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BitCoin Gets a Futures Market
fireballrus writes "There is one more way to use your BitCoins rather than buying weed or socks. Recently, a Bitcoin Exchange called ICBIT quietly introduced a futures market, obviously using Bitcoins as its main currency. Gold futures trade roughly at 137 BTC/tr.oz and Sweet Crude Oil at 7.3 BTC/bbl. This may play a positive role in the Bitcoin economy which needs more ways to actually use coins instead of mining them." While this sounds intriguing, I'd like to hear a good case for why BitCoin makes sense in this context.
So you use this, and you either lose or gain bitcoins. That seems like a circular system where bitcons beget bitcoins. That is NOT a "use" for bitcoins, not when the end result is ideally more bitcoins.
"Have you ever thought about just turning off the TV, sitting down with your kids, and hitting them?"
Awesome! Hat off to you, sir!
I love bitcoin, but so far every exchange or market turns out to be a way to lose your coins to poor security or straight fraud. Add in gold and oil futures and it sounds like another great fraud opportunity.
You mean that theres no "use" in using USD to gain more USD?
Well, futures markets in general are quite useful because they help provide economic stability if you have an economic interest in the underlying commodity.
For example if you are an airline you can buy futures in oil. If the price of oil goes up you make a profit in the oil futures that helps offset the cost of your fuel.
If you are a farmer you buy futures in the crop you produce. So if your crop fails due to weather you will likely make a profit in your futures because the price of your crop futures has gone up.
So if I were a producer or buyer of bitcoins, a solid futures market would be of great interest.
WoW gold. Linden Dollars. Diablo 3 gold. Whatever. This is the same, minus the game. The American dollar and the Euro are built on the same voodoo magic in terms of value. BitCoin, if it has anything going for it over these other examples is sound principal for the system going forward as a currency in the real world.
"When life gives you lemons, don't make lemonade. Make life take the lemons back!" -- Cave Johnson
I've never understood the vitriol heaped on BitCoins in this forum. None of the stated reasons for "It'll never work" seem to hold under examination.
1) It's not based on anything
Well, neither are any of the major currencies, especially the dollar. The Euro is teetering on the brink of disaster, the Fed has been spraying money with a firehose, numerous South American currencies have gone bust - I just don't see any difference. ...except, that bitcoins are immune to *some* of the problems typically found in national currencies.
2) No one is using them
There was a time when no one used the internet, either, and look how big that got.
I'm not sure there is a point here - lots of things didn't get big and no one uses them (pets.com, anyone?), and lots of things got big and *everyone uses* them (google.com).
If you're saying that not enough people will *ever* use them, so that the idea won't take off, then that's an opinion. A lot of people are predicting success, so why are they wrong and you right?
3) It's a scam
All of the scams reported so far have been, effectively, companies trying to be a bank without banking regulation.
It's not a problem for BitCoin if someone convinces you to deposit your coins in their bank and then loses them, any more than it's a problem for US currency if someone convinces you to give them your money and loses it. People get scammed all the time, but it's not the fault of the currency.
Again, I don't see the difference. BitCoins are like money, and can be stolen like money. Why is having money any different?
==================
BitCoins doesn't solve all the problems of money, but it does solve a fair number of them. Logic and reason would seem to indicate that this is a better way to do currency.
I must be missing something.
Can one of the economists explain why it won't work?
I mean, explain it without appealing to emotion and irrational fear. Like, by using logic and evidence.
What the bitcoin economy needs is not another financial market but more people accepting it as a payement for real goods and services.
I still offer a 5% discount for bitcoin users, but until now, no clients have been interested. However I do not despair as I am getting clients from all around the world and a lot complain about the difficulty to make international payement.
So, if you have bitcoins and need computer vision development, contact me : IV-devs
The Wise adapts himself to the world. The Fool adapts the world to himself. Therefore, all progress depends on the Fool.
On the contrary, I know how to trade, but most other people don't.
Like I said... *CHA-CHING!*
I'm curious as to what BTC is actually good for.
It's not an untraceable currency. The BTC currency exchanges seem to be getting hacked all the time, and I constantly see their markets being rolled back. All the geeks are busy off drooling over expensive ASIC hardware to "mine" bitcoins, while none of them seem to understand that the cost of such equipment will never actually pay for itself- because the more ASIC miners you add, the higher the difficulty becomes, and the less everyone gets paid in the end.
Some websites accept it, apparently it's great for getting things on the black market. Beyond that, I dunno. It seems largely like a giant hobby hack that is doomed to eventually fail.
While this sounds intriguing, I'd like to hear a good case for why BitCoin makes sense in this context.
I'll give you a positive and a negative.
Positive - This make sense because "futures" relate back to the (expected) scarcity and surplus of real-world material goods, the availability of which has no connection to the value of the Euro vs the Yuan. It would make more sense to hedge crude in terms of soybeans than in dollars, yet we only really have the option of doing it in dollars.
Negative - Bitcoin lacks even the connection to reality that Dollars have by virtue of the latter's use in trade for otherwise-real-world products and services.
Now, you could take that in two ways - Connecting Bitcoin to commodities may make it more "meaningful" than most government-issued currencies, because it can float against the rest of the world's currencies to maintain an accurate reflection of the reality underlying production, rather than some random economic policy put in place by a central bank. On the flip side of that, you currently can't actually take delivery of 50 tons of pork denominated in Bitcoins, so this looks like a "futures" market in the worst speculative sense, without the faintest connection to the underlying commodities.
You probably haven't been following the hikes in the price of commodities or the stories of people selling stock in oil and resources they don't have.
Typical ignorant blathering from the BitCoin crowd
Typical ignorant blathering from the antiBitCoin crowd...
Pro-tip for life, instead of just saying someone is wrong, tell them why you think they are wrong, and maybe even how you think they can fix it.
Game currencies cannot be compared to BitCoin, Game currencies are created at extremely high rate (how much D3 Money created per minute?) and are centralized (by the company server). BitCoin are mathematically restricted and decentralized... that's huge difference. I'm not a bitcoin user [yet] but I think this currency will succeed against all the international trading regulations, fees and delays.
This is a BIG deal! It gives the currency liquidity; it can now readily be transferred back into other currency forms by washing it through gold or oil in the two examples provided. That also increases how desirable it is to intercept and steal people's bitcoins though. I hope the servers hosting the coins are as secure as they need to be.
Actually, I only emitted the idea as a joke. Not only that, but what they're really talking about is not a futures market for bitcoins as the summary tries to imply, but a futures market for oil and gold in which the transactions are done in bitcoins.
That's hardly the same idea, so I'm not sure if I should be offended that they took my half-baked idiotic idea and tried to implement it, or that I should be offended that they took my half-baked idiotic idea and tried to copy it badly.
Either way, I'd recommend against investing in this market, and as the inventor -- I should really be the one to know.
I find myself wondering how the producer of the socks makes any financial gain. According to the check out page the socks cost -2.00 USD. I'm heavily thinking of investing in some sock storage because at 2.00 for every sock I adopt I could make a fortune. I'm sure the initial investment will more then pay for the shipping and afterwords I can resale them for additional capitol.
Momento Mori
Can you leave your editorial comments to the comments section please?
It is pitch black. You are likely to be eaten by a grue.
Why obscure the links behind a link abbreviation service, so we can't see where they're leading? This isn't Twitter, and it's not like the submission itself is particularly long.
That right there stopped me from clicking on them. Which is sad, because I haven't had a chance to mock a BitCoin story in several days now.
#DeleteChrome
Only a few fantasists and dreamers use gold to purchase items. Both gold and bitcoins can be exchanged for different forms of currency. I fail to see why it's a joke even if it's unpopular...
There are about 9 million bitcoins in existence right now, with a value of $12.11 each, meaning there's (theoretically) over a hundred million dollars tied up in this. I think that makes it newsworthy.
...laugh all you want, but how many people shell out real money for WoW -based virtual goodies, or worse, pay shitloads of money to Zynga so that their crops grow faster, or some other similar bullshit? And yeah, folks actually blow money on Second-Life virtual crap as well (and were are a ton of dumbasses as late as two years ago promoting it.
I guess if it makes 'em happy, it makes 'em happy. Fool and his(her?) money, etc.
All that said, if you catch the right trend, and are creative enough in how you sell those virtual goods, you can stand to make a few bucks off of the deal.
Quo usque tandem abutere, Nimbus, patientia nostra?
SRSly, Slashdot, it's a joke currency used by a few fantasists and dreamers
All currencies are ethereal, the difference is belief that it has value.
Think of it this way. I can go into a shop, with a selection of rectangular pieces of paper with fancy designs on them, and I can come out with food, cigarettes, or a laptop, or a television. Why would anyone trade something useful like a laptop, or a basic necessity like food, for some fancy bits of paper? Simple: we all believe the paper has value. You think it does, the shop thinks it does, and so on.
If you want to talk about digital currency, its even more ethereal. You're attributing value to nothing more than a number.
Say there's $100.00 in your bank account, and for the sake of argument its represented as a cell on a spreadsheet at the bank. What is the difference between that $100.00 in the banks DB over say, opening a file and writing $100.00 in the first cell. Again, value. Both figures are identical. The way of storing them is identical. They are the same in every way.
The difference is belief means their cell in the DB is worth something, and yours isn't.
Then you realise central banks create money by nothing more than writing enormous numbers in the cells of spreadsheets.
The only way something stops becoming a currency is when no-one believes in the value of it. Likewise, belief creates currency.
There is zero value in bit coins and I wish Max Keiser from Russia Today needs to make a stance with Stacy Herbert on this http://rt.com/programs/keiser-report I know Max Keiser is still a sceptic for obvious reasons.
Bit Coins are being sold to us in a unique way, whereby funds can be transferred. There is nothing tangible with bit coins and it is a con on the back end of the financial crisis to try and replace currency. Please read https://en.wikipedia.org/wiki/Asset
If I can give you an example...... If buy gold or silver bullion I want that bullion in a physically tangible asset to which I can own and hold in my own hand.
I do not want to part with my cash with some stock trader on Wall Street or a Corrupt Banker who are quite willing to take millions off you if they can and give you a piece of paper to say you bought $1,000,000.00 in Silver Bullion. That is all you have my friends a piece of "toilet paper". Bitcoin is the same if you ask me and it is a get rich quick scheme on the back end of world financial meltdown; but the ideas of it are sold really well to you.
Just take my advice and be very shrewd with your money and only buy things you physically have an not some piece of paper ;)
Do not get conned!
Love NSN
All cows eat grass!
Yes, there's a lot of people who are in Bitcoin because of become-a-billionaire-overnight fantasies. But you remove all that and you're left with a really fascinating system that should appeal to everyone on Slashdot. It's a mix of cryptography, freedom of speech, computing, networking, finance, economics, and even politics -- most of us here dig that stuff.
