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BitCoin Value Collapses, Possibly Due To DDoS
hydrofix writes "The Bitcoin-to-USD exchange rate had been climbing steadily since January 2013, from around 30 USD to over 250 USD only 24 hours ago. Now, the value bubble seems to have burst, at least partially. The primary trading site MtGox reported a drop in value all the way down to 140 USD today, a loss of almost half in real value. With many sites unreachable or slow, there are also news of a possible DDoS attack on MtGox: 'Attackers wait until the price of Bitcoins reaches a certain value, sell, destabilize the exchange, wait for everybody to panic-sell their Bitcoins, wait for the price to drop to a certain amount, then stop the attack and start buying as much as they can. Repeat this two or three times like we saw over the past few days and they profit.'"
zero dollars...
http://en.wikipedia.org/wiki/Black_Wednesday
It was over 260 and under 120.
so they wanted an unregulated market. this is what they get...
...have to DDOS and byu cheap...
Today's high was $266, the low was $105 and currently it is trading around $180
what will it take for this failed experiment to be abandoned?
Stop trying to predict the short-term market movement, and you'll do just fine.
And the most exchange rates at MtGOX are already back up to $200 after a big rally yesterday, so it's apparently correcting just fine for anyone who is looking to sell their bitcoins worth 10x or 100x what they used to be.
So yeah, Botcoins are subject to wild swings in exchange rates.
The party of stupid and the party of evil get together and do something both stupid and evil, then call it bipartisan.
have found another target. Having bankrupted several major economies they are looking for virgin lands to grab.
My money is a few bits in my bank's private datacenter.
What's the price of a few bits? If it's what Wells Fargo is telling me it is - holy shit. I've got a NAS with several TB of storage sitting here. Do you know how large of a number I can store on that sucker?
I'M RICH! Monocles and top hats for everyone on Slashdot! You get a monocle! And you get a monocle! And you get a monocle!
And I don't even care that Anonymous Cowards are getting back in line for multiple monocles!
bitcoins are a cyber criminal's dream come true.
The ultimate value of a dollar is zero ... anything.
The dollar used to be a receipt for a certain amount of gold that you owned in the federal reserve. But starting from 1971, the government defaulted on this commitment and the dollar became just a piece of paper.
Bitcoin is not different in this aspect. There is nothing behind it either. The difference is that there is a limit to the amount of bitcoins that can exist, but there is no limit to the amount of dollars the government can print. The government and the bank cartel known as the federal reserve can and do print insane amount of money every year to finance government spending, at the expense of the value of every other dollar in existence.
To illustrate this, take a dime from 1942, you could buy a gallon of gas with it back then. But you can still buy a gallon of gas with the same dime _because_ it is made out of silver. So it is not that things are more expensive, it is that the money changed, there are a lot more dollars circulating now that the government and the FED printed, which has caused it to lose a lot of value over time. This kind of devaluation by printing money is mathematically impossible with bitcoins.
It's funny how people believe that their imaginary currency would have grown 10x in value in a few months weren't for those evil hackers.
au contrair, bitcoin is a raging success. it generates the <blink> LULZ </blink> every time some whiner bitches about what a useless waste of electricity it is.
full disclosure -- I too enjoy slagging on bitcoin with cheap shots.
the preceding comment is my own and in no way reflects the opinion of the Joint Chiefs of Staff
You can get gas for $1.99 a gallon? Do tell.
Ok, who's trading in Bitcoins with the server right next door to Mt.Gox?
The whole issue here is that there is just ONE major exchange and they own 80% of the trades. Hitting one exchange impact the whole currency. The exchange rate has been manipulated for weeks now. Its time for other exchanges to pop up or this will continue. Its easy money so they will keep doing it untill & unless there is multiple exchanges!
Google Glass will be the rich-nerd monocle of the 21st Century
If it works right etc
Wish I had bought some Bitcoins (or mined up a bunch) in January.... They're back up to about $200 now. From about $15/ea in January. Could have been more than a tenfold return if timed right.
The solution's the standard one: take the long-term view. If you think Bitcoins are actually going to be worth that much long-term, don't sell. Hold onto them, and buy during the drops. If you think Bitcoins aren't worth their current value long-term, sell before another drop happens and don't buy back in. The speculators (because that's what's driving any manipulation) depend on people dumb enough to do short-term trading while lagging behind the curve. They're professionals with all the tools, so as a non-professional the only way you can win is to not play their game.
Rule of poker: there's always a sucker at the table. If you look around and don't see one, it's you.
Reefer Madness is a pretty funny movie.
Either the Spanish Inquisition or Goldman Sachs. Either way, it sure was unexpected.
I said no... but I missed and it came out yes.
you can talk the shit out of bitcoin you want, but this unregulated market may provide us with data about currencies that we never observed before, we can get real good data from this experiment.
...that the same Slashdot that was up in arms about the US instituting a reporting requirement on certain Bitcoin transactions seems to also be up in arms about Bitcoin currency manipulation.
If you want to be the completely anonymous, "no one can track us" currency, then this kind of manipulation is exactly what you're signing up for.
You know how they catch stock and commodity manipulators? Reporting requirements. Look at who sold/bought what before and after a major market moving event.
This kind of devaluation by printing money is mathematically impossible with bitcoins.
The irony of bringing that up in response to a story of how Bitcoins devalued by ~50% overnight all by themselves is hilarious.
Really, once the general public is aware of 'get rich quick scheme' it is going to collapse.
I am not saying Bitcoins is such a scheme, just that some people interpret it as such. Currency speculation is not a good get rich quick scheme. It seems to best with people who have taxes in 30% range, or otherwise need to launder their money.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
Before the current silver bubble started you could buy a quarter's-worth of gas. You may not be old enough to remember when the last silver bubble was, back in the 1970s, but that dime would probably have bought two gallons of gas at the time. Once enough of the common public is invested in silver and gold the speculators will collapse the bubble, the public gets taken to the cleaners, and only the banks, speculators and lawyers win. A few years ago your logic was being used to inflate the real estate market.
"Think about how stupid the average person is. Now, realise that half of them are dumber than that." - George Carlin
People at the top are using technology to manipulate the value of assets. Let's setup some virtual tents and go light some shit bags on their doorstep.
True enough, on both accounts.
But especially the second one. Perhaps I need to stop being experienced and bitter. Who wants to buy my old Flooz?
The FDIC has signed off on a plan to "Bail-In" banks in the USA just like that, if they are considered Too Essential to the economy, and are about to fail.
Bitcoins could be a good way to move money out of a crashing currency model on a temporary-only basis. But in the long run, only things you can put your hands on and move with your body (or things like land that no body can move) are a safe bet.
We might need to have a talk about what "steady" means.
Kinda makes me wish I hadn't wiped the system I had my original bitcoin wallet on, made back when CPU-based mining could do it in less than a week.
Even at 140, it'd have paid off.
To illustrate this, take a dime from 1942, you could buy a gallon of gas with it back then. But you can still buy a gallon of gas with the same dime _because_ it is made out of silver.
Do it. Nine times out of 10 or more, I'll bet the attendant will say "Nice try buddy. That's a dime. It's worth 10 cents. Now pay up!"
Fiat currency works both ways. You want to get your $1.99 out of the dime, melt it down and take it to somebody who buys silver. Less fees and commissions. If it's a collectable dime, you might get more selling it to a numismatist, but the "value" of the dime will be in in its collectability, not in its silver content.
Even in 1971 the idea that everything in the world had a gold equivalent was absurd. These days we have computers and big-screen HDTVs that no amount of gold could give you back then. For a little while, these items may be worth hundreds or thousands of dollars, despite being made from inexpensive materials, then their value will plummet as something newer and better comes along. The amount of gold is limited and so, too is the value of the goods and services you can buy with it. If you owned all the gold in the world and spent it, you would still not own most of the world.
Value is what people give to things, not what things inherently have. To a parent of starving children, the only value gold has is if you can convince someone to accept it in exchange for food.
They're still worth 28 times what they were a few months ago.
MtGox owns too much of the Bitcoin conversion market. They need a solid competitor.
Right now, if you can harm MtGox, you harm the entire Bitcoin network. Slow it down and you slow down Bitcoin trades. Manipulate it and you manipulate the entire market. Regulate it and you regulate most of the market. Destroy it, and Bitcoin may completely die, at least in the short term.
I'm not saying any of this is MtGox's fault - they're doing a good job at what they do. But they're the closest thing Bitcoin has to a single point of failure. We need redundancy.
a loss of almost half in real value.
Thus proving (like any currency, ultimately) that they have no value.
systemd is Roko's Basilisk.
How can something that has no real value drop by almost half of its real value? BitCoin is based on the "other idiot" principle. No surprise that the value has "adjusted", the shock is that it is still so high. Consider the advice of the great philosophers Mr. T and Nelson.
I'm an American. I love this country and the freedoms that we used to have.
Living life in the fast lane, volatility is fun.
Why is everyone so hung up about printing money? Money printed is really the least of your concerns when it comes to inflation. For every greenback in circulation, thousands are digits on some bank account.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
And what was the value of that gold? That is just as artificial as any currency. It is just as made up.
Don't fight for your country, if your country does not fight for you.
Odd... Comparing the group of people I know who do MJ and the group of people I know that have BitCoins, they're quite distinct. Maybe 'cause the average dealer 'round here isn't too high tech either, probably he'll look at you with glossy eyes and go "duuuuuuuude... whatever, just put your bitcoins on the table there."
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Reddit also has a community where people identify themselves as addicted to masturbation and go on and on about how not doing it anymore has made them all but superhuman. And that's not even getting into all the self diagnosed aspies. It's not a website very well geared to medical issues.
You're understanding of the dollar is laughable, at best.
" but there is no limit to the amount of dollars the government can print."
Not true in in practical way, but common statements from the ignorant masses.
" the bank cartel known as the federal reserve "
the federal reserve is not a bank cartel,. You should probably look up what a 'cartel' is so you understand why the Fed. Reserve isn't one.
Let me know when they eliminate banks, until then Rothbard isn't even worth considering.
"print insane amount of money every "
hardly insane amount.
"year to finance government spending, "
nope.
" take a dime from 1942, "
ok:
type: mercury
weight 2.5 grams (current dime weight 2.268 grams
Content: 90% silver
Silver weight 2.25 grams.
Value(4/10) 1.99 ASSUME 100% purity of the silver.
So, no you couldn't by a gallon of gas.
But Weight!*
in 1942 Cost of a gallon of Gas 15 cents, Coca Cola 5 cents Average Price for a new car $920.00
So no, it wouldn't have bought a gallon of gas, but it wold get 2 bottles of coca cola, unlike today.
you would need 9200 of them to buy a house. If what you said was correct(it isn't) the average house would 18,400 dollars today.
