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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.
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.
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?
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.
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.
. 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.
But you can learn from historic reactions to varies pressure. For example Austerity has never gotten anyone out of a recession. Now, if people would look at that, look at it's history and act upon that, we wouldn't be having these issue in Washington.
So the testing part is looking at previous success a failure, and the prediction side would be using the previously success as a reaction to current economic situation and seeing the results.
You can't really do it in the lab, yet, but you can apply it.
The Kruger Dunning explains most post on
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?
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.
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.
For example Austerity has never gotten anyone out of a recession.
Wow! That is incredibly untrue. Shrinking government spending (while deregulating private activity) caused a boom in China. It has also made Germany the only stable economy in Western Europe in the recent years. Austerity itself is a loaded word. It's not that the government has to just cut the money it spends. It has to also get out of the way. For example, cutting government expenses by shifting them to the private sector, is not going to solve anything. It will only increase regulatory costs. But cutting government expenses by cutting government involvement has been beneficial in most economies in which government had previously was TOO involved in economic activity.
Any guest worker system is indistinguishable from indentured servitude.
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.
The over extension of debt can be corrected by devaluing the the currency. You pump more money into the economy during the process, which creates jobs and stimulates economic activity. It will make your exports more attractive to other nations and while decreasing the demand of imports, which improves the trade balance.
This works and is how the US got out of the great depression with help from the New Deal and WW2.
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.
I like how you write devalue the currency like it's nothing. You do understand that by devaluing the currency you destroy the life savings of the elderly and people on fixed income. You basically rob all of the people that lived within their means and saved their whole life to bail out those that borrowed to the hilt and lived like there is no tomorrow.
And we never recovered from the great depression until after WWII and we cut government spending WAY down and fired millions of soldiers. WWII only got us out of the depression if you think the way to get rid of unemployment is to ship millions of unemployed people overseas. Look how people actually lived during WWII. It was terrible with rationing and cost controls on all sorts of products.
I love Jesus, except for his foreign policy.
http://en.wikipedia.org/wiki/John_Maynard_Keynes#During_the_Great_Depression
Because all the other major industrial powers had been crushed in the war, giving US-based industries an unparalleled opportunity for expansion and near complete control of global markets.
Also, social spending soared after World War II. There was less wealth going to war, and more to infrastructure improvements and individual consumption. That's the opposite of austerity.
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.
I personally think people pick their favorite "school" based on their pre-existing views and agendas, and not on any actual merits of their philosophies.
Also, the way you put it sort of hurts the Austrians, at least in my eyes. Theory is useless without observations. Where observations are somewhat useful with the judicious use of statistics and large data sets.
Personally I think both of them are completely useless. Both of them, applied, have caused a decent amount of harm. Neither of them, applied, have seemed to do the slightest bit of good. And generally people who vocally subscribe, and show brand loyalty, to any of them are as idiotic as people who declare themselves as following one of the the two established political agendas. Its just as arbitrary. Reading debates about which of the various schools of economics is gospel leads to the conclusion that economics has more in common with religion than with science. There is no way to conclusively falsify any claim, and thus the argument never, ever, can have an actual objective conclusion.
A patriot must always be ready to defend his country against his government. -edward abbey
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.
You do understand that on the planet Earth, if you actually do this, you will indeed come out from the hole by continually digging?
No, no you will not. What will happen is that eventually you will dig deep enough to reach molten rock and you will die from the heat.
"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." ~Thomas Jefferson