Get over the hype and take Bitcoin for what it really is: a fascinating experiment that has, so far, withstood the amazing barrage of publicity, hacking attempts, legal uncertainties, and remains valuable for reasons completely contrary to everyone that says it's worthless. It may become worthless one day, but consider the possibility that Bitcoin is disproving all your wildly oversimplified assumptions about what makes something valuable. It is completely different, and there's plenty of reasons to believe that it could succeed as much as it could fail.
Why does gold have value? Nothing is backing gold. Yet it has value, mainly because of its properties: scarcity, fungibility, density, beauty, etc. Bitcoin is really quite similar but some different properties. Ease of transfer over the internet, fungibility, scarcity, storage efficiency, near-anonymity and built-in escrow.
I don't think it's any more ludicrous for Bitcoin to have value than it is for gold to have value. And in the end, when I want to sell WoW weapons, buy webserver space, or play a few games of poker online, why would I use gold, credit card or paypal, which all require me to remember log-in creditials, give away information and/or pay a bunch of third party fees. There's plenty of value in being able to pay people across the world, instantaneously, without sacrificing your privacy, and without paying any fees. Why is that not valuable? Seriously... quit focusing on the get-rich-quick kids, and start appreciating Bitcoin for it's unique properties and philosophy.
I run a gold mine and want to hedge so I sell futures contracts for December delivery.
By sheer coincidence, I do business with someone who prefers bitcoins over dollars.
So, do I sell a future contract for dollars then buy bit-coins on the spot market, or do I sell a futures contract for bit-coins and hopefully save paying the money trader?
OK, I know, everyone's saying "yeah, right, like that's going to happen," and you are right, it's very, very unlikely. But it could happen, and if it did, it's a legitimate use of a bitcoin futures market.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
there is a standing army behind the value of the American dollar. as long as that is true, the abstract representation of value that is the meaning of currency is as real as you ever will get. and that standing army makes a hell of a difference
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
On the contrary, I know how to trade, but most other people don't.
Like I said... *CHA-CHING!*
Yes, because we have tons of billionaires trolling Slashdot yelling out "CHA-CHING!"
CHA-CHINGA! There, see I can do it too, and even better than you.
And yes, of course you must be a billionaire, because if you actually did know 'how" to trade, then no other amount of money amassed would be acceptable.
Money is a measure of work done. The value may be hard to pin down but at some point it is linked to somebody doing something of use.Ponzis, bitcoins or other pyramid schemes like to confuse their marks by making noise about all currency being fiat currency but that's not really how it works. Pretending that currency is imaginary is just sophilistic bullshit that is equivalent to saying that just about everything agreed to in a society is imaginary. Belief also creates laws and the selection of leaders.
there are many examples of utopianists. people who were fed up with society, and wanted to start a new one from scratch. usually these were religious in nature. heck, mormonism is a surviving example of this utopianist era
http://en.wikipedia.org/wiki/Utopia
they run the range from this:
http://en.wikipedia.org/wiki/Harmony_Society
to this:
http://en.wikipedia.org/wiki/Peoples_Temple
with thousands of other examples, some harmless, some malignant
but nowadays, there is no more new world. so the pioneer utopianists are doing it in cyberspace (forgive the outdated term)
but the thing with utopianists, today and from yesteryear, is there is a lot of faith in grand schemes that don't really mean much when coupled with basic human nature. they mostly fail
so the scorn is from people who see those with great passion for something like bitcoin, and the curious identification of someone who is so bothered by something that, yes, is a bother (contemporary currencies), but not something so horrible that going all utopian idealist on the issue actually results in any improvement
but hey, who knows, maybe bitcoin will be like mormonism: someday mainstream. 99% of utopian projects fail, but 1% do change history
but i wouldn't bet on bitcoin. it's more like second life to me: high minded but destined for the dustbin of history, populated with a lot of eager highminded idealists for a moment in time, riding the wave of fervent passion but destined to crumble, a curiosity show for the rest of us to mock. which may seem cruel, but anyone who is a fervent idealist better get used to mockery. if your idealism is among the 1% of utopian projects that work, you will change the world, so take heart and shoulder the mockery with fortitude. but please note: 99% fail, so don't be too disappointed if your efforts fail
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
No doubt.
Futures and derivatives are NOT "capitalism". They are gambling. Pure and simple. This has been one of the main downfalls of banks and Wall Street, directly contributing to the 2008 debacle.
We should not base our economy on fake money. Investment is fine. And all investment is "gambling" to a certain extent... at least if it's done honestly.
BUT... speculation and derivatives are PURE gambling. It's nothing more than a government-sponsored casino.
I know next to nothing about bitcoins, but what happens if someone decides to do a "scientific experiment" on BitCoins that has access to one of the worlds most powerful supercomputers? Say if in the name of science, social experiments, or unregulated currency and the effects of mass input of them (or simply to make a few bitcoin bucks themselves) and dedicates the full power of one, or more, of those to the crunching of numbers for a little while. What happens then?
[citation needed]
You are aware that Bitcoin is traded in places other than the USA. Where US law does not apply.
Have gnu, will travel.
Have gnu, will travel.
Um... no, you're wrong. They are insurance. Producers of commodities often can not afford the ups and downs of the market. Specifically farmers. Futures allow them to sell their crop at a set price, and then if the market crashes they are protected... also, if there's a spike in price they do not profit like they normally would.
Capitalism requires transparency. The problem with overly complicated financial products isn't the products themselves, its the lack of transparency caused by their complexity. When a bank sells you a derivative that's based on mortgages, that's fine. When the bank gets permission from the federal government to give out loans to people that can clearly not afford to pay them back, and fails to disclose that to you... that's when there's a problem. The banks realized what the government was asking them to do was insane, but they didn't want to tick off their benefactors. So they gave out the loans anyway, and then sold the risk off in packages designed to hide them.
So who is going to buy my bitcoins for $12.11 each? Something is only worth what someone else is willing to pay for it. Zero demand, zero dollars.
or "Lindsay Lohan" and "not intoxicated" appearing in the same statement.
And how many BTC will it cost me to get /. to add a -1 Dumbass moderation option?
"I'd like to hear a good case for why BitCoin makes sense in this context."
It's anonymous.
I don't know if you knew this or not but criminals trick stupid people into getting their bitcoins or USD stolen, just in 2 different but similar ways. Can you keep your credit card 100% unusably encrypted 99% of the time and only unlock it when you need to make a transaction that you approve manually? Nope, only bitcoin does that.
Apparently you've never seen what happens to the people of a country that have lost their belief in their currency. Imagine a loaf of bread selling for a million dollars today, and going for $1.2m tomorrow. They fall back to a barter system pretty quickly.
If you don't think it can happen in the USA, look up "shin plasters".
Currency that is not backed by gold is backed only by faith and promises. And those last only as long as you trust the people holding and printing them.
John
Not really, no. The government told them to be more liberal in their risk assessment for first time buyers. The banks COULD have offered modest loans for starter homes that the borrowers probably could have paid back, but instead FREELY CHOSE to talk their least financially savvy customers into huge loans on McMansions and to bury those hot potatoes in complex financial instruments so they could foist them off on others.
It was all quite profitable to a select few and devastating to the world economy.
Don't drink the cool aid.
When someone is as completely wrong-headed as the GGP, there's no point in telling them why you think they're wrong. If I told you that the Illuminati are planning to collect all the world's fish in a giant aquarium buried beneath Australia, would you try to reason with me? If yes, you're a fool. Some people are just broken. The internet makes it easy for such people to meet up with others who share their delusions and receive reinforcement for whatever crazy ideas they have.
For the rest of us, we can laugh at them and mock them to prevent their contagion from spreading to third parties, or we can roll our eyes and walk away. But we certainly can't reason with them. You can never reason someone out of a position they didn't reason themselves into.
>When the bank gets permission from the federal government to give out loans to people that can clearly not afford to pay them back, and fails to disclose that to you.
That's not what happened here.
What happened was that we had people making loans that they could be sold to "greater fools," i.e., Wall Street.
-Joe Broker makes a loan to Alice - Banks don't make loans anymore, brokers do.
-Alice can't pay it back, but Joe Broker says it's OK.
-Broker doesn't give a shit because he gets a commission for each loan sold. Falsified paperwork EVERYWHERE.
-Broker sends the paperwork to the bank. The bank doesn't give a shit because they can sell the loan to Wall Street.
-Wall Street separates and chops up the mortgages and securitises them by creating securities with different levels (tranches) in the security. These are the "Mortgage Backed Securities." AAA on the top, junk on the bottom.
-These are then sold as if they are all AAA to (see where this is going?) to retail and institutional investors.
-They are considered *cash equivalent* by nearly everyone, except people at places like Magnetar.
-The whole house of cards fell in 2007 and the people holding the bag were people like you and me and our retirement funds.
Meanwhile everyone in the entire system from the broker through Wall Street gets away with not even a slap on the wrist.
But that's not all!
In the chain of passing the buck, at each level, the transfers of these mortgages weren't (and still aren't) handled correctly. Hundreds of thousands, maybe millions, of mortgages have been passed along without the required good paperwork making the servicers of the mortgages in these loans *not* valid mortgagees. And when the loan goes belly up, and a servicer forecloses, there is often either fraudulent paperwork or no paperwork at all and *no right to foreclose*. And in the confusion, there have been people making monthly payments to servicers that don't even have the right to take money for the mortgage at all! That's what the whole robosigner scandal is about, and robosigning is still going on.
And to make it even worse, people have been kicked out of their homes while not even *having* a mortgage to begin with!
http://www.tampabay.com/news/business/realestate/bank-of-america-forecloses-on-house-that-couple-had-paid-cash-for/1072632
It is fraud on a national scale, and it was *not* at the government's prodding. Regulation after regulation was ignored. Rampant fraud was committed by brokers, securitizers, banks, everyone who should have done due diligence.
And the dearth of people going to prison for this shit is why we have Occupy Wall Street.
You have oversimplifed it and you have blamed the wrong people.
--
BMO
You can never reason someone out of a position they didn't reason themselves into.
I think you give up to easily.
All humans reason, even "crazy" people. The difference is that some people have previously received bad input, so they give bad output. The only possible way to correct that is by giving them good input.
we can laugh at them and mock them to prevent their contagion from spreading to third parties
I dont believe this approach works, they will just see you as you see them, you both see each other as crazy and therefore prevent yourselves from learning from each others mistakes.
there is a standing army behind the value of the American dollar. as long as that is true, the abstract representation of value that is the meaning of currency is as real as you ever will get. and that standing army makes a hell of a difference
As far as I know there have been several countries with powerful armys and hyper-inflated money in which you ruin the paper by printing notes.
there is a standing army behind the value of the American dollar.
So if someone refuses to accept my dollars I can call in an airstrike on them?