It's nice that you can cherry pick a dime out of all of USE dime history and kinda force it into you incorrect understanding of money, but you are wrong.
*ha!
The Kruger Dunning explains most post on
You can buy 12 gallons with a pretty one. You can buy a whole lot more with an ugly one (error). Highest price would be for a 1941 struck over 1942 from Philly in mint condition going for just over 4,200 gallons of regular unleaded.
when people say "printing money" usually they mean "creating money."
RUGBYRUGBYRUGBY
Of course someone could get addicted to Marijuana.
However it's less likely then Alcohol. Anything the feels good can be addictive, so don't just dismiss it.
If someone says smoking a joint till make you an addict! yes, shut them down but do not dismiss the idea, there are too many.
Kids under 15 have a pretty high rate of addiction.
Ryule of thumb, if you are knowingly harming yourself then you should talk to a professional about whether or not you are addict.
The Kruger Dunning explains most post on
I have literally smoked at least my own weight of it, since high school and on through college. Every day, if I could manage to obtain it. It was totally awesome, but a fairly wasteful expense of money. As of today, however, it has been years since I did that. One day, everyone has to grow up and get jobs that do random drug testing, and the responsible lot decide that paying the bills is more important than partying.
All it takes to stop is the decision to stop, and enacting that decision to stop is mostly an exercise of inaction - you don't do it. The enaction of that inaction is made less difficult by removing oneself from environments that offer temptations, but there are no physical withdrawals. The worst thing is boredom. You'll be sitting around wishing you had the magical cure to make boredom disappear, and it's frustrating. But eventually you learn to actually DO things, and find entertainment in activities that (sometimes) provide real-world benefits.
Bottom line, it's just a matter of willpower. Some people claim they don't have it, and call themselves addicts, but they're really just lazy-asses. Other people claim they can't work, and live on welfare, etc.
link to this alleged plan?
also, the fact that you think you can hide using bitcoin is cute.
The Kruger Dunning explains most post on
The dollar used to be a receipt for a certain amount of gold that you owned in the federal reserve
And gold is only valuable because someone says it is. In a societal collapse, abount the only currency would be ammo, food, shelter, and medicine. "Just a piece of paper" isn't appreciably different than "just a chunk of gold" in that regard.
XML is like violence. If it doesn't solve the problem, use more.
Sort of like how Slashdot is not a website well geared to economic issues?
We have a complement of aspies shouting about how Bitcon is superior to every possible other currency and will revolutionize the world.
If we shouldn't believe aspies on reddit about weed addiction, why should we believe aspies on /. about fake currency?
Fiat currency is sort of like the relativity of economics. It makes people uncomfortable, it doesn't seem to jive with everyday experience (although it does), and it pulls the rug out from under the idea of universal references (either reference frames or the valuableness of certain rare metals.)
Those who fail to understand communication protocols, are doomed to repeat them over port 80.
That's okay, gas wasn't 10 cents a gallon in 1942 either. Hand the GP some toilet paper, he's done now.
FWIW most references are listing 20 cents for 1942, but let's keep in mind America is in a war economy so prices aren't exactly normal. But yeah, two made-up numbers and one ill-chosen one. It's remarkable he named a coin that actually was silver, but even a broken clock is right twice a day.
AFAIK there hasn't been any evidence of an actual DDoS against any of the market sites. People who were using the biggest market site Mt.Gox reported 25 minute delays in their trade orders, most likely because of people scrambling to cash in on their bitcoins before it's too late and people looking to buy bitcoins at 'bargain' prices. The most popular chart site bitcoincharts.com crumbled completely, most likely under the load of people who were legitimately interested in viewing the data, or in my case semi-legitimately interested in it (it's fun to watch).
Full discosure: I sold my small fraction of a bitcoin back when the price was at $235. I currently hold 0 BTC. I'm treating this like a game and I hope everyone else is too. I feel sorry for anyone who is investing real money now. Don't be stupid.
No pretending you have any idea what you're talking about is crazy, along with everything else you said, but you believe a lot of things you read on the internet don't you?
not sure if this is related but I had trouble logging into my blockchain.info wallet in the past few days. blockchain.info didn't update some info on their website for hours. i wanted to transfer like 0.5 Bitcoins to my off-line (cold storage) address.
also, my online bank website is slow. odd coincidence. i had to go to an ATM to check my balance.
The government and the bank cartel known as the Federal Reserve can and do print insane amount of money every year to finance government spending, at the expense of the value of every other dollar in existence.
That is at least as questionable claim. The "insane amount of money" that the Federal Reserve "printed" (actually, just enters a number in a computer, but never mind that) was about $280 billion in 2012. Now, that's obviously not a small chunk of change, but it's not even remotely close to funding the $1,126 billion deficit in federal spending in that same year. Where most of that deficit spending money is actually coming from is private investors happily buying up US Treasury bonds (at very low interest rates to boot), which is probably caused by (a) investors fleeing Europe, and (b) record high profits for businesses and their owners that has to go somewhere.
Also important to think about: Ronald Reagan and George H.W. Bush spent more during their administrations (as a % GDP) than Barack Obama did in 2010-2 (2009 was a year he only had partial control over budget-wise), and is currently projected to go lower. The reason deficits are so high right now is that tax receipts are the lowest they've been (again, as a % GDP) since 1945.
I am officially gone from
They're still worth 28 times what they were a few months ago.
For now. Crashes of this size are an indication that a bubble is in process. It might continue to go up, but OTOH, it might crash hard, as in more than a factor of 28 hard.
No, from 1933 to 1971 you couldn't cash a dollar for gold. For a while you could get silver with certain dollars.
Ain't nobody talkin' about hiding anything either. I be talkin' about how much the US Dollar is worth now vs how much it would be worth after a possible crash of the currency value. I.E. your life savings are worth jack shit even though the numerical value is a high one. Currency trading, simply stated.
Citation requested: http://www.fdic.gov/about/srac/2012/gsifi.pdf
You have Wall Street and you have Main Street.
Wall Street forces value onto everything, and they lose all their worth. Imaginary, speculative and manipulative value.
Main Street provides value, stuff people need to survive, food to eat, somewhere to sleep, tools, you name it. Intrinsic human value.
If you play their rigged game, you lose.
End of discussion.
Actually, if you were a user of the sites, you'd notice there is strong evidence that points to a coordinated DDOS. The spurts of traffic aren't continuous, and they "break" at suspicious timings. For example, at the bottom of the curves, the sites work fine, most of the market/chart sites get their feeds, etc. It's only during the drops/raises start, when it would be fortuitous for people to put in trades, and then freak out when they can't, that the connection issues occur.
I'm not entirely ruling out it being sheer volume of people, but if it was it wouldn't "Come and go" as drastically as it's doing. We're talking sites entirely unusable one minute, and suddenly perfectly fine the next, then unusable 30 min later.
You never realize how much manually made unmanaged "linked" lists suck, till you have src.link.link.link.link...
The ultimate value of a dollar is zero ... anything.
WRONG! The ultimate value of a dollar is what you can trade it for.
The dollar used to be a receipt for a certain amount of gold that you owned in the federal reserve. But starting from 1971, the government defaulted on this commitment and the dollar became just a piece of paper.
WRONG! I would suggest you learn what it means to default on a financial commitment, also, refer to initial WRONG! statement.
Bitcoin is not different in this aspect. There is nothing behind it either. The difference is that there is a limit to the amount of bitcoins that can exist, but there is no limit to the amount of dollars the government can print. The government and the bank cartel known as the federal reserve can and do print insane amount of money every year to finance government spending, at the expense of the value of every other dollar in existence.
DOUBLE WRONG! The government "creating" more money for the financial system isn't the same as printing money (1). "Creating" more money does not necessarily reduce the value of money that already exists - inflation does that (2a). Inflation is currently at record low levels, and negative inflation (which would actually increase the value of each dollar) is universally accepted as a bad thing (2b). The only way this could actually be accurate would be if we were still on a gold standard and the total amount of gold backing our dollars was fixed.
To illustrate this, take a dime from 1942, you could buy a gallon of gas with it back then. But you can still buy a gallon of gas with the same dime _because_ it is made out of silver.
WRONG! Just try paying for a gallon of gas with a dime...see how far it gets you. (refer to top WRONG! statement as necessary).
So it is not that things are more expensive, it is that the money changed, there are a lot more dollars circulating now that the government and the FED printed, which has caused it to lose a lot of value over time. This kind of devaluation by printing money is mathematically impossible with bitcoins.
CORRECT! Things are not more expensive, in general they are less expensive. If (after adjusting for inflation) a certain income level now can buy more and better goods and services than the same income from 30, 40 or 50 years ago - it doesn't matter how many actual dollars are being spent.
It should be captioned something like:
"CRIMINALS GAME BITCOIN.
Basement dwellers shocked. World yawns."
Pumpity-dumpity from the Great Wall.
Pumpity-dumpity had a great fall.
All the geek women and all the geek men
Need to configure the routers again.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
The dollar used to be a receipt for a certain amount of gold that you owned in the federal reserve. But starting from 1971, the government defaulted on this commitment and the dollar became just a piece of paper.
It's not just a piece of paper. Only the only the Federal Reserve can legally create it, so the supply is tightly controlled. That's a big difference between the dollar and a stack of empty sheets sold at Office Max.
The government and the bank cartel known as the federal reserve can and do print insane amount of money every year to finance government spending
That's absolutely not true. The US Government is financed only through taxes and loans. The government and Federal Reserve's balance sheets are separate. Federal Reserve does create money, but strictly for the purposes of controlling the money supply. In a recession, the goal is to increase supply of money to decrease the chance of deflation and to lower interest rates. In times of high economic grows they normally do the reverse in order to reduce inflation.
The gold standard is completely obsolete. For it to work, the gold supply _has_ to grow at the rate of economic growth. It can't of course. Instead, the amount of inflation or deflation will depend on the rate of gold extraction.
The dollar used to be a receipt for a certain amount of gold that you owned in the federal reserve. But starting from 1971, the government defaulted on this commitment and the dollar became just a piece of paper.
The government did not default, first off. Second, the current commitment to the dollar is the full faith and credit of the United States. In other words, it's worth whatever people are willing to pay for it.
!#@%*)anks for hanging up the phone, dear.
Ditto for the Euro, etc.
They are *imaginary* values. Their market value changes with *belief*. Which is *the* worst way to define worth in the history of the universe! Because if *anything* is behaving in a clinically insane and highly dangerous way, it is something based on highly dangerous clinical insanity (=beliefs [=willful ignorance & delusions])!
