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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."
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.
Qualifying Krugman as a "prominent Keynesian economist" is like calling Stephen Hawking a "prominent Einsteinian physicist". I call shenanigans.
I'm pretty sure taco wasn't editing the New York Times.
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.
You are making the New York Times into something important and noteworthy and it is not.
No wonder Taco left.
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
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?
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.
DATABASE WOW WOW
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)
. 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.
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.
The peace prize is a real Nobel, it's one of the original group set up by Alfred Nobel. The economics one isn't, it's a separate award that uses a very similar name, set up by the bank that handles the Nobel grant because they wanted to give their field some legitimacy off of the name.
I still have more fans than freaks. WTF is wrong with you people?
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.
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.
nedlohs has it right.
Economics is not a real Nobel -- as you point out.
Further, it's as related to reality as the Peace Prize -- that is, it is not.
He doesn't say the Nobel Prize for Peace is not a real Nobel, he just said it's not related to reality. It's not, just look at the past recipients of the Nobel Peace Prize. There's no way a sane person could correlate those winners to the concept of progressing peace.
... still waiting for this free-as-in-beer free beer I keep hearing about.
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?
Awesome furniture, accessories and cabinetry in Santa Rosa, CA: http://humanity-home.com/
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.
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.
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.
Keynsian theory stated that the government should run deficits during cyclical depressions and surpluses during periods of growth that fully pay down the debt to "smooth out" the business cycle .
The second half prescription has never once been practiced because a government running a surplus is as unnatural as water flowing uphill.
Just as soon as Nobel Peace Prize winner Barack Obama stops all the wars. Hint--if you're left of center, you tend to win prizes from left of center organizations.
It's his blog, he can post what he wants.
Some times he posts about science fiction.
Some times he posts about indie bands he's into.
It wouldn't surprise me if he were reading this thread.
In this way, it is much like Communism: "It only doesn't work because no one does it right!" The fact is, expecting a government entity to impose limits on itself in order to make a plan work is tautologically identical to saying it doesn't work.
while (sig==sig) sig=!sig;
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"
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.
Canada. Googling "canada budget surplus history" turns up several relevant hits, including blogs referencing the surpluses, news stories talking about it, and this page at the Government of Canada website. Surpluses became the norm after Chretien and his finance minister Paul Martin balanced the budget in the 1990's or so, and remained that way until the last Harper government, who went into deficit spending as a response to the recession. And just as an aside, after Chretien did his budget balancing act, most if not all of the provincial governments had to follow suit. Voters simply stopped accepting deficit spending in good economic times.
Rule of Slashdot #0: You and people like you are not representative of the larger population. - A.C.
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.
Hint--if you're left of center, you tend to win prizes from left of center organizations.
That doesn't explain why Obama got his Nobel Prize.
Dilbert RSS feed
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).
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."
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.
> 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).
I'm pretty sure they were real, not through personal knowledge but because funny bookkeeping seems to come out to the public sooner or later, usually sooner. The last government fell in part because of funny bookkeeping. Of course, they got re-elected with a majority, so what can you do?
There has often been related funny business that has gotten exposed. A few of our surpluses actually came out of the funds set aside for Employment Insurance, when employment numbers did better than expected. The government of the time (Liberal I think) just rolled those surpluses into the general funds where they went to debt repayment. Some of the opposition parties thought the money should be reserved in the EI funds or paid out in increased benefits. There was a minor stink about it. Having more than one opposition party is a great aid to catching bookkeeping cheats and tricks.
Does all of this mean the surpluses were real? Not really, but it suggests it strongly. Also, the surpluses in question were on the order of 1 or 2 Billion dollars. Not a huge amount compared to the total budget, but still big enough to be hard to "create" with bad accounting. Also, when the first surplus it, it was quite controversial: the conservatives of the time pushed hard to make it illegal to run surpluses, arguing that the money belonged to the taxpayer, and should go right back to him. But not allowing surpluses when there's a huge debt to pay off would be idiotic, wouldn't it? No civilized country would pass a law like that, right?
Rule of Slashdot #0: You and people like you are not representative of the larger population. - A.C.
You're just stupid and uneducated. You're also probably a college student.
I am NOT Paul Krugman!
Dark Reflection
And yet, there are governments in the world that do impose limits on themselves and make plans work. Something doesn't become logically impossible just because it's not within your experience.
Rule of Slashdot #0: You and people like you are not representative of the larger population. - A.C.
Ironically, it's exactly in the short term, when liquidity trap conditions apply (like now, and unlike the 70's) that Keynesian policies work. In the long term, they lead to contraction. In stagflation conditions, ineffective. Krugman has been explaining, talking about, making predictions about, and refining his models of all of this stuff since 2008, and his predictions have been almost always right (he thought wages would drop, they didn't, that's the only thing he's missed as far as I can tell). No modern economist is arguing that Keynesian policies are a magic bullet.
Rule of Slashdot #0: You and people like you are not representative of the larger population. - A.C.
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.
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.
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.
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 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
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.
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"
In this way, it is much like Communism: "It only doesn't work because no one does it right!" The fact is, expecting a government entity to impose limits on itself in order to make a plan work is tautologically identical to saying it doesn't work.
And that is why fiat currencies are so superior to the gold standard. With a fiat currency you always have the ability to pay back any debt, but at the same time there is also no need for it as you can always print the interest you need to pay.
Government debt in essence becomes little more than a subsidize on private savings. Of course, governments can still screw up in the short term, but unlike with a more primitive system like the gold standard you aren't screwed in the long term.
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.