I think not. Perhaps you are suggesting that if a country refuses to take your dollars for their oil (or accepts anything else) you can call in an airstrike on them and just take their oil. That certainly seems to be the foundation of US foreign policy and indirectly the reason non-Americans value the dollar.
The reason Americans value the dollar, besides habit, is surely that their government will accept nothing else in payment of taxes.
You're both wrong. The banks wanted to make money. Since both the property market and the packaged loan markets were going up, any bank that didn't loan out like crazy stood to be less profitable, and hence not do as well on the market themselves. The government opened the door to bad loans through lax regulation and no checks on leveraging. The banks responded to what market pressure and the drive to be the most profitable loan institution would normally do. The lack of transparency just made it all the worse.
I swear they give me mod points to shut me up.
Raspberry Pi a scam? only on /.
in any case, it's either a 32-bit scam, or a 200-bit scam.
At the moment, 1 BTC is about 100 bits' worth of scam.
Your calculations were orders of magnitude off: I'd be posting AC too.
Still working on the Libraries-of-Congress conversion.
Those who advocate genocide deserve every protection afforded by law, and none afforded by common human decency.
So the banks saw that other banks were making money hand over fist through crooked tactics (enabled by the eeevil government not regulating them enough?) and figured they better get in on that action? They were helpless against the incredible power of their own greed and so aren't responsible for their criminal behavior?
How do you s'pose it'll fly if I decide to get in on that credic card fraud market and use that as a defense if/when I get caught? I just wanna make some money!
Futures are gambling.. Are you serious? Do you know what futures are?
A farmer grows x bushels of corn that will be harvest 6 months from now. He asks people who need corn 6 months from now to sign a contract for it, so he has someone to sell the corn to, and he knows the price he will receive for it.
That is a futures contract.
How is that gambling?
Maybe you shouldn't throw around terms you don't know. It gets in the way of the adults having an informative discussion.
"Um... no, you're wrong. They are insurance."
Um... no, I'm not wrong. Insurance IS gambling.
"You're both wrong."
No, they (we?) are not both wrong.
The government (you can thank Barney Frank in particular) increasingly required Freddie and Fannie to make more risky loans. This process went on for years. The entire market got in on the deal.
It wasn't JUST corporate greed, although there was plenty of that. Our own government REQUIRED investment in high-risk mortgages. And it eventually caught up.
Our government's policies were DIRECTLY behind most of the policies that led to the 2008 crash. If you don't believe that, you haven't been paying attention. Of course they had the cooperation of the banks and so forth. The banks can't lose. If they play by the Federal rules, they are Federally insured, right?
You're being soaked.
"That's not what happened here."
Yes, it is. The policies of Freddie and Fannie are set by Congress, and Congress (courtesy largely of our "friend" Barney) mandated year after year that Freddie and Fannie MUST (not should, but MUST) increase its percentage of loans to higher-risk buyers. This was a CENTRAL part of liberal government's plans to make houses "more affordable" to everybody. Literally, year after year this went on.
It's right there in the laws. This is not a question. It's history.
"It is fraud on a national scale, and it was *not* at the government's prodding."
Yes, it is fraud on a national scale, because business went along with Freddie and Fannie, knowing that they could now make high-risk loans and have their asses pulled out of the fire if something went wrong.
But yes, it was at the government's prodding. Fannie and Freddie ARE government prodding. That's what they're for. And it's a matter of record. All you have to do is look it up.
I haven't found a single post that doesn't miss the point.
Being able to buy/sell futures of commodities such as oil ties the bit coin to the real world in a way we haven't seen before. A potential user of bitcoins may be put off by the volatile nature of the value of the bitcoin itself, but if he can pin it down to the value of oil or gold by trading those futures, it makes holding bitcoins a much more sensible, or at least much less financially treacherous prospect.
Imagine... I could sell 1000 USD and buy 100 bitcoins (no idea how this compares to the real exchange rate, bear with me...)
I could then, with my 100 bitcoins, buy gold futures. Even if the value of a bitcoin plummetted meanwhile, I'd be making all that money back as the price of gold (expressed in bitcoins) skyrocketed. I'd be essentially immune to the fickle price of a bitcoin and merely invested in gold. I could further stabilise my finances by SELLING gold futures in USD. If I did this right away, for a small cost, I would essentially have pegged the value of my bitcoins at 1 per every 10 USD.
The creators of bitcoin have been very smart to introduce this market. It enables the use of bitcoins without the fear of volatile price moves. Surely the biggest barrier to entry for most potential users.
j'ai découvert une démonstration vraiment admirable (de ce théorème général) que cette si
In fact... now that I've gotten over your gross and unjustified insult, I'll give you an example that even you can probably understand: corn futures.
Corn futures are often use as a classic example. Corn futures were great, right? Corn was doing well, and there was ALWAYS a market for it! In fact we started selling a lot of it to make fuel, so you could ALWAYS sell it! 40% by some reports is now being used to make ethanol, mainly for fuel.
Then 2012 hit. Well, guess what? It hurt the corn crop. (Investing in weather is gambling.) So corn prices didn't go down. Surely not. But EVERYTHING ELSE went up!
And of course, in any futures market, somebody loses when something goes up, too.
So no, futures may not be direct casino gambling like most derivatives are, but it's still gambling. Futures do not invest in production and production capacity (capitalism), what they do is BET on production and production capacity.
That's called gambling.
That price is from MtGox.com. It's increased quite a bit over when I last checked a few months ago, so apparently demand keeps increasing.
Well, non-dividend paying stocks are pretty similar. If everyone tried to sell at once then the value would hit zero if investors are rat fleeing from a sinking ship. Conversely, if it's a computer glitch (e.g. a news site inadvertently posts that an airline went bankrupt), then the price falls by 15% or so and quickly shoots back up. Most often, when everyone sales, it's because it's a buyout and generally that's at a ~40% premium over market value.
I don't use BitCoins myself, but apparently many retailers and individuals accept them as payment. Taxes are paid in the standard currency of a specific government, so that's a unique case. I can't pay US taxes in yen, and I doubt Russia would accept taxes in pounds. Apparently you can buy food with bitcoins. I was rather surprised at what-all you can buy with bitcoin.
BTW, you can't tell something's a bubble until it pops. If you have a better method then I encourage you to test it on the stock market. Your keen insight will allow you to make a killing. Or at least that's what investors are doing on a somewhat consistent basis, hence why they have money to invest.
Must be the first time you've seen it - Yes it's funny to those who know of the Time Cube site - Once. But it's getting stale.
Who is John Cabal?
I'm glad you brought that up. As it happens, I'm a math major and I can be easily convinced by arguments that are based on math.
Let's start with the basics: What is the "best" value for single-digit inflation? I assume that 1% is too low and 9% is too high - what's the optimum value to use? Is 7% too much?
While we're on the subject, what's the math formula for calculating the optimal value? If the answer is "it depends", then what does it depend on? Is the function relatively flat (any value within a range is good) or peaked (one specific value is best, and near values are bad)?
Actually, how does one even calculate the current inflation rate? Are gas prices included? Luxuries? How do I tell which purchases contribute to inflation and which don't? Is there a rule I can look up?
Don't appeal to math unless you know what math is. Economics is not math.
So if someone refuses to accept my dollars I can call in an airstrike on them?
Well, Saddam Hussein was planning to switch to the Euro....
OK, let's take a look at one of their derivative contracts. Read, especially, Margin Call. The example given is buying a derivative contract, but the real issue is selling one. (There must be an equal volume bought and sold; this is a zero sum game.) Buying a contract costs you a known amount up front,which you may lose. Selling a derivative contract implies that, at some specified future time, you must deliver what you sold, even if you take an arbitrarily high loss doing so.
This is implemented by draining the account of the seller as necessary to pay off the loss. That would be OK if it was a cash account, with no margin. But this exchange permits selling derivative contracts on margin, where the seller is effectively borrowing from the exchange. They currently require 75% margin. Does the exchange take the risk of a counterparty defaulting? No. They write "your profit is always limited by ability to pay of counterparties to your contract." Actually, that's incorrect - it's limited by the cash counterparties have on deposit with the exchange, not their total assets. (That's probably just as well.) However, as a contract buyer, you don't know, and aren't allowed to find out, who the counterparty is or how much money they have on deposit.
The way this is set up, a seller of a derivative contract can escape part of a loss by draining their account. If the value of a derivative is increasing, the seller can cut their losses by draining their account up to the margin limit. This will force the exchange to drain out the rest of their account and close out the derivative contract. The derivative contracts can't change price by more than 10% per day, so there's a maximum loss when selling a derivative contract. This makes derivative contracts less valuable than they would otherwise be.
Then there's the issue of allocating losses when a counterparty defaults. Everything is anonymous, so you have no idea if the exchange is screwing you. On top of that, of course, you're relying on a pseudo-business with no identifying information to pay you money at a future date.
If you don't understand everything above, you should not be in this market.
You're just proving how WRONG you are.
If I sign a futures contract today for corn to be delivered 6 months from now.. in 6 months, that farmer will sell the corn to whoever holds that contract. That contract cannot be broken -- no matter the current price on the market.
If I sign a futures contract 2 months from today, the price for that new contract may be different.. but it does not affect the price of my previous contract, even though the farmer has not delivered the goods yet -- that price is fixed.
Look.. if I buy a gallon of milk that I will drink for the next week, that is not gambling. If 2 days from now the store has a sale, then I can buy more milk for the sale price.. but the price of the gallon I already bought does not change.
There is no gambling here.. futures contracts are just people buying goods in advance.
Wait... apologies for multiple posts but I see that we may be talking about different things.
Yes, I know what futures are. And you do, too. But what you aren't taking into account is that futures are bought and sold on the basis of projected future value. So, using some hypothetical example, I'll call Jeebits for example:
A futures contract is not made on the basis of this year's price. If we expect a particularly good year for Jeebits next year, then a futures contract will be offered for less. If we expect a drought, then we would ask (or be offered) a higher price.
So, lo and behold! The next year is a bumper crop of Jeebits. Those who sold contracts at low values (perhaps in a desperate market, to undercut the competition) lose out. Those who sold futures at higher value, perhaps in their confidence in their production, reap the main benefits.
But that is anti-competitive. It's not a matter anymore of who produced more, or how efficiently. In fact those who bet on what would be a normal, competitive free-market price might not actually have done very well.
It is a matter of who BET on what the futures would do, and who came out on top. But it's that ANTICIPATED FUTURE VALUE that was bet on (which is why they're called "futures" in the first place).
Again: that's gambling. And I don't mean "taking risks", I mean actual gambling.
But one of the design criteria of bitcoin is a lack of transparency, namely transparency about who pays for what. There are of course extremists who believe that e.g. insider trading should be perfectly legal and unproblematic... and it's for a large part such extremists who are fans of bitcoin.
xkcd is not in the sudoers file. This incident will be reported.
> The American dollar and the Euro are built on the same voodoo magic in terms of value
I suppose you imagine that gold, or some other credit token, isn't?