The only correct way to measure worth, is in *Joule*! Because everything is a tree of works of a certain difficulty (W) over a certain duration (s), plus the matter/energy of nature, which belongs to everybody and nobody. (Where difficulty *includes* one part of the works done to attain that level of skill and of everything required to do that work, including tools, knowledge and of course life-forms, etc.)
Can I have your paycheck?
!#@%*)anks for hanging up the phone, dear.
This is not historically correct. Most of the currencies containing specie do not get melted down and are instead exchanged at or near their melt-down value. It's more of a wealth store than a product that is melted down and recycled.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
because I will move to the Amazon if bitcoin takes off, or rather falls off the edge. Even the original inventor seems to be AWOL.. joke of jokes of currencies.
Similarly, the "save to diskette" icon can be used to save to, well, anything.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
Actually, if you were a user of the sites, you'd notice there is strong evidence that points to a coordinated DDOS. The spurts of traffic aren't continuous, and they "break" at suspicious timings. For example, at the bottom of the curves, the sites work fine, most of the market/chart sites get their feeds, etc. It's only during the drops/raises start, when it would be fortuitous for people to put in trades, and then freak out when they can't, that the connection issues occur.
I'm not entirely ruling out it being sheer volume of people, but if it was it wouldn't "Come and go" as drastically as it's doing. We're talking sites entirely unusable one minute, and suddenly perfectly fine the next, then unusable 30 min later.
Massive surges in trade are expected during a speculative boom-bust cycle. This is how it works: every now and then, for whatever reason, the price either drops or increases significantly into a territory where you enter into a self-reinforcing surge of traders (many of which will be small traders) who are scrambling to sell and/or buy before it's 'too late'. This goes on until the price stabilizes at which point people calm down.
Gold is highly scarce. It cannot be created and very little can be mined, so, generally speaking, the total inventory of gold does not change. The value in this is that governments (or kings - what the word 'fiat' actually refers to) cannot arbitrarily increase the amount of money in circulation, thus diluting the value of currency already in circulation through what many refer to as an "inflation tax". Inflation and currency manipulation have been going on for eons, which is why gold evolved into the most valuable and trusted currency.
so, it sounds like he had the original price wrong. Lets say we start off with 20 cents per gallon, then at the current price of $27 per ounce of silver (and a dime is roughly a tenth of that) a dime is worth $2.70. So, 20 cents worth of silver then now buys you $5.40 worth of gas which is significantly more than a gallon since a gallon costs $3.50 or so. So, the point is that the thesis was correct and then some, even if the details weren't.
Only I can judge you.
1. Not legal tender.
2. Only exchangeable for other goods or currencies at a very small number of markets and merchants.
The Bitcoin system cryptographically and decentrally secures ownership and continued scarcity of the currency. But the real value, as with all currencies including gold, lies in the ability to exchange it. Lose that, and you're pretty much SOL.
(If a small number of actors can destabilize the currency like this, guess how resilient it is against the pressure that national governments can put on it.)
I have absolutely no problem with alternative currencies. I don't see them taking off in this corrupt centralized communist paradigm we're heading into these days but bitcoin..not under any circumstances.
The Fed loaned trillions of dollars to foreign central banks and gave untold billions to select private companies. There is nothing that states the Fed cannot create as much currency as it desires.
The Fed sets interest rates, and nobody else can. Banks are required to be members of the Fed and it is a private organization that operates without Congressional oversight. Just going by the Wikipedia article on Cartels, I'd say it's a pretty close match.
Rothbard never argued for eliminating banks. No clue what your point is.
The Fed is currently adding $40 billion per month directly through the purchase of mortgage backed securities. The Federal Government continues to run $1+ trillion deficits. Insane is certainly a subjective term, but the amount of currency currently being created seems unreasonable.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
Gold as a metal has very interesting properties that other elements don't have, and as such, is objectively useful and valuable. Likewise, diamonds are valuable in certain industries.
OMG, yes. If Bitcoin didn't have a predictable monetary base, it might have volatility as high as 50% in just a few hours. Just like the dollar.
Oh... wait...
It is most defiantly a DDoS, you can tell they are being hit if you have the MtGox ticker chrome extension. The second it goes gray you know MtGox is under attack. You will however be able to "buy" bitcoins through your account page but you will be getting fuct over if you do, as you will be put into a buy queue at a high price (if you thought it was good idea to buy at say $190) you will be locked into this queue and no matter how many times you click cancel your pending order will not cancel, and even if it does their db is so fuct that even when the pending transaction is gone from your account page the transaction will stil go through the second the DDoS is stopped, This happened last week as well when the price was at $112 then shot up to $136, it had then hung around $126 for about a good 2 hours and then the DDoS commenced and dropped the price back down to $102 after that DDoS stopped price shot back up to $119 and took another 3 days to hit $124+ mark. within 3 days after that price has been over $200 So you can see how easy it is to destabilize the bitcoin market quite easily... Funny enough if you make a bot using the shitty MtGox api you can avoid the DDoS entirely to make your trades and this is how they are snatching up all the coins and setting the market during the DDoS. You can however sell your coins through your account page and it will queue them for sale without any issue, however just like the buy issue trying to cancel during the DDoS is impossible, so you see how a bot comes in handy ;)
Also MtGox is total trash for claiming to have DDoS protection they seem to go down in flames pretty damn fast, so until more trading sites come online you are pretty much stuck with the morons running MtGox. They let the DDoS happen because they still make $ of every transaction either way so why should they give a shit whats getting traded at any given time... It would be easy enough for them to just shut down for a few hours but you know they wont.
Is "No sovereign state accepts tax payment in BTC" any more valid?
As are germanium, wolfram, titanium, chrome, iron, copper, tin, ...
Many of those with even more interesting and rare properties.
Gold's "doesn't rust, very malleable, nice conductivity" doesn't sound like properties valuable after society collapse (also not quite rare, especially taken one by one). Diamond's "extremely hard, unusual optical properties" - somewhat, given limited applicability of that hardness and need for special optical engineering in collapsed society.
Wolfram's very hard too, but high melting point makes it not very interesting when power plants are destroyed and you can't melt it. So iron-copper standard, with titanium and chrome thrown in here and there?
but by external debt [the largest country is] also the US, in fact it's debt is larger than its GDP.
Debt can't be larger than GDP; they're in different units. Debt is an amount of money; GDP is a velocity. It's like the difference between energy and power. But debt can be larger than a year of GDP, which is what you probably meant.
China is largest by population and and it may not have the GDP of the US but its GDP is many times what its debt is.
Is China's monthly GDP greater than its debt?
http://www.youtube.com/watch?v=4Vpin9VhNck
Not necessarily true. We used to have silver certificates on some bills, but not all of them. Silver certificates and reserve notes were both printed at the same time.
Note that when we first went on the gold standard in 1873 it was considered a bad move by many citizens since made gold investors win big while silver investors lost big. So we were originally on a silver standard, which declined for awhile then silver was huge again in western states until 1873, then we went to a gold standard, then a mix of gold and silver (very weird), then back to silver, and then to not being tied to one commodity at all.
Yes, more money is printed. However the total worth of all good and services also grows and is not constant, because economies are growing (and shrinking, but with rising populations they are mostly growing). If you limit the supply to never increase, then the value will change tremendously over time. Keeping it fixed benefits people who hold the money static without any investing. Wages in actual dollars would go down over time, and people don't like that, and I don't think any amount of reeducation would fix that. Being fixed on a "standard" is sort of a naive idea. Consider how primitive modern economics is as a science, why would you want to roll back time to when when the theories were even flimsier?
There was never any time while the US was on a gold or silver or bimetal standard that the metals were considered limited and unable to obtain larger amounts over time. Instead mining precious metals was a huge business.
An economy based on how much of a useless metal you could dig out of the ground was a naive economy, and bitcoin seems to want to reinvent that style of economy. And the reason bitcoin wants to reinvent it is for exactly the same reason that useless minable metals were used as currency: it makes miners rich! Early miners are richer than later miners. It is a system intended to enrich early adopters. If the bitcoin backers were true believers in a digital currency that had a fixed amount, they would implemented it differently (ie, you buy into the system with an existing commodity).
> I'm treating this like a game and I hope everyone else is too.
So, in other words, you exist to devalue an object. This is regardless of what intrinsic properties it might otherwise hold.
Do you always actively put yourself in the company of pure investors, marketers and thrillseekers?
If people want to debunk the value of bitcoin, they can be right, and at the same time primarily debunk the value of humanity while optionally using themself as the example.
BITCOIN MINERS threaten strike over FED regulations:BITCOIN MINERS
Didn't we hear the other day how bitcoin 'collapsed' to $120? Now it's 'collapsed' again, this time to $140? Considering when I was actively mining a year and a half ago they were at $3-4, this is some 'collapse'...
The real cause wasn't a DDOS attack at all. It's just the slashdot effect due to all these bitcoin related articles.
One problem with the idea of one dime of silver is that the economy grows. If you could be paid in one dollar of silver in 1942 for one hour of work for example, then you would like to be paid at least in one dollar of silver in 2013. But it doesn't work that way if the amount of silver is fixed. If the economy grows but the amount of currency is fixed, then you get paid less over time. Theoretically it's the same amount of value, ie "one hour of work", but people are not happy at all when the numerical value of the currency goes down. But it worked out in practice because over time people actually dug up more gold and silver.
What form do those Joules take? Are they contained in the chemical bonds of a potato, a mass atop a gravity well, the heat in a few thousand gallons of luke-warm water? How efficiently and quickly can you get that energy to where you need it? And how do you need it - are you freezing to death in the arctic, starving in the desert, or in need of some electrical power to check your email?
Whenever you to define universal value, Adam Smith's ghost chuckles gently.
somebody's been reading Senator Ron Paul's book "End the Fed" :) if that turns out to be a mistaken assumption, read his book and come back! repeat until true :)
but seriously: you're absolutely right. the USD has basically been run on a hyperinflational policy in order to "help" america repay its trillion dollar debts. as of 2008 i believe that the US owed - just to china alone - enough money to average $7,500 per person. if however the $USD is *devalued* then, why, of course that $7500 can be paid easily!!!
uunnnfortunately, the $USD is the world's reserve currency. so basically what this means is that *every* country must follow the exact same hyperinflational monetary policy so as to not get screwed.
it's only going to take one country to say "fuck this, we've had enough" and the system begins to unwind.
now, with bitcoin - exactly as you said, paulpach - you *CAN'T* fuck with bitcoin like this... because inflation is NOT POSSIBLE. there is - and always will be - a limited supply. therefore, what *MUST* happen - over the long term - is that the exchange rate for bitcoin against *ALL* hyper-inflational currencies *MUST* go up.
if you've read any of Tom Holt's books, you'll know what happens when a high-value currency gets cashed out: in one of Tom's books, someone exchanges $BOH 12 for "real-world" currencies and causes a major melt-down of the international exchanges. hilarious :)
bottom line: the value of bitcoins will, as economic pressure on their limited supply increases, go UP.
