bitcoins being held in reserve somewhere, assuming the bitcoins themselves can't be made convenient enough (which is likely).
You speak as though gold is incredibly more valuable than data for some reason other than that gold is actually used for trade. Then you say this:
Oh, bullshit. How much would it actually be worth if we only valued it for its industrial applications?
Nowhere near what it's worth now.
Which was my point. The actual inherent value of a currency is almost entirely based on how much it's actually being used as a medium of exchange, and not some intrinsic properties of it. Dollars, for example, are not backed by the gold standard and have almost no use other than as a medium of exchange, and are more often digital than physical anyway -- so you could at best exchange "virtual" dollars in your bank account for "real" paper dollars.
For that matter, what's the industrial application of any "real money", like the dollar?
Facilitating trade.
Oh, zing!
Except you just contradicted yourself. If "facilitating trade" counts, then the dollar would be worth exactly what it's worth now. You just admitted it wouldn't be worth nearly that much. Clearly, you weren't talking about "facilitating trade" as an application of gold.
Don't thank God, thank a doctor!
The claimed 'danger' of currency deflation is that consumers will postpone purchases and lower aggregate demand. Specific sectors demonstrating constant deflation merely indicate that purchases of goods in an environment where prices constantly falls does not mean purchases postponed indefinitely, indicating a demand baseline and that a prolonged period of deflation would stabilize once the stimulus and inflation blown bubbles finish deflating.
While currency deflation might make investments in productive capacity less palatable for a time, as compared to value stores, their profitability would eventually stabilize as well, catering to actual demand instead of demand taken from the future.
And no, vocabulary differences don't mean you're wrong (and as the various economic schools can't even agree on the definition of inflation vocabulary differences are inherent to economic discussions). But the state of the current economic system and the huge inventory of produced goods, like housing, that nobody would have wanted had they actually had to pay for it rather suggests you're wrong.
That article cites numerous instances of Krugman advocating the housing bubble. They also missed one that I recall, which was in an interview in Der Spiegel.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Actually, a lot of newer residential installations in the US are using 30-amp breakers these days, although 20-amp ones are probably still more common, even in new installations. (Setups from the late twentieth century, however, often use 14-2 cable (instead of 12-2 or better) and so tend to have 15-amp breakers for everything except the dryer and range, because a heftier breaker wouldn't be a real great idea with that cabling. Heaven forfend you put a modern thousand-watt microwave oven on such a circuit, because it'll trip the breaker every time you turn around. And don't even get me started on old fusebox installations that you can find in nooks and crannies in the unfinished basements of older homes from the first half of the twentieth century, complete with pairs of non-cabled cloth-insulated wires [shudder] plastered right into the wall, without the benefit of junction boxes or conduit or even a second layer of insulation, running to ceramic standoffs, with no proper grounding anywhere...)
I have no idea what's prevalent in Europe. For all I know they could have speaker-wire-quality pre-WWI uninsulated lines running through the mortar between the foundation blocks and gnawed by dozens of generations of rats in one building and separate sixty-amp circuits run through proper conduit for each outlet in the building next door.
Cut that out, or I will ship you to Norilsk in a box.
Actually, a lot of newer residential installations in the US are using 30-amp breakers these days, although 20-amp ones are probably still more common, even in new installations.
I'm not sure where you heard that, but the required lighting and small appliance circuits in a dwelling as detailed in the National Electrical Code section 210.52 must have overcurrent protection of either 15 or 20 amps. I believe you CAN install general-purpose circuits rated higher than that around the house, but those would be in addition to the required 15/20-amp receptacles (of which there are many: any wall space must be within 6ft of a receptacle, kitchens must have no less than two separate small-appliance circuits feeding not less than two receptacles with any countertop space more than 12-in wide having no point on the wall be further than 24-in from a receptacle, etc, etc, etc), and would require receptacles rated for whatever the circuit is rated for (in most cases). A 15-amp circuit must only have 15-amp receptacles. A 20-amp circuit can have 15- and/or 20-amp receptacles. A 30-amp circuit must have only 30-amp receptacles. Basically, if the plugs in your house don't look like this, then you don't have 30-amp circuits... and frankly why would you?
(Setups from the late twentieth century, however, often use 14-2 cable (instead of 12-2 or better) and so tend to have 15-amp breakers for everything except the dryer and range, because a heftier breaker wouldn't be a real great idea with that cabling. Heaven forfend you put a modern thousand-watt microwave oven on such a circuit, because it'll trip the breaker every time you turn around.
Most new construction still runs 15-amp lighting and small-appliance circuits... and therefore usually runs #14 because it's cheaper. And a 1000W microwave on 120V only draws 8.3A or so... if your wiring is planned out properly such that the microwave mostly has a circuit to itself, it should never trip a breaker. And as for "a heftier breaker wouldn't be a real great idea with that cabling"... there are clear requirements in the form of both text and tables that dictate how you are to plan the circuitry for a residential dwelling as well as what size wire, breakers, etc you are to use. It's very clear-cut. Either what you're installing meets code or it doesn't. If it does, you're fine. If it doesn't, you're breaking the law and risking your life and property (or that of whomever you're doing the work for). I hope you're not installing wiring in your own house using fuzzy logic like that.
And don't even get me started on old fusebox installations that you can find in nooks and crannies in the unfinished basements of older homes from the first half of the twentieth century, complete with pairs of non-cabled cloth-insulated wires [shudder] plastered right into the wall, without the benefit of junction boxes or conduit or even a second layer of insulation, running to ceramic standoffs, with no proper grounding anywhere...)
That's called knob and tube wiring. It was common until the 1930s or so and usually uses wire insulated by a cloth/rubber composite... and it was considered proper and perfectly up to code back then. No grounding anywhere because no appliances needed a ground back then (rather, the need for a ground was not recognized). Most existing K&T installations have extremely brittle insulation and nobody in their right mind should dare fuck with it or you'll end up with some extremely hazardous conditions.
(Hint: I'm an electrician.)