Also, principle.
xkcd is not in the sudoers file. This incident will be reported.
Except that you can trade these BTC back into "real money" at the same place you probably got them anyways
That's splitting hairs about "hyper". Turkey has (and had) a significant army due to the conflicts with Greece, internal conflict with minorities, and numerous military coups, yet had an inflation rate of almost 40% per year for the better part of a century. You should provide a causal explanation for why you think powerful armies prevent inflation, or you might as well point to cosmic radiation as an explanation.
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It's certainly a damn important factor. Recommended reading: Wikipedia article on Chartalism
xkcd is not in the sudoers file. This incident will be reported.
They don't fall "back" to barter, because the traditional economist narrative of barter as a precursor to money economies is without historical basis. And in fact, shinplasters is an example of people not resorting to barter in an inflation crisis, but rather issuing their own notes of debt.
xkcd is not in the sudoers file. This incident will be reported.
If you consider that the banks and investment firms dictate to a great extent the government's macro policy, you get the right picture.
When his defense asked, "Which computer has Jon Johansen trespassed upon?" the answer was: "His own."
Insurance is not gambling, it is bookkeeping.
When his defense asked, "Which computer has Jon Johansen trespassed upon?" the answer was: "His own."
"You know, I would agree with you except that you are wrong."
And I would argue with you more except that you don't have any real arguments to make that you can back up.
Repeat: look up the regulations governing Freddie and Fannie. Read them. (It might take you a while... that is not intended as an insult; it would take anybody a while.) After you have done your studies, get back to me. Then we can discuss it.
Not true. Why do you think filling your car up hasn't gotten any cheaper?
Actual demand's been down over the last few years and the prices have stayed high because your good old friends Goldman Sachs et al. managed to get previously non-classified commodoties such as crude oil made tradeable as futures.
A barrel of oil changes hands something like 20 times before it even exists these days... And that's not an exageration.
"There is no gambling here.. futures contracts are just people buying goods in advance."
Answer me these questions:
What wins a futures contract?
What is a projected marginal value versus a current market price?
So are futures contracts formed primarily on the basis of the current value, or a projected marginal value?
You don't really need to answer. Futures deals are made (or not made) after negotiating the projected marginal value. Never before. Nobody would be stupid enough to sign a futures contract based on today's value. That's not the way it works. Your milk example is bullshit, because it's not next year's milk. Or milk 5 years from now.
Projected marginal value is a BET. It is nothing but a bet on what is going to happen later. You are talking about commodities markets as though they were futures markets. But they are not the same things.
I will put it a different way:
In many places in the world today, you can "invest" in what horses will do in the future. You never know. Maybe the conditions will be too dry, or something else... it's not totally predictable (except when the outcome is "fixed", which is illegal, and even then it's not totally predictable).
Of course we're talking here about horse racing. Which is gambling. The only genuine difference between the futures market and horse racing is that the base price has been subtracted out, so that ALL of the gain or loss in a horse race is the projected margin. In the futures market, the margin is (sometimes) small compared to the base, so the risks are generally (but not always) lower.
But lower risk does not equal "not gambling".
Yes, futures are a form of insurance for the farmers. But there is a way bigger market in futures then there are products, since the people who bought the futures in the first place then trade them. And THAT part is pure gambling.
"If I sign a futures contract today for corn to be delivered 6 months from now.. in 6 months, that farmer will sell the corn to whoever holds that contract. That contract cannot be broken -- no matter the current price on the market.
If I sign a futures contract 2 months from today, the price for that new contract may be different.. but it does not affect the price of my previous contract, even though the farmer has not delivered the goods yet -- that price is fixed."
Who said ANYTHING about breaking the contract? Or modifying other contracts? Or them not being transferrable? WHO? Sure as fuck not me. Go back and read everything I wrote again. Find where I wrote anything about ANY of those things, and point it out to me. I mean specifically, the entire sentence(s). Because I sure as hell don't recall writing anything of the kind. Are you sure you are replying to the right person?
I don't even understand what you're trying to say here. Nobody brought up anything about breaking contracts. Where did this come from? Are you sure you're only eating the mushrooms that came from the store?
In a way it's ANTI-gambling. Instead of trusting to chance to make money, you reduce the effect of chance. You agree to reduce your potential winnings by X, but taking them 100% certain (you either win or insurance pays out).
That part of the futures market is a basic business transaction. The part that is gambling is when that same future is resold a dozen times.
But they do invest in production - the farmer is paid in advance, and he can use some of that money to finance the harvest (or even the entire growing, if the futures are bought soon enough).
"In a way it's ANTI-gambling. Instead of trusting to chance to make money, you reduce the effect of chance. You agree to reduce your potential winnings by X, but taking them 100% certain (you either win or insurance pays out)."
Robert A. Heinlein probably said it best (paraphrase): "Insurance is nothing but gambling. The problem is: if you win, you lose, and if you lose, you win."
"... it is bookkeeping."
So is horse racing. There is a reason they call them "bookies".
Your point is?
No need for airstrikes, just topple their government.
But the problem is that currency can be produced for close to zero cost. And the exchange rate for goods can change at any time. And that exchange rate is based on belief. If enough people loose 'belief' in a currency, then the prices they charge will skyrocket. So the amount your money can buy will drop like a stone. And there is nothing that you are guaranteed to be able to buy at a certain price, except perhaps the metal in coins.
Look.. if I buy a gallon of milk that I will drink for the next week, that is not gambling. If 2 days from now the store has a sale, then I can buy more milk for the sale price.. but the price of the gallon I already bought does not change.
I think this discussion is all about defining gambling. You could certainly argue that your milk purchase is a gamble. If you buy a gallon of milk today, intending to drink it tomorrow, then you win the gamble if the price goes up tomorrow, and you lose the gamble if the price goes down.
However, by that definition, everything financial is a gamble. Putting money in a savings account is a gamble. Having a pension is a gamble. Buying shares is a gamble. Buying stocks is a gamble.
Attaching this loaded word "gamble" to these transactions doesn't really help us decide whether they're harmful or beneficial to society.
Exactly. The way to make more money is to get it from more people. That they lose money is not your concern, that's just plain old capitalism. Bitcoins just took the next step on the long and winding road of capitalism. And will end up exactly where all others end: in stock crashes.
Or get your BTC stolen by using said services.
Change is certain; progress is not obligatory.
Requests by the federal government to increase lending on riskier mortgages came ten years before the banks started doing so in earnest. It took a considerable amount of advance work on neutering regulating agencies (and repeal of glass-steagall), such that banks could bury those toxic assets in misrated financial instruments, and insure all of it blindly with companies like AIG.
Just to expand on the AC reply to you, $12.38 is the current weighted average price on https://mtgox.com/.
Mt.Gox is an exchange - it simply connects compatible offers to one another. i,e, "I want to buy 100 BC at any price below $12.40/BC" is compatible with "I will sell up to 200 BC at any price above $12.35". Mt.Gox charges commission for each trade of course.
So if you had 1 BC, it's realistic that you could trade if for ~$12 right now.
Yea thats true, providing good input wont definetly fix broken internal processes, but its the only thing that possibly can.
Telling them they are dumb is just as much a waste of time.
Buying gold futures, by contrast, does not have any use, except to then sell those futures, hopefully at a profit.
You mean except for the actual purpose of a gold future which is to take delivery of a defined amount of gold at a specified price on a specified date?
Methinks you are confusing speculation on a financial instrument with the actual purpose of the instrument. The purpose of a gold future contract is to lock in a price on a delivery of a defined amount gold. The primary purpose of futures contracts is to hedge against future price fluctuations in commodities like gold or corn or frozen concentrated orange juice. [/movie reference] If you are a farmer and you are growing corn, you are carrying a lot of risk if you wait until the end of the growing season. Not only do you not know how much corn you'll have but you don't know what the price will be. So you sell a contract to deliver X bushels of corn on Y date for Z price. Your price is locked in and if there is a drought you can simply sell the contract on the futures market instead of delivering the corn.
Anyone who buys a futures contract using bitcoin is an idiot or a scam artist. No one who is actually hedging risk is going to use bitcoin to do it so all that is left is speculators. Speculating in futures contracts is highly risky even without adding an additional level of exchange rate risk in using bitcoins. Furthermore, I'm rather doubtful that if you purchased a futures contract through this "market" that you could actually take delivery of the products that underlie the contract.
I have no idea why there is this obsession with bitcoin by a few people here on slashdot. Bitcoin is an incredibly stupid idea used mostly by people doing illegal things. Anyone who uses bitcoin either has no concept of exchange rate risk or is doing something illegal that carries an even higher risk like jail time. At best bitcoin is an ill-conceived and fatally flawed virtual currency. At worst it is a pyramid scheme and/or a money laundering scheme. Either way it is something to stay away from.
yeah that's what _real_ futures are..
buying things in advance.
"a futures contract is a standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality for a price agreed today (the futures price or strike price) with delivery and payment occurring at a specified future date, the delivery date. "
I have serious doubts about this bitcoin operation being anything more than a fantasy football trading setup tied to futures though
world was created 5 seconds before this post as it is.
it's gambling because it's possible he could buy the corn for cheaper price - and for the farmer because he might be able to sell it for higher price.
of course NOT doing a futures contract is gambling too.
however.. if you're just buying stakes in other peoples futures conctracts then that's definitely gambling, all you're doing is betting money on contracts being profitable or not.
world was created 5 seconds before this post as it is.
I was not really the banks it was the brokers (who were often poorly monitored subsidiaries or departments within the banks; I realize).
Those guys sold loans with crazy interest and repayment schedules, and those guys failed in large part to do the customer vetting and do diligence they claimed to do. They then resold the loans to banks and the GSEs.
Now mind you the banks and the GSEs rather than going, "wait a moment the volume is way to big our models don't indicate there are this many well qualified borrowers even out there", chose to take the brokers at their word, pay them their commissions and report these high margin and yet completely safe loans on their financial statements, and collect their own bonus payments.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
You are correct and you should be all for it, becasue most of the traders who speculate with bit-coins are the same speculators who speculated on other financial markets. It would be only fair, if they keep out of the real forex markets and speculate against each-other.
~ Best man at your service.
Be a helluva lot better in the long run to get the government OUT of picayune regulation, let the crooked banks actually FAIL, and toss the crooks in jail.
So tell me shit for brains, if there is no regulation, on what charges would you throw the crooks in jail? Without regulation, there ain't no crooks.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
Lets be honest about how Wall Street sees the GSEs. The point of them is to reduce risk to the private sector. Be Fanny, Freddie, or Sally. The idea being that it creates an effective subsidy for less qualified borrows to get access to capital. That is how the policy makers look at it. Personally I am not sure as noble as all that sounds even that is ethical but, that is what my idiot country men voted for so...