You're saying "fixed supply" as if it was a good thing.
Pray tell how do you reconcile fixed supply of currency with growing supply of goods and services?
Everybody knows it not a DDOS attack they just don't have the network resources to handle the amount of trading thats starting to happen with bitcoin.
The Fed loaned trillions of dollars to foreign central banks and gave untold billions to select private companies. There is nothing that states the Fed cannot create as much currency as it desires.
Technically true, but tell that to Zimbabwe or the Weimar Republic. Money is "worth" what people want it to be worth. The more money floating around, the less people value it. This is what gives gold the illusion of "absolute" value. People value gold at a more or less constant level regardless of how many dollars or marks are floating around, because they don't actually value the gold in dollars or marks. Of course, people value pizza regardless of how many dollars are floating around as well. The main advantage of gold is that since the sum total of the entire planetary supply is supposed to be containable in a cube 30 meters on a side the relative value per ounce is a lot higher. Plus, of course, gold has a longer shelf life than pizza, although perhaps not longer than Twinkies.
The Powers that be are quite aware of this, which is why they don't print money as freely as the accusations would suggest. Nevertheless, the amount of "value" on the planet is still (so far), a growth item as we create new toys to buy, import fancier foods and find other ways to dispose of our incomes. So if value grows, a static monetary basis isn't really what you want as your standard. Thus they print more money. And, from time to time, cheat a bit while doing it. But not enough to kill the goose that lays the fiat-golden eggs. The Ford-Carter years are still remembered. No one wants to go back there.
There's no "hyperinflation policy" when there's no hyperinflation. At the least, to have hyperinflation, you need a massive drop in the value of the currency over a relatively short time plus a strong incentive for everyone to treat the currency like passing around a hot potato or live hand grenade. That hasn't happened in the US.
I shouldn't have to point out the obvious here, it will clearly fall on deaf ears considering the vast amounts of stupidity revealing themselves in postings on this topic. But hell, if it brings just one person to their senses I'll count it job well done.
First, nobody is forcing anyone to hold their savings in US Dollars. You can hold your savings in whatever form you want, it's called a BROKERAGE ACCOUNT. Buy a commodity-tracking ETF if you desire, and keep just enough dollars around to service your monthly needs. The dollar, after all, is very definitely stable in the short-term. One month isn't going to destroy its value. Realize, though, the price of everything in real terms fluctuates. Someone who bought gold at $1900 is sitting on a 15% loss of value in dollar terms right now, for example. Real commodities generally maintain their value over long periods of time. Are you worried about buy/sell fees? If you are, then you don't have enough savings to even be AFFECTED by inflation in the first place.
Second, Bitcoin isn't a currency. It's a commodity with a limited supply. Not only is it a commodity with a limited supply but it is a VIRTUAL commodity with a fixed supply. It isn't even real. It's not something you can touch. It doesn't even behave like a currency fod gods sakes! It may not be possible to counterfeit, but that doesn't stop anyone from creating their own virtual commodities and competing. In fact, there are MANY virtual currencies already in existance, primarily used in games, which are already far more stable than bitcoin.
Third, Bitcoin's 'value' is fleeting. It's like tulip-mania but worse. It's worse because the market is so shallow it is trivial (and obviously trivial) to manipulate. Heavy manipulation by people selling high slowly, causing a panic, and then buying low. Rinse and repeat.
I'm guessing that a large percentage of the exchange volume is from rinse and repeaters and very little is actual investment purchases or sales. It creates the illusion of decent volume when, in fact, there actually isn't any. Each time it cycles the manipulators are removing more real money from the system, leaving everyone else holding the bag.
Think about what this means, folks. It isn't rocket science. Whatever cash was injected into the system by real investors is being leeched away by the manipulators. There is LESS real original cash remaining, yet all the remaining real investors believe that a Bitcoin is worth at least as much as they originally paid for it, because they see that magic exchange value in $USD 'Oh look, 1BTC is worth $166 BTC!'. What these investors do not understand is that they cannot ALL get that price if they were to sell. They can't get it even if they all paid that price going in because the manipulators have already squeezed out a considerable amount of cash from the system.
The very definition of a Ponzi scheme. This will only end in tears.
-Matt
...
To illustrate this, take a dime from 1942, you could buy a gallon of gas with it back then. But you can still buy a gallon of gas with the same dime _because_ it is made out of silver.
And silver is valuable why exactly?
May Peace Prevail On Earth
> I'm treating this like a game and I hope everyone else is too.
So, in other words, you exist to devalue an object. This is regardless of what intrinsic properties it might otherwise hold.
Do you always actively put yourself in the company of pure investors, marketers and thrillseekers?
If people want to debunk the value of bitcoin, they can be right, and at the same time primarily debunk the value of humanity while optionally using themself as the example.
That's interesting and confusing. I don't quite follow your line of reasoning...
To be clear, my advice is this, if you ask me, spend zero dollars on Bitcoin. If you own Bitcoin, think of them as a lottery ticket with an unusually high chance of winning (so far).
One where there's lots of speculation. These kind of shifts are NOT what you want for a currency. When a currency changes value by 10% in a YEAR that is a problem governments try to deal with (2-3% is the normal target), never mind doubling or halving in a day. Even a normal stock or commodity would be having some extreme problem for that kind of movement to happen.
It shows all the signs of sever speculation and a bubble. People playing it to try and make a big short term gain, at the expense of others.
Do you always actively put yourself in the company of pure investors, marketers and thrillseekers?
There are worse groups to be members of. At least, it'll be exciting.
While gold has a few industrial applications (in very small amounts), it is precisely as worthless as dollars. In both cases, what determines its worth is solely how much other people are willing to give you for it, or give it to you for. You can see the same volatility in the gold price as you see in Bitcoin, if on a slower scale, with its ebbs and flows dictated by demand. If tomorrow, everyone who owned gold decided that the time was right to sell, the market would implode. There is no magical Ronpaulium contained inside gold that lends it an inherent worth.
Specifically, it's sunk cost. You cannot redeem the bitcoin for the computing power needed to mine it, so it isn't an inherent value to the bitcoin, it's just a cost you have to pay to mine one.
Since it's sunk, it's just gone. You can no more say a bitcoin has an inherent value based upon this than you can say a US quarter has an inherent value based upon how much it cost to mint it.
If a quarter (or a dollar) has an inherent value, it's the value of the metal of which it is composed. And since bitcoins are composed of bits, they have no measurable inherent value.
This kind of devaluation by printing money is mathematically impossible with bitcoins.
Yes. That's a problem, not a benefit.
I agree wholeheartedly with the other replier, energy and work comes in many different forms which are not equally valuable. Let's consider the special case of human labor, the work I do by punching a few keys can be far more valuable than the work someone does by lifting a shovel load of dirt.
Second, money buys work just fine. So no need to trade in work directly. The system is not broken.
Work also doesn't have a lot of the characteristics that a unit of money needs to have. It's not a store of value. It's not fungible or easy to trade.
Finally, you still run into the problem of beliefs or expectations as they're also called. Everything has a prior expectation because someone expects either to do something valuable with it or trade to someone else for something valuable. That wouldn't change a bit, if we were trading energy instead of something else.
Absolute value isn't want you want in a good currency. Doesn't matter the specifics of denomination against other currencies. It is STABILITY. If you are going to park your money in something, do business in something, you want it to be stable. Ideally, perfectly stable, no change in value, would be great. You can't have that in reality because the economy and population change, and there isn't (currently at least) any system that can perfectly map a currency to them. So in general you look for small, predictable changes. Stable currencies see changes on the order of 2-3% per year usually in terms of inflation.
If a currency massively swings in value, it really fucks you. Like say you are a business why tried to pay your employees in Bitcoins. I don't mean set an amount in US Dollars you'd pay them, then bought that many Bitcoins to do it, I mean actually denominated their pay in Bitcoins. You sell all your stuff in Bitcoins, you pay in Bitcoins, you use it as a real currency, not just a quick intermediary for USD.
Then suddenly Bitcoins deflate 100%, they are worth twice what they used to be. That means you have to cut your prices to half of what they were, or people won't buy from you anymore. However now you have a big payroll problem. Your employees are all making twice as much, effectively. The amount of coins you are paying them didn't change, but the value of those coins did. You are bringing in half as many coins, but still owe your employees the same amount.
So now with volatility like that you'd have to link your peoples' salaries to some kind of index. How much they'd get paid would depend on the value of BTC at the time. You think people would be happy with that? With a drastically fluctuating amount of pay. Also, all you really done then is started to peg their pay in another value, like USD.
All this change in value, no matter what direction, is an EXCEEDINGLY BAD thing for Bitcoin if it is to be a currency. Doesn't matter if it goes up and up and up, up and down, down and down, whatever. If the value changes rapidly, it is a bad thing. That makes it unsuitable as a currency.
If you view Bitcoin as an investment or get rich quick scheme, then this is all great. If you think it is the next amazing currency then this should worry you a lot, because it is not how a good currency works.
Another thing that plays against these bitcoin idiots is that their "currency" is limited, there will only every be 21M bitcoins, who knows how many are out there now, but it's certainly a number small enough for any passing Russian billionaire to play with, especially with 90% of these nerds stockpiling these bitcoins, nay, buying even more in the hopes of becoming fabulously wealthy. Can't take more than a few dozen million on the buy side to seriously impact the market. The best bit about this type of market manipulation is that when you start buying, by definition you are the one buying low. And of course if this kind of manipulation can happen once, it can happen "n" times since as we've said, the number of bitcoins is fixed. Let's see just how stupid these nerds are...
Plus lets completely ignore that these nerds forget that the purpose of bitcoin was supposed to be a currency. As a vendor how the hell am I expected to set my price when the "currency" is changing at a rate of 100% a day? And how is a buyer supposed to decide to buy, when he can get more goods or services if he waits a few hours? There is no value as a currency. I can imagine NO ONE is honoring bitcoin transactions for goods/services at the moment. So what good is bitcoin again? It seems like Satoshi-san's brilliant idea failed to account for good old fashioned human greed. But hey, if he kept some of the initial blocks of bitcoin to himself he's quite likely sitting on a fortune if he cashed out anyway, so what does it matter?
But yeah nerds, blame it on DDoS. THAT is what undid your precious Bitcoin. Hey the price is still good, you could always get out a 2nd mortgage and buy more. If it went up to $260 once, it could do it again! In fact, why not $520!
Seven puppies were harmed during the making of this post.
Money is worth as much as people believe it is. That's how it's always been. Gold's always been valuable, but I don't really see how the practical applications of gold really justify the price. It just appeals to the "Oooo shiny" part of humans so they decided it was valuable which made it valuable.
"Fiat currency is sort of like the relativity of economics"
Oh, please.. Fiat currency is more like the perpetual motion machine of economics. A total scam.
One of the reasons the US is borrowing so much is that the US Dollar is the world's reserve currency and the world really, REALLY wants to buy it right now. Lots and lots of people, businesses, and countries want a place to park their money that they find safe. They aren't looking for big returns, just a place to keep it. Hence the yields are all kinds of low. The 10 year yield is 1.8%, meaning you actually will lose a big on average, since inflation is normally 2% or above (it is targeted at that). Investors are willing to take a small loss in real terms to make sure they don't take a much bigger loss. Even the 30 year note is only 3%. The 2 year? 0.23%. Basically people are willing to take a real loss of 2ish% per year for a couple years, just to protect the principal.
Well, when you can borrow that cheap, is it any wonder the government is happy to do so? Also when you do a bit more research on the global currency situation and the position of a reserve currency, you find some interesting implications of just what would happen if the government wasn't willing to sell securities. It wouldn't be a good thing for the world economy right now if the US government said "Nah we're good, not issuing new debt, go park your money somewhere else."
This is our economy on a micro scale, and the same thing is coming at us.
"If any question why we died, Tell them because our fathers lied."
"The gold standard is completely obsolete."
lol! It's always hillarious when Johnny-come-latelys attempt to poo-poo thousands of years worth of history, claiming "financial innovation" which is just a fancy word for "fraud".
Since:
I would say that your notions about hyperinflation are pure fiction.
The fact that you cite two fictional works (a Tom Holt novel, and a rather dull fiction by Paul) as your only support lends credence to this.
*The CSA, not part of the USA at the time, being in rebellion and all, had hyperinflation in the last year of the war. The U.S. had a short war-related very high inflation period in 1864, but it never experienced hyperinflation - where money essentially ceases to have value.
Second class citizen of the New Gilded Age
Gold's "doesn't rust, very malleable, nice conductivity" doesn't sound like properties valuable after society collapse (also not quite rare, especially taken one by one).
And yet it served quite well as the primary currency for humanity for a few thousand pre-industrial revolution years, so I'm going to go out on a limb and suggest you are wrong.
Do it. Nine times out of 10 or more, I'll bet the attendant will say "Nice try buddy. That's a dime. It's worth 10 cents. Now pay up!"
Are you serious? If you try to cash in a silver dime for it's face value, you would be an idiot. Just like you would be pretty dumb to cash in a gold dollar for 1 dollar.
If you want the gallon of gas, you would first exchange your valuable silver coin for something that the the gas station would accept, most likely paper dollars.
The point is that the silver dime preserved it's value not because it is a dime, but because it is made out of silver.
U.S. government tax receipts are, as percent of GDP, among the lowest in the first world. http://thinkprogress.org/economy/2013/04/08/1834981/the-us-collects-less-in-taxes-than-all-but-two-industrialized-countries/
The difference is that the metaphor is used to bring up images of using wheelbarrows to hold enough money to buy a loaf of bread (see http://www.mises.org/daily/1611 ). But if we just add zeros digitally and index everything, where's the problem? Consider Israel's experience: http://www.jewishvirtuallibrary.org/jsource/Economy/eco5.html :
When hyperinflation hit in the 1970s, the article continues:
But what if "dealing with the daily linkage adjustments and their repercussions" was fully automated, so it didn't drain any time and resources? In other words, no one would have to worry about money except for computer programs, while we got on with our lives.
Bitcoin doesn't have the worlds largest military to ensure its value.
Another thing that plays against these bitcoin idiots is that their "currency" is limited, there will only every be 21M bitcoins
It's not as bad as that. BTC is the wrong unit of measurement here. It's only being used because we are still at the beginning of the BTC inflation ramp. BTCs are divisible down to 8 decimal places, meaning there are 100,000,000 satoshis per BTC. Eventually, at these valuations, prices will be quoted in satoshis (or, if you prefer, decimal fractions of BTC.)
HSJ$$*&#^!#+++ATH0
NO CARRIER
Don't know what your point about pizza is, but the people in Zimbabwe and Weimar Republic Germany certainly understood that while their currency could be measured out in some amount to buy gold, it was an amount below where it was then they earned the money, representing a huge loss of wealth. The reason a static money supply is desirable is to preserve wealth. When the supply increases, wealth is removed and transferred to those who receive the newly created money. There is no need for a growth in the money supply as the value of the money will increase with the growth of the economy, thus no need to transfer wealth to the wealthy. This gradual increase in the value of money is desirable because it discourages malinvestment. When people realize that their money is going to be worthless when they retire they feel pressure to invest. With security in their wealth, then they will tend only to invest in things they understand and thus are more likely to succeed, as opposed to real estate, Yahoo!, Bernard Madoff, etc.
We are well headed towards 70s level inflation as the government has been increasing the money supply at an historical rate. The biggest difference is that now the government even more heavily manipulates the numbers that we use as metrics for economic performance. For the CPI, the lack of inclusion of most things people purchase, such as food, real estate, and energy, combined with what they call the substitution effect, means that the numbers they provide are substantially lower than what the real inflation numbers are.
The history of fiat currencies is that 100% of the time they are ultimately abused by governments to support the rich and impoverish rest. We are on our way there. Labor participation rate has fallen to the same level it was 1979, a time when women were still significantly underrepresented in the workforce.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
Did you know that 50% of all gold inventories in the world today were mined since 1967? http://www.goldsheetlinks.com/production2.htm
Did you know that the US is the world's #3 producer of gold? http://www.goldsheetlinks.com/production.htm
Do you realize that the "inflation tax" has been far less than income tax rates?
The Fed should use created money to help people directly instead of giving it to institutions. Give everyone the choice of a basic income, and hold challenges to stimulate the natural creativity most of us are born with. As long as we keep advancing knowledge and technology, we can create as much money as we want. The focus should be on increasing knowledge, not economics, because greater knowledge increases survival fitness the most, by better enabling us to predict and adapt to sudden catastrophic change.
Like a paper dollar, a bit coin is worth nothing at all. It's only worth what someone will trade you for it. Now with a paper dollar the federal reserve will offer tangible rewards to stabilize the value of the dollar. True there can be softmoney policies or deflationary policies that change its value as well, but those don't do 50% swings in a day. Bit coin has nothing to damp it's value. If everyone collectively decides its going down then nothing will intervene to stop that.
Of course it's possible that in the future some central bank will adopt bitcoin. In that case they would presumably intervene to buy and sell bitcoin or bonds denominated in bitcoin. But right now there's no active buffer like that/
Hence it behaves more like a tulip bulbs or stock speculation in unprofitable but growing internet companies than it does as a stable currency.
Knowledge is best gained in an environment that is economically productive. The greatest productivity has occurred under a gold standard. In the 19th century, the United States went from being a bankrupt, backwater country to a global superpower that produced more than any other nation. If you are truly on a pursuit to gain knowledge, I strongly recommend Henry Hazlitt's book Economics in One Lesson, a book which does a fantastic job at explaining why a gold standard is superior to fiat currency, among several other economic issues.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
Damn, I just started minning today!
People once told me 68K ram was all we needed,
And the value of gold isn't arbitrary?
Some of your argument is interesting, but the idea that something's value is equal to the effort that it takes to obtain/create the thing is certainly not the case. There are lots of things that are very difficult to create and/or duplicate that have no value. If I have my computer hash random strings until I get a hash that includes my name in it, even though it might take 10 hours to do (and would take another 10 hours to duplicate), it doesn't make that random string valuable.
Take two watches
One Rolex - The other Timex
Which one is more difficult (take more time) to create ?
Why that Rolex watch has more "value" than that Timex watch ?
That being said, your argument could still (sort of) work like this: there SHOULD be a cap on the value of a bitcoin.... the $ cost in computing power to mine a new coin.
If Bitcoin is a commodity, and behaves like a commodity, then, the value of Bitcoin can go way up, or crash - just like any other commodity
There should be no "cap" nor "floor" on the price of any said commodity - as the marketplace being the final decider
Muchas Gracias, Señor Edward Snowden !
Anyone think the Fed is doing this? :) Quantitative Easing of the tubes.
I'm not actually how that's different from bank accounts paying interest which happens to be tied precisely to inflation. Having reasonable interest on savings is definitely a good way to encourage savings, but realize that a lot of the people paying close attention to how much money they have have zero savings, so that wouldn't affect them.
Marijuana is not a drug. I used to suck dick for coke. Now that's an addiction. You ever suck some dick for marijuana?
With thanks to Mr. Bob Saget
To be useful in commerce, a currency must be stable,
so that the value of one's [company's] work, products,
or services aren't unduly lost, at the whim of investors.
So, the point is that the thesis was correct
Except it took more time to learn that dime in 1942 than it does today to earn $3.
"If anything can go wrong, it will." - Murphy
It would be interesting to see if someone sold off a substantial amount of bitcoins right before the drop... (I'm too lazy to check the public transaction log)
Here's how I use Bitcoin: I convert a stable currency to Bitcoin, then buy things with it immediately. I accept payment in Bitcoin and convert it to a more stable currency immediately. The exchange rates make no difference to me. Even if it was a million Bitcoins to a dollar, it would still be useful to me.
So there you have it. In a market where investors wouldn't touch it, still has tons of value to folks who just want to buy and sell things without costly wire-transfer fees... So, you're wrong. Now you know, and knowing is half the battle.
No, Bitcoin doesn't have an intrinsic value - the cost you spent to mine a bitcoin is sunk cost, but that doesn't mean that the bitcoin you produce is actually worth anything. (Consider a mathematical problem that requires a similar level of effort to compute - you can do that computation and get the answer, but it won't be worth anything, even though you spent an amount of electricity and hardware depreciation that could have gotten you a bitcoin instead.)
What bitcoins have is utility value, which is fairly independent of the mining cost. The mathematical properties make it somewhat useful for private transactions over the internet, and the market value of the coins usually has enough stability that people are willing to float them for a few minutes to a few days in order to use them to facilitate transactions that do have value. Specifically, that $100 sheet of LSD on SilkRoad costs about $10 to make, so a seller who's willing to accept bitcoins as payment can risk a 10%-50% drop in price (if that happens) in return for successfully making the transaction, and the buyer's willing to risk $100 worth of bitcoin and hope the seller doesn't burn him. (The buyer doesn't have to worry about price fluctuations between buying the bitcoin and spending it with the dealer, because he can buy the coin right before purchase, and if the price goes up or down between the time he sends the bitcoin and the time the drugs arrive in the mail, it doesn't actually cost him any money.)