This is how Wall Street sees it:
He they government will buy any high risk paper we ask them to buy! That means we can sell bundles high margin loans. If we don't think to hard about the real risks associated we can over state the net present value! Then pawn them off on the government for a slight discount on that over stated value, raking in huge profits. Government gets the paper and it might work out for them, we get hard cash so are covered no matter what, and hey even if we do decide to hold some the paper and it goes tits up we will probably get a bailout anyway.
This is precisely why Government should get OUT OF THE BANKING MARKETS. No DEPOSIT INSURANCE, NO MORTGAGE LENDING ETC. Anytime you socialize risk, its going to be exploited. After all I might as well bet big and possibly strike it rich, if you are going to just cover my losses when it does not work.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
All currencies are ethereal, the difference is belief that it has value.
That's completely true for any asset - currency or otherwise. However there are proven mechanics regarding how to administer a currency such that it is actually useful to a society. While confidence in the value of a currency is a necessary condition it is not a sufficient one. Bitcoin is terribly flawed in a variety of ways that go well beyond whether people actually believe it has value - which they largely do not.
It's gambling when the guy selling the contract isn't growing the corn and the guy buying the contract doesn't plan on using it.
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Well, Saddam Hussein was planning to switch to the Euro....
He was also planning to stockpile weapons of mass destruction. We all know how that turned out.
-
Is it even possible to make money mining them? Why on earth would people do it? It can't really be feasible unless they already had a crunch box or something.
Currently people are paying a bit over $12 for a Bitcoin. I suspect it would cost you a little less than $12 on average in electricity and other costs, to mine a single BC -- if you did it particularly efficiently. The difference is profit.
Or you could hoard what you've mined, gambling on continued deflation, and sell it for a lot more than $12/BC in future. The risk, of course, being that it collapses and you've spent that money for nothing.
Insurance is insurance, gambling is gambling.
Gambling is the spending of a (relatively) small sum of money on the hopes of the outcome of some event. If you guess the outcome correctly, you gain a (relatively) larger amount of money. At least that's how it works in the ideal case.
Insurance is the spending of money to ensure that if something happens to you or your property, funds will be available to mitigate the physical and financial damages. Generally speaking buying insurance is a net negative on your bank account - the price you pay for the peace of mind knowing that your expenses will be covered in an emergency.
If you are buying health insurance in the hopes that you will get sick, buying homeowner's insurance in the hopes that your house will burn down, buying car insurance in the hopes that you'll get hit by a truck, etc... and thinking you'll make a profit... you are either a complete idiot or attempting fraud.
If you think insurance is gambling in the sense that you are betting these things WON'T happen, you still lose money - just less. I'm aware of no sensible definition of "gambling" that includes a net loss of money regardless of the outcome.
=Smidge=
In general, as stocks decline, gold goes up as people shift money from one market to another. So if you buy both, when one goes down, the other will go up faster, helping limit losses.
Gold and real estate may tend to have a negative correlation with stock prices but there is little actual relationship between the two assets in most cases. Gold can just as easily go up at the same time as stock prices go up and that often happens. Our current financial crises was caused by real estate dropping in value (for complicated reasons) and taking other assets (including stocks) along for the ride. A futures contract creates a perfect hedge for a defined amount of the underlying commodity. A perfect hedge is not always possible so sometimes we use proxy commodities (oil for gasoline for instance) but "hedging" stocks with gold or real estate is merely diversification with negatively correlated assets. Might work but it is a rather poor hedge if that is the actual goal.
So the banks saw that other banks were making money hand over fist through crooked tactics (enabled by the eeevil government not regulating them enough?) and figured they better get in on that action? They were helpless against the incredible power of their own greed and so aren't responsible for their criminal behavior?
The problem is that you think of banks as conscious entities. They are not. They are a collection of people, each working mostly for themselves. This can easily cause ripple effects that make company as a whole be self destructive if the incentives for each employee makes them focus on short term profits. This is what happened in the finance crisis. Everyone would get their bonus based on short term goals, and saying no to bad customers would not have benefited them. It would have benefited the company as a whole, but it would not have done much difference to the security a specific persons job if he or her said no to more customers. They would however have lost a lot of bonus. This goes for the bosses as well. They would have got no bonus and probably lost their job for low profits. It wouldn't have helped them much if their actions would have later turned out to have saved the company.
But but but... They have those horrible horrible guns!!
“He’s not deformed, he’s just drunk!”
I'd +1 if I could because this is interesting.
But why isn't anyone offering this in conventional currencies? Is it because it would be classed as illegal gambling?
And if so, isn't it just as illegal in Bitcoin?
So then why were so many of these loans of a size that Freddie and Fanny could not handle them?
Keep fucking that chicken.
Once upon a time the government did stay out of banking. What we got were market crashes, people losing their savings and the same people who take advantage of socialized risk doing the same fucking thing but with ordinary depositors money.
If you own the bank you might as well bet big, if you fail you can just take the depositors money and close up shop, if the government will let you.
Well, gee, what isn't gambling in that case? In Pennsylvania I can choose who I want to supply my electricity. I can pick a variable cost, which is based on the LMP in the wholesale market. That's definitely a gamble. Fine, I'll pick a fixed cost contract. Six months? A year? Who knows what the price of electricity is going to do over the next 12 months?
I go to a warehouse store and buy paper towels in bulk. It's a very low risk, but the cost of paper towels might go down in the next few weeks. Uh-oh, should I have purchased just enough to get by on the chance the price might go down?
Going outside every morning is a gamble. I might get hit by a car. I might trip and break my ankle.
Where do you want to draw the line, Jane? At some point it just gets silly. Futures markets, as described in the post to which you replied, are a way of hedging some of the risk. You give up a chance of making much more money (or losing lots) for the security of having a fixed price. This allows you to plan your cash flow much more sanely. This ends up saving money (because you know what's going to happen in six months from now) in a variety of different ways - supply chain management, cash flow, how you structure your notes from your lending institution, etc.
And the farmer selling the contract, 6 months away from one single kernel of corn being harvested, betting against drought, pestilence, floods, fire, famine, etc.; they're not gambling... how?
Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
So in other words, the government opened the door to the lemming cage and the lemmings eagerly started to climb over themselves in order to be the first to the cliff.
Seriously, did anyone think it was a good idea to hand over the keys to the economy to a bunch of sociopathic 16 year olds trying to prove who's got the biggest penis made out of money?
~X~
Being that they are going for $12.40 on mtgox right now, I'll take how ever many you're selling.
Voodoo magic? Really man, you need to go back and take a few courses on economics. By your reasoning, every single method of exchange besides bartering is "voodoo magic", and bartering would be a miserable failure in a world where labor is the primary trade commodity for the masses.
Commodity backed (and more recently fiat based) currencies exist for a reason.
~X~
You are wrong – and it is a classic rookie mistake. If you believed that I would love to trade with you, because it means that I could make money off of you risk free all day long. It is called It is called the “No Arbitrage Price” – see http://en.wikipedia.org/wiki/Forward_price. All you need .
1. The current spot price
2. Current interest rates
3. Storage and lease rates.
Unlike options, CDO, or other fun financial products, Futures pricing is straight forward. No probability, no liner programing, etc.
The difference is that when someone buys WoW gold, they aren't looking to get some return on that other than the entertainment value of being able to afford the item they're looking to buy in-game. It isn't an investment that they are looking to liquidate at some point in the future, as the value of whatever they use that gold for is going to depreciate rapidly to zero as soon as the next content patch hits.
Even the value of WoW gold is depreciating, as it's stupidly easy to get gold in the game, and has been for quite some time. You can get 10k gold for like $8 now, found doing a 4-second Google search. I'd love to see what the price per thousand was 5 years ago, I'll bet it's somewhere above 20x that.
Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
But that is anti-competitive. It's not a matter anymore of who produced more, or how efficiently. In fact those who bet on what would be a normal, competitive free-market price might not actually have done very well.
It is a matter of who BET on what the futures would do, and who came out on top. But it's that ANTICIPATED FUTURE VALUE that was bet on (which is why they're called "futures" in the first place).
Again: that's gambling. And I don't mean "taking risks", I mean actual gambling.
Not for the farmers.
The whole point of futures and derivatives is to transfer risk from those who can't bear it to those who want it. Farmers need stability; they need to be able to cover their costs and make a profit in good years and bad, and they need to know before they plant that they're going to be able to get a reasonable price for their crops. Futures allow them to offload their risk. It's not cost-free... on average they'll make less money than if they sold at market prices, but it's a good deal for them.
On the other side, the speculators who buy the futures are in a position to accept risk in exchange for potential gain. They can bear the losses they take when prices decline, and they want to profit from what they make when prices rise. Over the long run, if they price the futures accurately, they'll also earn the premium that the farmers effectively pay to buy stability.
When all of this is done by people who know what they're doing, it's not gambling at all. The farmers know what they're getting: reduced risk for reduced profits. The speculators, meanwhile, are "gambling" the way a casino "gambles"... they may win or lose on a given hand, but the percentages are tilted in their favor over the long run.
Not only does this arrangement make sense for both sides, it actually provides the market with stability and tends to smooth out price fluctuations over time.
Futures are a Good Thing. Period.
Most derivatives serve the same purposes in their respective markets. Granted that some instruments are so insanely complex and so far removed from the underlying business that they truly are gambles -- or even swindles -- but that's not the case with the ones that stick around decade after decade.
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
Under your example, all insurance is gambling. And it is. But we generally separate it from casino/sportsbook gambling. Therefore we call it insurance and not gambling.
Pffft! Mr. "critical thinking skills" wants us all to define our terms guys! Lets laugh at him derisively while we continue to argue past each other and never come to an understanding.
Ha ha!
"Ignorance more frequently begets confidence than does knowledge"
- Charles Darwin
They were helpless in the sense that they failed to help themselves peer through the fog of packaging. If the banks dealing with the debt packages had management structures that had done the slightest bit of due diligence, they would have known they were walking on thin ice. In fact this very thing was realized by multiple people in multiple institutions. Red flags were raised but internal audit groups and those people were silenced, promoted out of a position of audit, or outright fired. This is all well documented.
Banking/finance/market regulation doesn't mean that you can't make money lending or selling derivatives. Banks need to be strongly encouraged to do legitimate documentation so that their customers can know how risky the institution is. Ordinarily you could do this by threatening prison to any manager of any company found to be dealing in what amounts to fraud. Unfortunately all those white-collar criminals at that level are so buddy-buddy with politicians, that'll never happen.
I swear they give me mod points to shut me up.
The government (you can thank Barney Frank in particular) increasingly required Freddie and Fannie to make more risky loans. This process went on for years. The entire market got in on the deal.
This is true, but it hardly accounts for the entire market. Even if just Fanny/Freddie were making shitty loan guarantees, it doesn't explain the collapse in value. That collapse came from a total lack of transparency in loan packaging resulting in over-leveraged institutions (that didn't know they were over-leveraged). It's the same old banking story every 20-30 years. A new type of crap is sold, banks go for it, and they justify their loan-to-asset ratio based on a vaporous understanding of their reality. Eventually it comes crashing down.