Bill Stewart
New Fast-Compression-only CPR http://preview.tinyurl.com/dy575ks
your statement tells me that you're not familiar with economics. when there's a fixed supply of currency, the value of the currency *increases* with its demand. so the apparent value - the amount you pay for good and services - appears to go DOWN because you hand over LESS coins for the exact same service / goods.
please read senator ron paul's book. you will begin to understand. ok?
please read senator ron paul's book. you'll see the graphs which show that the actual value of the USD is very subtly going down-hill.
also, did you note the fact that i said that "the rest of the world's currencies are forced to follow suit"? i said "the rest of the world's currencies are forced to follow the same policy".
this means that RELATIVELY SPEAKING, nobody notices what's going on, because the exchange rates all stay roughly the same.
it's only through things like bitcoin - which is a monetary market that goverments CANNOT manipulate [long-term] - that you see the REAL picture.
does that make sense?
well, i tell you what: you believe what you want to believe, and i'll follow my own instincts and make my own judgements, ok? come back in say 4 years and we'll compare notes on how our respective finances fared as a result of our beliefs.
You realize that without "money printing," growth requires private credit expansion, right? You're always going to need some amount of new money unless you want the average leverage to go up into the thousands and beyond, forever.
.: Semper Absurda
The price of oil is determined by Saudi Arabia due to their ability to arbitrarily constrain supply while demand is ever-increasing. And it doesn't matter if Bitcoin depreciates or not, since it is divisible and its value ultimately derives from its usefulness for making private transactions in secret.
.: Semper Absurda
If you still wanna play buying Bitcoins in the UK, directly without intermediators on ebay or other pages (with huges fees) is very difficult , I made this guide with a simple process:
http://howtogetbitcoinsuk.blogspot.co.uk/
Best
People shouldn't forget that the gold coverage of the US dollar was always far less than 100%. The Swiss and French runs on US gold, leading up to the Nixon Shock in 1971, were triggered because the coverage became especially low as new money was being created to fund the war in Vietnam.
"Gold backed" always means "government guarantee," and even in the Middle Ages, state (or ecclesiastical) authority was always required for gold and silver coinage (which was worth its weight).
.: Semper Absurda
The Fed has cabinet oversight. According the Federal Reserve Act, the Chairman is supposed to defer to the Treasury Secretary.
.: Semper Absurda
In the Weimar Republic, inflation served to drive wealth towards real assets and therefore towards those who produced such assets. This effected a recovery - a "re-inflation" - of the German manufacturing sector. Then, once hyperinflation had done its job, they created a new currency based on debt issued by a land bank and backed by real assets. Yes, they could have done this without hurting workers so badly, if they had had superior social insurance.
.: Semper Absurda
I agree with this, however it neglects the actual intrinsic value of Bitcoin, which is its putative secrecy for private transactions.
Putative or not, it is illusory. One might just as well extol Slashdot as a forum with putative anonymity for untraceable comments.
In both cases, practical attacks exist to unmask the parties involved unless special preventative measures are taken. Eg. for bitcoin, laundering; for Slashdot, proxies/VPN/Tor/etc.
Bear in mind that there is a limit to "secrecy" in any system that requires that the ledger of all history of every transaction be publicly available and downloaded by every client. This means that transactions can be traced from a known wallet address through the chain, much in the same way that the US ATF can putatively trace firearms based on serial numbers.
Last I checked (in February) the blockchain data was several GB on disk. Per client. And took days to sync. "Thanks, Satoshi Dice!" (ugh, talk about crapflooding the blockchain...)
The Treasury Secretary does not work for Congress.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
Hey, just wanted to point out that if you ever need a metric to determine when you have become too inebriated to communicate online, then use your post above as the threshold for determining your standard.
Compared to your baseline communication competency, in the post above you have less sophisticated grammar, more frequent spelling errors, somewhat awkward conveyance of ideas, disjointed thoughts, etc.
It's just something I have noticed in your posts from time to time over the years.
HTH.
This is also why money should NOT be made of anything valuable. The moment the materials value exceeds the face value of a coin their usability as a instrument of trade vanishes as they become barter items instead of debt notes. That's why gold as money isn't a good idea. It creates a situation where ten 1 dollar silver coins isn't exactly the same as 10 dollar paper note. Not good.
Bitcoin and dollars aren't that different really. Most of both only exist in some computer somewhere. Both can have physical manifestation ( coins, paper, usb stick with wallet file ). Miners create more bitcoins, fed creates more dollars. Dollars will die in a inflationary spiral, bitcoins in deflationary one.
The dollar used to be a receipt for a certain amount of gold that you owned in the federal reserve
And gold is only valuable because someone says it is. In a societal collapse, abount the only currency would be ammo, food, shelter, and medicine. "Just a piece of paper" isn't appreciably different than "just a chunk of gold" in that regard.
I like the sociaetal collapse scenario when trying to find the real value of something. I believe durable hand tools would also have some value. I also think clothes would go up in value as time goes by, as they break easily and are surprisingly hard to create in "end of the world as we know it" scenario. Medicine would be super valuable. Impossible to create. Weapons would be valuable at first, then when the ammo supply runs out and people move back to bows and crossbows would become worthless. Food, water, and warm shelter are the things that are the basic pieces of any valuation, if you don't have those they will increase in value to you until you die, or until you get them somehow. You will kill for them, you will steal for them, you'll pay everything you have for them.
Or you could try the scam that the guy in Vegas did by paying his employees in Golden Eagles, which are stamped at $1, but has a value of like $1200. The IRS was none to pleased at this, as he was trying to skirt tax laws.
If you have to go through all kinds of hoops and machinations to prove that something is correct (like Bitcoins mean a damn), there just might be a chance that your original hypothesis was a bit flawed.
Vote monkeys into Congress. They are cheaper and more trustworthy.
Yes, I'm quite aware of that and yes, you, missed the point rather hard.
So WHO is a fool enough to buy anything except dire necessities today if tomorrow he has to hand over LESS coins? Why buy it tomorrow if a day after tomorrow he has to hand over LESS coins - guaranteed? Looking at it other way, you're losing a fraction of tomorrow-coins every time you buy anything today. How long should I hold out for my purchases, given that my wages are dropping to keep them in line with rising value of a coin?
Who is a fool enough to take out a credit to start a new enterprise if you'll have to pay back in currency that's worth more than it was when you took it?
Please, don't just point back to Ron Paul, tell us what you understand.
It might also be because we havn't mined massive amounts of silver since then.
Or because no cultural changes have lowered our demand for silver.
Ultimately the value of bitcoins, dollars, silver or gold is not zero, but is determined by the goods or services you can easily achieve in exchange of these. The overall exchange rate between goods and currency is determined by the sum of trust and expectancy each person has to the currency. Print more notes, mine more silver or discover that some strange quantum effect will make gold atoms decay into some useless other element during 2013 will lower this rate.
make that, medicine and food
everything else is inconsequential
Do it. Nine times out of 10 or more, I'll bet the attendant will say "Nice try buddy. That's a dime. It's worth 10 cents. Now pay up!"
Are you serious? If you try to cash in a silver dime for it's face value, you would be an idiot. Just like you would be pretty dumb to cash in a gold dollar for 1 dollar.
If you want the gallon of gas, you would first exchange your valuable silver coin for something that the the gas station would accept, most likely paper dollars.
The point is that the silver dime preserved it's value not because it is a dime, but because it is made out of silver.
No, the point is, that unless you take it to the proper exchange point, a dime is worth a dime, because that's what people say it's worth, just as a dollar is worth a dollar and there are a lot of "idiots" out there. In terms of legal tender, the age and silver content don't count.
I convert a stable currency to Bitcoin, then buy things with it immediately. I accept payment in Bitcoin and convert it to a more stable currency immediately. The exchange rates make no difference to me.
This works if you replace "immediately" with "instantaneously". Otherwise you are taking a risk on the exchange rate during for the time it takes to perform the conversion which (to return to the original topic) may be some time if there is a DDOS attack on the exchange.
Why pretend to be so stupid, it's not going to work. Everybody reading this will have swapped something for another thing without money changing hands a few times in their lives. My last effort along those lines was renting a forklift and driver with beer.
First, there is no intrinsic value in BitCoin.
Second, the BitCoin is a currency. Check Wikipedia for definitions of currency and commodity.
Third, the value of BitCoin is, like any other currency, defined by the habitability of buying products, services you want. Other for a currency uses are valid like speculation or value retention but the main use (by population percentage) is for buy products and services. (Dollar has a lot value because oil is most trade in dollars.)
Fourth, BitCoin is not backed by anything. Dollar was backed by gold a few years ago, but either way BitCoin is not backed.
Fifth, BitCoin value can me estimated like other currencies by the number of BitCoins required to but other currency AND products and services.
Sixth, BitCoin is way more controlled than other currencies. The difficulty of creating euros in a bank is almost zero, is just a account record stored in computers memory (in doubt check how money volume is counted). BitCoin has/should always be validated against BitCoin blockchain, the currency on your bank is not.
Seventh, BitCoin does not provide anonymity. All transactions logs and accounts used are broadcast.
"To be useful in commerce, a currency must be stable..."
There has been explosive growth in the amount of commerce being conducted via bitcoins. I think it's way too early to pass a final judgment. Due to the fact that the supply of bitcoins is capped, it should stabilize in price. Unlike Federal Reserve Notes which can be arbitrarily created. I attribute the Bitcoin volatility to the fact that this is a new phenomenon. The increase in the number of goods and services that can be swapped for bitcoins can only drive up the value. The recent run-up in the BC/USD has also attracted speculators.
What sort of time frame are you talking about when you say "stable", and in terms of what? The USD has lost 95% of its value over the past 100 years. The EUR/USD has ranged from 1.25 to 1.50 over the past 2 years. Does that constitute "instability"?
I'm taking a "wait and see" approach. Still, I think that any transaction conducted with Bitcoins is a thumb in the eye of the banking cartel and their money monopoly, so I applaud the new popularity.
in 1942 Cost of a gallon of Gas 15 cents, Coca Cola 5 cents Average Price for a new car $920.00
So no, it wouldn't have bought a gallon of gas, but it wold get 2 bottles of coca cola, unlike today.
you would need 9200 of them to buy a house. If what you said was correct(it isn't) the average house would 18,400 dollars today.
I'm more interested in how you turned a car into a house... some sort of RV, perhaps?
If one is going to trade in their USD for anything [excluding food and rent], buy silver and gold.
That is all.
Just investors dumping BTC because the price skyrocketed....
Same thing happens to the stock market.
Nothing to see here.
which show that the actual value of the USD is very subtly going down-hill
Your currency subtly goes down hill? That's inflation. Goes to hell in a hand basket? That's hyperinflation.
All good as far as I'm concerned. I sold a few (3.67) for about $875 in, oh, 3 seconds on Monday, and received my wire transfer of USD to my bank account as of close of business yesterday.
Yeah, I've heard people talk about "taping" a show on their DVR. :-P
Slow down, cowboy! It has been 4 hours since you last posted. You must wait another few hours.
I heard somewhere that after the collapse, the primary currency will be toilet paper. I'm stocking up.
suffering from pronoia
A slight inflation on currency is desired by a currency issuing state. It encourages investment. And there's nothing like (de)flation to stop an economy in its tracks. Your dime example is flawed, silver is just an arbitrary substance just gold and just like paper. Anything of value is worth precisely what two parties are willing to agree on during trade. Nothing more, nothing less.
Over the last 20 years Knapp's State Theory of Money (also called the chartal theory of currency, well stated by you and still taught in Economics classes nearly everywhere) has been empirically disproven by the continued existence, acceptance and convertibility of the Somali shilling within recognizable free markets. See Luther & White (2011). Somalian currency is not permissible for tax payment anywhere in the world, but you can buy food with it so it is money and has value.
There's a lot to ponder in regards to the reasons chartalism turned out to be wrong - I don't think anybody's proven the why of it - but it's definitely been proven wrong. See here for a somewhat Austrian-slanted but interesting discussion of unbacked fiat currencies with a focus on Somalia.
http://www.fdic.gov/about/srac/2012/gsifi.pdf
Resolving Globally Active, Systemically Important, Financial Institutions
A joint paper by the Federal Deposit Insurance Corporation and the Bank of England 10 December 2012
The above is a plan published by the FDIC to save failing banks by "bailing-in" the money in customers' savings accounts, just like they did in Cyprus where lots of people lost their life savings.
Like dollar, bitcoin should be pegged to OPEC oil.
https://en.wikipedia.org/wiki/Nixon_Shock
Casteism
Kinda hard when the conversion price of bitcoin can changes by 2% in less than a second. Let alone all the transaction costs. Good luck with that.
-Matt
"whiner bitches" == "Materialistic people"
The downfall of your "mentality" will be painfull for you, and for those you "manipulate" around you...
This currency will bring alot of changes...
Be Free!
CLOUDFLARE?
Somalian currency is not permissible for tax payment anywhere in the world, but you can buy food with it so it is money and has value.
You appear to be right about taxes not being the only necessity of life that gives a currency value. Somali shillings are a private currency for the same reason that Canadian Tire dollars have become a private currency. But where can one buy food and shelter with Bitcoin?
Gold is of little practical use in a pre-industrial environment. It has been valuable for thousands of years due to the incredibly persistent belief that it's worth something. It's not useful to produce food, but if a farmer thinks gold is valuable he'll be willing to trade food for gold. It's no different from dollars in that regard (except that dollars have the intrinsic worth of being necessary to pay taxes), only more so.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
It has been valuable for thousands of years due to the incredibly persistent belief that it's worth something.
Why would that belief arise in a pre-industrial world? Why would it persist?
Gold is sufficiently rare, and sufficiently easy to work with. It is non-toxic, doesn't rot, rust, evaporate, or otherwise deteriorate, its reasonably stable and easy to store. And on top of all that it isn't particularly useful for building any essential pre-industrial weapons or infrastructure.
Gold is of little practical use in a pre-industrial environment
It is literally a "naturally occurring currency".
Between these natural characteristics and historical momentum any post-collapse civilization is all but guaranteed to use gold as a currency, at least for a time.
(Sure it will be of little practical value in areas of full on apocalyptic anarchy, but anywhere that's stable enough to warrant any sort of economy will need a currency. Straight barter will only get you so far. Iron is both too plentiful and rusts. Food is heavy and rots. Fuel is volatile, toxic, and difficult to move and store. Likewise ammo degrades over time - sure it stores well in a "cool dry storage container" ... but individual bullets pass around as currency, getting wet, dirty, thrown around, left in the sun...? Forget it.
The US went from being a bankrupt backwater to a wealthy superpower because it developed the infrastructure necessary to exploit its substantial resource wealth on a large scale (particularly railroads, but also oil), amidst IP laws that mostly looked the other way when American companies infringed upon foreign patents, and large-scale immigration that was an abundant source of cheap domestic labor.
Under those conditions, the US could have declared its currency to be backed by dogshit and gotten away with it. If anything, backing Dollars with dogshit would have been preferable. The gold standard *caused* at least two major depressions during the late 19th century, because the value of (and demand for) American goods & services exploded while the amount of gold in the possession of the US Treasury remained mostly constant. At least the volume of dogshit tends to increase at a linear rate over time... daily input correlates to daily output. ;-)
Real estate ownership isn't all it's cracked up to be. Remember, owning land (and buildings on it) has ongoing costs of its own... taxes, maintenance, fines for code-enforcement violations you might have never even been told about, etc. Yes, you can grow crops on farmland... and the break-even point where you've grown food with enough value to offset its acquisition and ongoing cost is a couple of decades down the road.
It's also questionable whether classic hyperinflation of freely-convertible currency could even happen anymore absent structural market problems due to something like war. In the past, part of the fuel behind hyperinflation was anticipation of higher prices caused by non-realtime pricing information. Stores marked things up in price on the assumption that they'd sell out anyway regardless, and would cost more to replace. People paid more because they didn't have time to spend their lives comparison-shopping. We now have the equivalent of reverse-arbitrage, courtesy of price search engines and vendors like Amazon.
The most likely outcome of future conditions that, in the past, would have led to hyperinflation is a scenario where traditional retail gets destroyed, and a few vertically-integrated vendors like Amazon open warehouse stores where you do your shopping online, pay electronically, then go to the warehouse and spend the next 5 hours trying to find the stuff you paid for strewn around the store (80-90% where it's supposed to be, and another 10-20% in various states of disorganization, damage, or non-virgin packaging, forcing you to decide whether to take the ones you found, or get the purchase price credited back and take your chances that tomorrow, it might cost more).
Goods with short shelf-lives and inelastic demand would tend to be very expensive, but goods with long shelf-lives or highly-elastic demand might even be cheaper than they are now. Bundle-pricing that practically forces you to buy stuff you don't really want is likely... you might prefer Viva paper towels over Bounty Basic and want 2 rolls, but if Bounty Basic costs $2/roll in pallets of 20 when purchased with a pallet of Charmin Ultra, but a single roll of Viva paper towels costs $7.49 (vs $5.99 for a single roll of Bounty Basic if you don't buy the whole pallet or buy it together with the pallet of Charmin Ultra), you're pretty much stuck with buying a pallet of $2/roll Bounty Basic whether you prefer Viva and/or smaller quantities or not.
Are you joking? Is that supposed to be a joke? You think that explosive growth in commerce using a 'currency' which can't be expanded to fit that growth leads to stability?
Your comment regarding the USD indicates just how ignorant you are about what a currency is supposed to accomplish. If I sell something and get paid in dollars then I can be fairly well assured that as a store of value, those dollars will be quite stable for the few months they remain dollars, before they get invested (or spent) somewhere else. That's the purpose of a currency.
Currencies are not supposed to be used to store value in the long-term, let alone for 100 years. Why should you be rewarded for letting your cash rot verses someone else who invests it or cycles it back into the economy instead?
Now lets see how Bitcoin stacks up. A virtual commodity that isn't a currency, highly unstable with no stabilizing factors, can't be used to store wealth for even a few seconds without potentially losing its value. Deflationary and thus subject to hording and the fate of all other private currencies in history (that is, complete failure).
Did I miss anything? Oh yah, the EUR/USD exchange rate... only problem there is that the US has not seen any significant inflation, meaning that goods and services cost about the same so why should I care what the exchange rate is? I'm not taking any vacations anytime soon. Besides, the ECB is printing almost as much as we are, they are simply disguising the printing as 'loans' which nobody actually believes will ever get paid back. Europe's economy is in a huge mess because of their attempt to hold the value of the Euro constant.
How is something like Bitcoin supposed to react to a major recession or depression? You do realize that the dollar's peg to gold lengthened the great depression, don't you? It wasn't a good thing, and neither is Bitcoin with its built-in deflation.
For currencies, the most important event right now is what the Japanese are doing. They are basically forcing a very fast devaluation of their currency to boost commerce and clean up their massive debt. Japanese with their money under a pillow or sitting in a bank account are getting screwed. Even there, a Japanese citizen could be invested in Japan's stock market to essentially become immune to the devaluation, if he or she desired.
Which leads to another point regarding currencies and governments fleecing their own citizens: There are plenty of ways to protect yourself from currency devaluation already. Bitcoin is *NOT* one of them.
-Matt
Only problem here is that at least so far as Bitcoin is concerned, a Bitcoin is NOT a store of the energy it took to produce it. Oops. It's like expending effort to play a video game... all you are doing is adding to the entropy of the universe, that doesn't mean that your effort is worth anything down the line to other people.
-Matt
The gold standard caused no depressions. Read up on it. Take a look at the very minor increase in the value of the dollar over 100 years. If the amount of dollars in circulation was substantially too small, then the value of the dollars would have increased dramatically. This did not happen, which destroys your entire argument.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
Value is what people give to things, not what things inherently have.
So modern economists claim. And yet, a litre of drinkable water is still a litre of drinkable water in every human civilisation from ancient Ur to the International Space Station, and has kept exactly the same intrinsic value to the human body over 10,000 years.
Does your economic model account for physical and biological reality? Because physics and biology don't care about economics.
You are not a brain: http://books.google.com/books?id=2oV61CeDx-YC
You're understanding of the dollar is laughable, at best.
" but there is no limit to the amount of dollars the government can print."
Not true in in practical way, but common statements from the ignorant masses.
This is probably a nitpick on top of a nitpick.. but you did lead off with this statement.
It's true that the Federal Reserve can only print a finite amount of money at any given time.
But, it (the thing known as the Federal Reserve) creates money electronically that never needs to be printed. It just changes the numbers in the computer. There is literally no limit to the amount of "money" or float that can be created.
Granted, there may be some psychological limit..
But just like gold was abandoned as a literal backing of U.S. Dollar.. the actual physical bills have been abandoned as a backing of the currency too. (It would be sort of stupid to try and ship all those bills around anyhow.)
Only ideas back the U.S. Dollar.. (that.. several hundred million people living here.. and some bombs, ships, tanks and guns and whatnot.)
And really.. oh, your mind begins to melt when you try to think of notional amounts of derivatives outstanding. Random banks and hedge funds just write a legal contract and will more money into existence.