I swear they give me mod points to shut me up.
I see what you might be thinking, but there's a fine but distinct line between gambling and insurance. Insurance is risk management. Good insurance organizations will document the hell out the risk, even going so far as to spend money to buy down risk. Gambling usually entails a totally unknown risk, or if the risk is known you have no way to recoup or mitigate losses.
I swear they give me mod points to shut me up.
So what's the price for the contents of my wallet file?
Go on, citizen, stamp the vote card. R or D, your choice.
hard to tell from reading the details but it does appear that this is not actually backed by real futures contracts in oil and gold
What's a 'real futures contract'? Its just a contract between two private parties. It could be scribbled on a napkin an still be legal. Its an agreement to deliver some commodity at a future date for some fixed price*. It doesn't mean you have that commodity in your possession at the moment.
hence this would be classified as gambling in most countries
This was the case with CDSs. It wasn't actually necessary to possess the security that these bet against to write them. They are simply a bet against another security. At the end of the mortgage security boom, there were something like 5 times the coverage written against each security**. And that was explicitly made legal back during the Reagan Administration (I think).
Look at corn futures for example. Farmers enter into futures contracts all the time. Even before the corn has been grown.
* A particular exchange can have rules (often mandated by regulators) that require the parties to a contract to have some sort of collateral backing in order to trade. But that only depends on the jurisdiction of the regulator.
** No cabal of investors was necessary to bring the markets down at this point. The 'wisdom of the markets' described by Adam Smith suggests that when there is more profit to be made by the collapse of a security than by its continued liquidity, it collapses.
Have gnu, will travel.
You are extending the definition of gambling and then berating others.
Commodities markets are essential.
Let's use a "3rd-grade" example. I run the agency that salts the roads in the winter. I need to budget up-front for my salt supply, but the price of salt changes from day-to-day. How in the world do I budget? Is your answer:
(a) Sign a contract with a salt supplier for a year's supply of salt at a pre-agreed-upon price, to be delivered as-needed to keep stores full.
(b) Buy what you hope is a year's worth of salt all at once and spend money on a place to store it.
(c) Guess at what salt might cost and put that number in your budget.
Most sensible 3rd graders would choose (a), especially if no one is willing to give you the extra capital for storage facilities required by (b). Choices (b) and (c) are closer to gambling than the futures contract you (hopefully) chose to sign in choice (a).
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
You are only talking about price, which is only half of the futures contract. The other half is supply. If I pay a little more for a guaranteed supply in the future, I don't really see how that is gambling.
Of course one CAN use futures contracts to gamble, just as one can use a stock to gamble. But they are also an essential tool for anyone who needs to plan for more than the immediate future.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
Jones served the generic stuff dog fuck!
BitCoins doesn't solve all the problems of money, but it does solve a fair number of them.
Bitcoin doesn't even solve the problems it was created to solve. It carries enormous risks, not the least of which is huge exchange rate risk. It's not a particularly effective medium of exchange (complicated, requires a computer, thinly traded, not accepted anywhere) nor is it a particularly good store of value.
Logic and reason would seem to indicate that this is a better way to do currency.
Do you seriously think that Bitcoin is trying anything that has never been tried before? Limiting the amount of currency available by tying it to some arbitrary limiting function? Tried that with the gold standard - didn't work very well.
Can one of the economists explain why it won't work?
While I'm not an economist, I am a certified accountant. I see numerous problems with bitcoin.
First, governments are an integral part of EVERY economy and usually account for a substantial portion of GDP (20-50% is pretty common). We can fairly argue about how much of a role governments should play but the fact is that they do play a substantial role even in the most restricted forms. I cannot conceive of a circumstance whereby a government would abdicate its ability to control and influence monetary policy. Even if they were willing to do it however, it would remain a bad idea because...
Second, there is no escape hatch. The biggest flaw in the gold standard was that it was difficult to impossible to depreciate currencies if a country were to run chronic deficits. The Euro is experiencing this problem right now in Greece - exchange rates are effectively fixed within the Euro zone and there are limited ways for Greece to devalue its currency - basically the only option is austerity measures. (The US doesn't experience this because labor and capital mobility is easier within a political union) Bitcoin would share the same fatal flaw as the gold standard. In certain inevitable circumstances it would be extremely difficult to influence the money supply in helpful ways. Effectively bitcoin would severely limit options in the event of a fiscal crisis by replicating the single worst feature of the gold standard.
Third, I find it deeply unlikely that most people will ever trust bitcoin and trust is fundamental to any currency. People (sort of) get that the dollar can be created by the Fed and taxed by the government and used pretty much anywhere. It's complicated but fundamentally run by people. People feel they can wrap their head around that even if they get some of the details wrong. Asking them to trust the bitcoin creation and storage process which uses untested (for this purpose) and highly technical cryptography that sounds scary and incomprehensible to most people is going to be asking a lot. I cannot imagine successfully explaining how bitcoin works or why she should use it to my grandmother. Furthermore, bitcoin presently is apparently being used by most accounts primarily to launder money and facility transactions of dubious legality. If you want to be able to trust a currency, having the perception (right or wrong) of potential criminals as counterparties isn't a good start.
Fourth, exchange rate risk. Given that it isn't going to be supported by a government, bitcoin is almost certainly going to remain a niche currency. This means that it probably is going to remain thinly traded and subject to wild fluctuations in exchange rates. Inflation/deflation will be severe problems. You can facilitate transactions in bitcoin but eventually you will have to turn those bitcoins into dollars or euros or some kind of good. Without the support of governments it will be virtually impossible to achieve the kind of scale needed to provide enough liquidity to mitigate the exchange rate risks. As such it will effectively be more expensive to exchange goods in bitcoin once you fully account for the risks
Sometimes, you just have to trust that things will work out well and take a chance because if nobody does, nothing will happen.
Fine, you go ahead and take a chance with your money. If it works out well for you maybe the rest of us will consider it. Maybe you'll even find some great opportunities. Or maybe you'll be eaten by proverbial sharks. I'm quite comfortable not using bitcoin and see lots of risk to it with little potential upside. Always possible I could be wrong - but I doubt it.
Dollars are also not generated by doing useful work. They are generated by a printing press, which is not doing anything inherently useful. I don't really see why rewarding early adopters is a bad thing.
Dollars are created by the Federal Reserve loaning money to banks. Those loans are then turned into additional loans which are used to buy things that do useful work. Governments don't actually fire up a printing press to "print money" and haven't for a very long time.
What's a 'real futures contract'? Its just a contract between two private parties. It could be scribbled on a napkin an still be legal. Its an agreement to deliver some commodity at a future date for some fixed price*. It doesn't mean you have that commodity in your possession at the moment.
A 'real futures contract' is as you describe.
However, I think what's offered in TFA doesn't involve actual commodities. It is a contract along the lines of "You pay me the market value of 1 barrel of crude today, and I promise that in 6 months' time, I'll pay you the market value of 1 barrel of crude on that day."
As the GP says, it's hard to tell from reading the site.
I still offer a 5% discount for bitcoin users, but until now, no clients have been interested.
Why? That's financially stupid unless your transaction fees are greater than 5% which is a pretty easy hurdle to beat. Furthermore bitcoin introduces a whole mess of additional risks that need to be paid for and that I'm pretty sure you haven't adequately considered. Clients aren't interested because it is actually rather expensive in terms of time and financial risk to use bitcoin.
However I do not despair as I am getting clients from all around the world and a lot complain about the difficulty to make international payement.
Making payments internationally is absurdly easy. It's not free but it isn't hard at all. If someone complains these days that it is difficult to send money internationally they are either stupid or unbelievably lazy. In a previous life I owned an auction company and we sold things worldwide. Transmitting payment was never even remotely difficult.
Yes, but likely pressure from shareholders forced their hand.. Previously a "good" stock, was one that ~*kept* it's value over the years, and gave a good return. These days, however, the market's greed has pushed everyone to think that if a stock isn't continually climbing (ie.. the banks or any other public company, aren't posting "record profits" every single quarter) than the stock is a failure and dump it.. this is , of course , unsustainable.
Find me a service that delivers money into my account in less than 30 minutes, without fees, from Japan to France or Australia to France. I am more than interested.
Without fees or without cost? HUGE difference. Bitcoin might be without fees but it carries significant costs in terms of time and more importantly risk. You have to set up and administer the account which is an additional account beyond your regular bank account. You have to take the risk of putting your money into an illiquid currency and then have exchange rate risk when you try to exchange it for regular currency like dollars. I'm pretty sure you aren't even close to accounting for the actual expected cost of the transaction. I haven't even gotten into counterparty risk, market risk, and the rest. Sure it will often work out fine - but if you are actually accounting for the risk you are taking and time you are spending, the cost is no where near zero even if the fees are.
`Well, if the interest rates hadn't been slashed in the first place.. that's what screwed the average Joes.... It wasn't just the banks.. almost everyone with a mutual fund had some of these toxic CDOs.. My dad lost 1/3 of his life savings.. he used to invest in safe term deposits, but when the interest rates collapsed, he could no longer pay even the smallest bills off of the pittance 1 to 2 percent interest he receiuved.. Like many seniers, he was living partially off the interest of his savings. When he had to find a better investment., every mutuals he was offered had a percentage of these toxic assets..
That does apply pressure and perhaps even temptation towards criminal activity, but so does owing rent or needing groceries. None of the people in the banking fraud were facing homelessness or hunger.
You are correct, but the government *does* have blame here.. deregulation made all that sloppiness and fraud *much* easier to get away with.. Otherwise It is an accurate summary, and I am glad someone has encapsulated it here. I also hope that couple get a REALLY good settlement from BOA.. although I have a bad feeling BOA will try to drag this out for years.
No doubt.
Futures and derivatives are NOT "capitalism". They are gambling. Pure and simple. This has been one of the main downfalls of banks and Wall Street, directly contributing to the 2008 debacle.
We should not base our economy on fake money. Investment is fine. And all investment is "gambling" to a certain extent... at least if it's done honestly.
BUT... speculation and derivatives are PURE gambling. It's nothing more than a government-sponsored casino.
Negative. The 2008 debacle was caused by one thing -- a massive number of greedy consumers thinking they were taking advantage of the system, and a slew of bankers willing to give them the means to do so. It may not be as trendy as blaming the banks, but every single person to refinanced their house to buy a car they couldn't afford, or a bigger house they couldn't afford, or go on some fancy vacation they couldn't afford is singularly to blame for what happened. Everyone who racked up tens of thousands in credit card debt carries that blame. The banks simply did one thing -- happily give people the rope to hang themselves with, if they weren't living responsibly. Did bankers pull out a few hundred million in bonuses? Sure. The American people pulled out trillions in illegitimate money.
The irony of it all is that those people -- the tens of millions of "99%'ers" who lived the high life on the economy has convinced themselves that they were not at fault, and it was the big bad bankers who did it. And the ten million people in houses who (by any sane economic standpoint) should never have been homeowners, and the tens of millions of people in the middle class who were living an upper class fantasy complain that they're not getting bailed out? That's laughable. No one is losing a house who is living in their means and being responsible.
Claiming that the bank collapse was caused by futures and derivatives is just ignorant of the basics of economics.
Being able to buy/sell futures of commodities such as oil ties the bit coin to the real world in a way we haven't seen before.
No one who is hedging in those commodities for real is going to have anything to do with bitcoins. So the only people who are going to do anything combining futures contracts and bitcoins are speculators - and stupid speculators at that. It's super difficult to make money speculating on futures contracts even without adding in all the exchange rate and other risk associated with bitcoin.
it makes holding bitcoins a much more sensible, or at least much less financially treacherous prospect.
No it doesn't. Introducing derivatives contracts for speculation ADDS risk to the equation. There is no causal relationship between the value of any commodity traded as a futures contract and the value of bitcoins with relationship to other currencies. The only thing bitcoins add to the equation is additional exchange rate risk.
A potential user of bitcoins may be put off by the volatile nature of the value of the bitcoin itself, but if he can pin it down to the value of oil or gold by trading those futures, it makes holding bitcoins a much more sensible, or at least much less financially treacherous prospect.
So your idea is to (somehow) reduce your exposure to the volatility of bitcoins exchange rates by buying a differently volatile commodity which bears no relationship to the value of bitcoins whatsoever? Why not just avoid the bitcoins altogether and buy the futures contract directly using dollars? It would cost less and have no exchange rate risk.
I could then, with my 100 bitcoins, buy gold futures. Even if the value of a bitcoin plummetted meanwhile, I'd be making all that money back as the price of gold (expressed in bitcoins) skyrocke
Gold and bitcoins bear no causal relationship regarding their value. Gold can just as easily go down while bitcoins are going down. Gold is of dubious value as a hedge against fluctuations in the value of bitcoins.
I'd be essentially immune to the fickle price of a bitcoin and merely invested in gold. I could further stabilise my finances by SELLING gold futures in USD. If I did this right away, for a small cost, I would essentially have pegged the value of my bitcoins at 1 per every 10 USD.
If you are going to peg to the dollar, why not just own dollars? You have just taken a lot of risk and spent a bunch of money on a hedging strategy that you could replicate without spending anything and just holding on to your dollars.
p>-Joe Broker makes a loan to Alice - Banks don't make loans anymore, brokers do.
You're dodging Alice's personal responsibility with your list. The problem isn't anything you listed, its Alice's belief that she's owed something more in life than she earned. Alice took out the loan, not Joe Broker. Joe Broker's job is to write loans, not make people live responsibly.
The break-down in the system is that, for some reason, we think as a society we should support people who make bad decisions rather than punishing them.
+1 mod parent up - I believe people have suggested futures markets be restricted to producers and consumers, banks, hedge funds, and other speculators would be shut out - when you allow speculators in you can get crazy short-term price fluctuations because people are just following trends and have no intent of using the product they are speculating on.
If Alice knows she can't pay it back she should be held accountable, too. I don't feel sorry for people who knowingly filed false paperwork to get big loans. Those bastards are just as big a part of the problem as the "fatcats."
One of the biggest injustices is that a lot of the time in 2003-6, you had people who were not-exactly-savvy first-time buyers who were mislead or lied to about the nature of their loans. My wife and I bought a home in 2003, and everywhere we went, builders and sellers were trying to get us to spend about double what we felt we could afford. Here's the kicker: my wife wasn't even employed at the time, but we were budgeting knowing that she would be. So really these people were trying to sell us 3 or 4 times more house than they should have been.
We knew that the market was going to be in for a tailspin. Probably should have rented. Oh well. We ended up losing about 30k on the house when we sold it this year. Would have been down more like 50k just 18 months ago, so I guess it could have been worse.
That's how most futures contracts are settled. Not many speculators expect a rail tanker of crude to show up on their driveway at contract maturity. The only problem I can see with Bitcoin is that there are (presently) not many end users willing to settle in that currency. So speculating in crude oil would require hedging the Bitcoin/dollar, Bitcoin/Euro, Bitcoin/Renminbi, etc. exchange rates. Bitcoin may prove to be a better intermediary for conducting such trades, as there is no single political entity that can fiddle with the money supply (by design).
If Canada produced the oil and China was the eventual consumer, the only contracts you'd need wouldd be Bitcoin/$CDN, Bitcoin/Renminbi and Bitcoin crude futures. No dollars were harmed (or needed) in this transaction. This is when the US Marines enter the picture.
Have gnu, will travel.
"Good insurance organizations will document the hell out the risk, even going so far as to spend money to buy down risk. Gambling usually entails a totally unknown risk, or if the risk is known you have no way to recoup or mitigate losses."
And good betters on horses document the hell out of every past race, the race conditions, and EVERY fucking statistical detail about each horse.
Your "fine line" is so fine, it doesn't actually exist.
"You are wrong â" and it is a classic rookie mistake"
I'm not wrong, you are just misunderstanding me.
First, you are wrong here:
"Futures pricing is straight forward. No probability, no liner programing, etc."
Straightforward is one word, and the other word is linear, not "liner". But that's just FYI, not why I'm saying you're wrong.
I never claimed futures needed complex calculations. Only negotiation. Not even close to the same things.
But there *IS* probability! Absolutely! If you are betting on corn futures then you are betting on how the weather affects next year's crop. If you get it wrong, you end up paying more than others. A LOT of people lost those bets this year.
Weather (not climate; I'm not getting into the "global warming" shit) is probability. And this year is an excellent example.
There are always variables in futures.
And by the way: you would not make a dime off of me, because
1. You appear to be semi-literate. But I'll give you this one. Maybe you were just having a few beers. I have fumble-fingered my keyboard before, more than once.
2. You might know your sales pitch, but you don't understand the actual economic foundation of the product you're trying to sell. Tell me all about the difference between a market price and a marginal price.
3. All of the items you list don't make it "not gambling"... those are just the "house advantage". You even admit it when you claim you'd take me for a ride.
"Under your example, all insurance is gambling."
I have explicitly stated this several times already.
"But we generally separate it from casino/sportsbook gambling."
So you put the sows in one pen and the boars in another. That doesn't make either of them "not pigs".
You're dodging Alice's personal responsibility with your list
And you're dodging what used to be done 20 years ago.
The banks themselves used to make the loans and hold them. That gave the motivation for "due diligence" to the loan officer at the bank to make sure that yes, you could pay back the loan.
Brokers do not have that motivation. They have the exact opposite motivation. Commission only. And since they are just literal paper pushers they were filing falsified paperwork and approving loans for people merely having a pulse.
>The break-down in the system is that, for some reason, we think as a society we should support people who make bad decisions rather than punishing them.
Yes, but you seem to be blaming only Alice, when the fraud goes way... way beyond Alice.
>Alice's responsibility
Joe Broker is supposed to be the expert on this. We rely on experts as sanity checks for our decisions. Joe Broker reassured Alice that she was making the right decision instead of refusing the loan, which is what would have happened 20 years ago in the old fashioned way.
There was far too much money to be made by people in the chain of operations that I listed above, and it's a direct result of deregulation.
--
BMO
It's a prisoner's dilemma. Let's say you're a lender for a big bank, and your job/bonus depends on your performance in relation to other lenders. The bank isn't taking on extra risk by making these loans (due to securitization), so there is no penalty for making a risky loan, but if you don't make the loan, then you maybe lose your job. If you don't make the loan, you will be replaced by someone who will. At that point, the rational thing to do is make the loan, even if you know there's a good chance at a default.
That's on an individual scale. At the organization level, the same thing is happening. If every other bank is making these loans and their earning are up because of it, your stockholders are going to want in on the action. Upper management's jobs are now on the line, so they send the orders down to the rank and file to make the loans. Again, it's the rational thing to do given the circumstances.
In a perfect world going against something like this wouldn't be career suicide, but the reality is that we don't allow people to act on their own conscience without severe consequences. The world is full of perverse incentives like this. The only way to stop it is through transparency and sensible regulations.
>You are correct, but the government *does* have blame here.. deregulation
I agree. But the assertion is commonly that "the government made all these people do this, " as if the banking industry's arm was twisted by regulation into doing so, which is clearly not the case. Glass-Steagall removed the last barrier between Wall Street and the banking industry, but that was not intended to cause robosigning and loan application fraud and a willing blindness of fraud as the hot potato of a bad loan got passed around from broker to investor. And that's what I'm trying to address. A lot of people on the side of the Tea Party and Republicans in general emphasize Alice as the main problem and anti-redlining laws that were passed in the 70s. That is an oversimplification, and false.
Because if you listen to Fox News, somehow all this fraud began and ended with Alice or was the direct result of Barney Frank. But the repeal Glass-Steagall was a Republican machination, even though it was signed by Clinton. Without Clinton's signature, it was going to pass anyway because it was veto-proof (It was soundly rejected by the dems the first time around, then some horse trading was done, and the dems approved it too). Clinton only signed it because at was "bipartisan" to not embarass the Dems who sold out.
Fox can't tell its loyal viewers about how Glass-Steagall's repeal was the seed of all this, because it goes against the narrative of all regulation being bad. And Glass-Steagall was deregulation.
> Otherwise It is an accurate summary, and I am glad someone has encapsulated it here.
I've been following it since I recognized the housing bubble in 2006.
I wish I was as smart as Magnetar and able to make a buck off of the fraud by hedging against it.
>BOA
I hope so too. And it's not just BOA, which is the scary part.
Watch. Marc Dann has a brilliant speech on all this.
https://www.youtube.com/watch?v=AfqSmuNyTyY
https://www.youtube.com/watch?v=xcEU692-a98
--
BMO
Alternatively, personal criminal liability for these people would both keep them from making the bad loans. It is exactly the sort of corporate psychopathy people talk about. Many people would refrain from committing a crime (and this fraud was a crime, they knew very well they were making a loan that was almost sure to default and that it would be sold off as AAA) even if they were fairly certain they wouldn't get caught.
So the dilemma would have been solved if they had thought there was any real chance they might be a prisoner (excuse the word play). Sadly, they were right, the DOJ and SEC seem to be completely uninterested in even investigating the largest organized fraud racket ever. Meanwhile, the crime goes on.
Parent really needs to be modded up. Peverse incentives let to the crash, not malice.
Phillip.
Property for sale in Nice, France
This is true, but it hardly accounts for the entire market. Even if just Fanny/Freddie were making shitty loan guarantees, it doesn't explain the collapse in value.
It easily explains the collapse in value. When it became apparent to those in the know that a large segment of the loan base couldn't pay back their loans then it also became obvious that the property "backing" those loans would soon have to be put on the market. Either the banks would put it on the market (foreclosure) or the "owners" would put it on the market (regular sale). With an increase in supply what happens? You guessed it... the price goes down for every bit of the supply. Then the "average time on market" significantly increases due to the higher volume of houses on the market and now you've got a real panic - even from people who could afford their houses! Since panic tends to amplify issues (if high demand then "panic" will make people spend way too much; if high supply then "panic" tends to make people sell to quickly or too low) the actual problem itself was amplified.
Every bit of this can be traced back to banks giving out risky loans that were backed by the US government. I don't necessarily blame the banks... they were asked to do it and they had "nothing to lose". But I do blame people who should have known better (yes, personal responsibility). And I do blame the government for trying to engineer a solution to a problem that wasn't really a problem ("low" home ownership) and passing legislation that created way more issues than it solved.
My present is the activity I am currently engaged in with the purpose of turning the future into a better past.
It's not gambling on weather, you KNOW there will be good years and bad years. A corn producer investing in futures, getting a secure income at at the expense of potential extra profit, is not gambling. A whiskey producer that has to produce a certain amount of bottles next year and knows how much grain they will be getting at what price is not gambling. A strategic investment vehicle that purchases futures in corn without a buyer, expects the price to go up, with the plan to sell the contract of the supplier to a buyer looking for corn at a good price (with a healthy margin in which to cream a commission), is gambling. JaneQ is caught up in Wall Street world and is talking about the latter, all those contradicting the former.
Phillip.
Property for sale in Nice, France
Parent is correct, you are not. The U.S. government did specifically direct banks to make much larger numbers of risky loans in order to service "minority" markets. Banks were required to make certain numbers of subprime and risky loans in order to avoid sanctions. Then Fannie Mae started repackaging those loans and selling them as high-grade securities. Then certain banks (JP, Goldman come to mind) started doing the same, and ended up making ass-tons of money, and then the whole thing crashed.
But it was at the directive of the U.S. government. The banks were not stupid, they knew perfectly well what was going to happen. Anybody with any understanding of finance knew what was going to happen. But the politicians trying to make sure 'minorities can experience the American Dream of home ownership' did not. And now Goldman, JP et. al. are laughing all the way to the bank, or hell, or whatever.
Gambling on FEAR, no less! :)
You are both wrong in theory and state arguments that apply to pretty much anything you might want to use as an exchange medium. The method is hardly dubious, it's laid out in black and white and is completely transparent, and it's not particularly complicated or incomprehensible (if you can be bothered). At the moment it's thinly traded and difficult to exchange, it suffers from the chicken and egg situation every currency suffers from. Look what happened to Beanz and Flooze and all the other micropayment systems people poured millions into before they failed.
As value of any item is determined by supply and demand, the smaller the supply the easier it is for one player to manipulate. Once it gains momentum it will stabalise, and it's already remarkably stable considering. Whether a futures market will help, or make things worse, I've no idea. It's an interesting experiment and let's see what happens. At worst the ability to explore the effects on a currency not manipulated by government will give plenty of raw data for a few Phd thesis.
Your allegations about illegal uses are irrelevant. Commercial interests that I am sure offend your delicate morals first saw the potential of the Internet, pushing it outside the boundaries of the academic world, and most of us are now glad it is as ubiquitous as it is today.
You remind me of one of those trolls that every time somebody posts about hydrogen powered cars has to talk about it being not a fuel but a transport medium, and it's all generated from fossil fuels anyway. Simply unable to see the bigger picture, no hope for a better future only understanding the status quo. If you don't want to use Bitcoin then don't use it. The economics will follow the normal laws with or without you.
Phillip.
Property for sale in Nice, France
Sounds like something Ann Coulter would say in reference to the media, but hardly objective, and quite telling about your commentary.
FYI -- the government of the United States is centrist with a skew toward the conservative side. It is not a "liberal government.", nor is it progressive.
When you take a look at party cleavages in the US (the demographics that the political parties have as their voter base), you'll see the Republicans at around 4.4, and the Democrats at about 5.2, on a scale of 1-10, with 1 being most conservative (fascist state) and 10 being most liberal (full-on communist).
Forcing government to make bad investments to make homes more affordable was a bipartisan, pork-barrel spending effort. It was very popular for the voting demographics on both sides. Everyone loves government subsidies when THEY are the ones getting the subsidy -- they only start to dislike it when they preceive others are getting more.
And the real helper here were the hedge funds that jumped on this bandwagon and sold/bought up all the toxic Credit Default Swaps, Collatoralized Debt Obligations (CDS/CDOs), etc, that really drove the market into the ground.
Maybe it's the hedge funds you should be calling "liberal" in such a condescending fashion.
"You are only talking about price, which is only half of the futures contract. The other half is supply. If I pay a little more for a guaranteed supply in the future, I don't really see how that is gambling."
And you're only talking about a single contract, which is not a market, any more than paying somebody to put out the fire in your house is an insurance industry.
As for supply: the fact that I was only (in most of my posts) talking about the price side is irrelevant. People win and lose on the supply side, too.
In a horse race, once you plunk down your money, it is up to the horse to deliver. When it doesn't, a lot of people lose.
In a futures market, it's not a matter of absolute delivery, but delivery at the marginal cost that was bet upon when the contract was made; if suppliers asked for too little (under conditions at time of delivery, which is often years later), then they lose their bet. If conditions are favorable and the margin in the contract is large enough, the suppliers win. It's not a one-sided deal.
But it's still a horse race.
You have opened the definition of gambling up so wide as to become meaningless.
Am I "gambling" that I'll make it to work alive when I get in the car in the morning for my commute?
Most of us use "gambling" to describe a game of chance with no purpose other than to try and make a lot of money using a little. Futures are a tool that let you reduce risk in your day-to-day decision making. Reduction in risk is not usually associated with gambling. The futures market is what makes it possible to buy or sell a contract without inefficient negotiation. Certainly there are gamblers trading futures - I don't think anyone would dispute that. And certainly they add some volatility that is not helpful. On the other hand, they also provide some liquidity and efficiency, which is helpful. The system just needs to be set up to balance these competing interests.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
Please get a native English speaker to explain it to you. If you are a native English speaker then you should be ashamed of yourself for deliberately making it more difficult to communicate.
Those people tend to leave the futures markets, either because they wise up, or because they run out of money to squander.
Side note: the posts I've noticed are about farmers protecting themselves from the risk of a price drop and speculators who can afford to take a few hits if there's an unexpected price change, and play the percentages (possibly supplemented by their own supposed expertise in analyzing markets).
It does work the other way. A baked goods manufacturer might want to insulate itself from rising prices, and be willing to pay to reduce or eliminate that risk, in the same way the farmer wants to reduce or eliminate the risk of falling prices. (My farming relatives that have used futures only hedge a portion of their expected crop.)
If there were no speculators, there would still be those who would want to insulate themselves against price swings (one direction or the other) who through the futures markets would find one another.
And if the speculators are, on balance, wrong about a commodity's future prices at any given time? They, as a group, have just subsidized the future buyers or sellers (depending on which way they were wrong) of that commodity.
There's no time like the present. Well, the past used to be.
If he doesn't know but has a hunch and feels like taking a risk, he's gambling. If he thinks he knows but he doesn't, he's gambling -- he just doesn't know it yet.
How to tell the one who knows from one who doesn't know, but doesn't know he doesn't know? Check on him later to see if he made money in the futures market. The longer until "later", the more certain you'll be of your conclusion.
There's no time like the present. Well, the past used to be.
And you can't get robbed or scammed when using cash.. right?
Someone please mod the AC above up. They've put it far better than I did. And AC, please get an account so we don't just lose you in the noise.
Not with coins and paperbills, no. However, I can at least get the transaction reversed where bank transfers, cheques, credit/debit/cash cards are concerned and additionally protected by various financial laws. Can't do that with BTC.
Change is certain; progress is not obligatory.
That's how most futures contracts are settled. Not many speculators expect a rail tanker of crude to show up on their driveway at contract maturity.
Yes, but nonetheless, in a real futures deal, a real tanker of crude does change hands. At some point you do own a real barrel of oil, which someone sells on your behalf.
From what I can tell, in the BC deal being discussed, you are *merely* betting on the market price; no real commodity is involved.
(Incidentally, I did once read a supposedly true story in which a trader screwed up, and a lorryload of some commodity or other arrived at their office. My Google-fu isn't up to finding it)
Banks were required to make certain numbers of subprime and risky loans in order to avoid sanctions.
Citation please?
I swear they give me mod points to shut me up.
This is the specific criteria: https://en.wikisource.org/wiki/Community_Reinvestment_Act_of_1977#Sec._804. Note that the Federal Government is the one decided whether or not the bank is meeting the needs of low-income customers. This is not the case in practice, however. Enforcement of the CRA is done by community advocacy groups. One of the criteria that is used to determine whether the bank is CRA-compliant is the comparative number of loans made to high- versus low-income clients. If you don't make enough loans to low-income clients, then you are not CRA-compliant. Source: http://www.frbsf.org/community/craresources/advocacy.pdf If a bank has a bad CRA record, then the bank will be prohibited from expanding or merging. Source: https://en.wikipedia.org/wiki/Community_Reinvestment_Act
This is the specific criteria:
https://en.wikisource.org/wiki/Community_Reinvestment_Act_of_1977#Sec._804
Note that the Federal Government is the one decided whether or not the bank is meeting the needs of low-income customers. This is not the case in practice, however. Enforcement of the CRA is done by community advocacy groups. One of the criteria that is used to determine whether the bank is CRA-compliant is the comparative number of loans made to high- versus low-income clients. If you don't make enough loans to low-income clients, then you are not CRA-compliant. Source:
http://www.frbsf.org/community/craresources/advocacy.pdf [frbsf.org]
If a bank has a bad CRA record, then the bank will be prohibited from expanding or merging. Source:
https://en.wikipedia.org/wiki/Community_Reinvestment_Act [wikipedia.org]
Yes, to be clear, what I was referring to was speculating in the futures market, not purchasing your own futures for your own use.
The banks are more to blame only because it was their professional duty to not do what they did. But yes, it's for the most part, just as much the 99% as it is the 1%.
"Only survives as long as people think it has value." - Sounds like Gold, and every other type of money ever and will be.
Money only has value because we collectively think it has value. Otherwise show me a law of physics that backs up your assumption that certain money has a certain value.
Maybe you should do some reading into how money works. The only thing stopping BC from taking off is not enough people using it. I'm not saying they should, but there is nothing theoretical wrong with BC, just practical limitations.
I wish I was as smart as Magnetar and able to make a buck off of the fraud by hedging against it.
Me too, if I could be sure it would only hurt the corrupt parties.. but sadly, that is never the case.. ;-(