Anyhow, the only limits are mental..
In the Weimar Republic, inflation served to drive wealth towards real assets and therefore towards those who produced such assets. This effected a recovery - a "re-inflation" - of the German manufacturing sector. Then, once hyperinflation had done its job, they created a new currency based on debt issued by a land bank and backed by real assets. Yes, they could have done this without hurting workers so badly, if they had had superior social insurance.
Oh yes, absolutely! If only the National Socialists had come to power earlier. They would have provided social insurance for all of the German workers. Especially government workers. And especially the military. Then the hyperinflation would have been good. All because the Reichsbank would have printed even more money in order for people to redeem their insurance.
I feel so stupid that you came up with such a brilliant solution before me!
"The illegal we can do right now; the unconstitutional will take a little longer." --Henry Kissinger
It took 220 years- from 1776 until 1996- for the US Treasury to ink $5 trillion worth of debt.
It took the Obama administration and an obsequious Congress less than 4 years to ink $5 trillion worth of debt.
Any questions?
p.s. those dollar figures are inflation-adjusted
"The illegal we can do right now; the unconstitutional will take a little longer." --Henry Kissinger
Just wanted to clarify, as the implication was that the Fed is not part of the fed, because it is. Congress may make any change it desires in the nature of the US money system through acts of law.
Also, I have to say your understanding of QE is incorrect. QE does not add "new" money, it just creates an asset swap of one interest bearing debt instrument for another (albeit with a lower interest rate). The net effect is to decrease interest income to the private sector, and to decrease the primary federal deficit by the same amount (as those interest payments are now made to the Fed and then returned to the TGA).
TL;DR: securities are money. If you had $100 million in US securities you would not be poor. Fed insiders even refer to them as "securities accounts" because they are directly analogous same as a savings account in a regular bank.
.: Semper Absurda
So your argument is that only Nazi's provide social insurance?
Look, when there is high inflation, you spend your money, as much and as quickly as possible (Weimar workers would get paid daily before work and go shopping immediately). The producers of real goods therefore rake in tons of money - which they also must re-invest as quickly as possible. Thus inflation can play an important role in recovery from a demand shock.
My quip about SI was just to say that if the government had engaged in further redistribution during this period, it might have been less traumatic for workers, who might then have been less receptive to Hitler's message of German empowerment. On the other hand, it would have been difficult to pull off, as the French were occupying industrial areas to collect reparations in real goods. The point about the Rentenbank is that the hyperinflation was actually stopped over a period of just a few months as the new, stable, land-backed currency was introduced. Actually, the economic stabilization did force Hitler's reformed Nazi Party to obtain power via existing political structures rather than violent overthrow, as they had planned initially. But - still not relevant to the effects and resolution of the inflationary episode.
.: Semper Absurda
Oh, so from which depositor's bank account was the QE money withdrawn?
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
Value is what people give to things, not what things inherently have.
So modern economists claim. And yet, a litre of drinkable water is still a litre of drinkable water in every human civilisation from ancient Ur to the International Space Station, and has kept exactly the same intrinsic value to the human body over 10,000 years.
Does your economic model account for physical and biological reality? Because physics and biology don't care about economics.
You don't make sense. The topic was the value of money. With emphasis on the US Dollar. How much money would you pay for a liter of drinkable water:
A) If you live next to a Perrier spring (Perrier literally "mines" water from a place not all that far from me).
B) In the middle of the desert at mid-day
C) On a raft with a tiger in the middle of the ocean.
OK, forget the tiger.
Water is water. But how much people are willing to exchange for it (which is the very essence of value) is not an absolute. In fact, Perrier - among others - makes a business out of that difference.
It appears that more an more evidence is surfacing that there have been DoS attacks much like you said, although I wonder if they were truly distributed attacks and not just a few guys with a small number of trade bots. Mt.Gox has admitted that some of the crashes were due to huge amounts of legitimate trading.
By the way, Mt.Gox must have been making about $50,000 per day in revenue the last few days, if I'm not mistaken. I think Mt.Gox is about to get some serious competition soon.
I can define myself to be the Queen of Sheba. It won't give me tits or put a crown on my head.
If I invent DigDollaz, and "design into them" that you earn them by digging holes and filling them in again, what value has been created?
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
pays out every so often. All that's happened here. Soon it will be comepletely gone because well who has a super computer to make enough coins to be worth it?
I used to be
Depositors at the Fed are other banks, local and foreign governments, etc. To conduct QE, the Fed marks up a depositor's reserve account (0.25% interest) and marks down the security account (a bit higher interest rate) by the same amount.
The "QE money" comes from their securities/savings accounts. Again, securities are money. Like money, the securities represent a government debt. Like money, the securities are highly liquid and can be used to make purchases.
Operationally, securities are exactly the same as a savings account. If I get money which I don't want to spend, I put it in my savings account. This represents a liability or debt of the bank to me, but if I decide to spend the money, I just transfer it back to my checking account, and the bank liability is redeemed. With QE, it's as if the bank is forcing me to make this transfer. My net financial assets are unchanged, but my interest income is reduced. Therefore, QE is deflationary to the extent that those interest payments (which really are new money) would have been inflationary.
The final point is all the interest payments that get made to the Fed (now that they own all these securities) get handed over in turn to the Treasury. This reduces the federal deficit; essentially, it's a tax on savers' interest income.
So QE has these effects: 1) reduce private sector interest income, 2) encourage further bond buying and lower the Treasury rate (thus slowing increase of federal debt), 3) reduce interbank rate IFF there are creditworthy projects to invest in, 4) encourage purchases of interest bearing assets (hey look, a stock market rally) and finally 5) reduce federal deficit (increase revenue by same amount as in pt. 1.).
.: Semper Absurda
Rubbish. "Backed up by" doesn't mean "caused by" or "created as a reaction to". Are antibiotics backed by bacteria?
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
It's definitely not an ocean, a moon or the floating head of Ayn Rand.
You realize that without "money printing," growth requires private credit expansion, right? You're always going to need some amount of new money unless you want the average leverage to go up into the thousands and beyond, forever.
Do you realize that the period of greatest economic growth in the us was during the industrial revolution? They had gold back there, and what happened was that prices kept going down, because productivity increased faster than the supply of money. This is a _good_ thing, as the cost of living goes down as productivity increases.
It is only Keynesians and governments that tell you that lower prices are bad. Usually the argument is that if prices go down, people would not buy anything. This argument is ridiculous in it's face for 3 reasons:
1) We all know that cell phones, computer prices and tv's go down. You can expect them to be lower next year. These items by no means are essentials. Are people buying them? of course. Is it possible that someone delayed purchase of a computer waiting for a better price? yes, so what? if you delayed a purchase today, the guy that delayed yesterday buys it anyway. And this sector is thriving, this is not a problem. If money supply remained constant, this effect would be the same on all sectors just at different speeds.
2) The argument completely ignores the time preference of people. All else being equal, normally an item is worth more right now than in the future, therefore it is only logical that there is a price difference between now and the future. By devaluing the currency, the government distorts and interferes with the time preference of people, and pushes them to purchase right now, when their preference was really to purchase later.
3) Devaluing the currency destroys the incentive for saving. Saving is the lifeblood of the economy (not spending). Without saving there can be no investment, and no growth. An economy only grows if it saves more than it spends, if you spend more than you save, then you are shrinking and you are going broke.
And silver is valuable why exactly?
For several reasons:
1) It has some actual industrial uses.
2) Silver and gold were chosen by the free market as money. The dollar was forced upon us by government. First they forced everyone into paper in 1933 and confiscated all the gold, with the promise that each dollar was equivalent to 1/20 ounce of gold. Once all gold was confiscated, they defaulted and lowered the value of the paper to 1/35, then on 1971 they defaulted again and make it 0.
3) Silver and gold just like bitcoins have a limited supply
4) Gold does not rust
5) Gold and silver are very hard to counterfeit
6) Silver and gold were valuable much before they were currencies. The were highly valued as jewelry and for religious ceremonies.
7) Silver and gold have a supply that is not too high or too little giving them an ideal value for a coin.
For these properties, gold and silver superseded all other commodities as currencies and were chosen by people to be the reserve currency of the world. Up until the government hijacked it and forced everyone into paper.
It is flat-out impossible for all of us to save more financial assets than we spend. Government debt issuance directly funds the savings desires of the private sector. If the government does not issue new debt / money, the quantity of private sector savings cannot increase - except via increased bank leverage. The assumption that all savings is investment is wrong; whatever is invested is by definition not saved.
Deflation is bad because wages and some other prices have downwards nominal rigidity (it's hard to cut wages). If products are getting cheaper, labor has to get cheaper, too, or else people are going to get laid off. This is a problem for us, because we want these people to support themselves via private sector job markets.
If you want to understand gold-based and gold-backed currencies (different things obviously), you should read a bit about how such currencies functioned in ancient Rome and ancient Sumeria, and during the Middle Ages, and before the industrial revolution. There is a reason why European countries would often rapidly switch between gold and silver standards, and there is a reason why all advanced countries had to quit the gold standard. Ultimately, the quantity of gold could not keep up with private sector savings desires, so new forms of money based on government debt were developed in order to satisfy those desires. Financial constraints imposed via monetary policy hardly require gold - look at today's Euro, the Volcker Shock, etc.
.: Semper Absurda
All fiat currencies in history since the roman invented them have collapsed. Only to be replaced by gold and silver. They always end up the same way: government starts printing a lot of it until hyperinflation kicks in and people abandon it in favor of more stable alternatives. The current fiat currency is strictly speaking only 40 years old, and if history is any indication, it is destined to fail.
It is perfectly possible to save more than you spend. Simply because people do not save money, they save capital. Meaning, they invest the money, the accumulate stock, open new companies, accumulate commodities, etc. The amount of money is irrelevant so long it remains constant. People are not richer because there is more money, they are richer because there is more capital.
There is a reason gold has been the currency of the world for thousands of years, and has always come back after every failed fiat currency.
Here are just a few samples of how failed this system has proven to be. It isn't hard to find hundreds more.
Gold is a fiat "currency" (actually, it is a commodity like any other, desired only because of its uses). There has never been a gold coinage which has been widely accepted without some form of state authority. A clear example of the failure of gold-based currencies is found in Western Europe in the early Middle Ages (c. 700 AD); not only was gold refused as payment when taxation ceased, but when coinage became more widespread once more (silver denarii, c. 1000) the people were constantly switching currencies in order to follow the trusted sources of authority. Moneyers who came under the sway of "immunists," feudal lords who had one exemptions from the crown, saw their coinages abandoned.
Gold-backed, rather than gold-based, currencies require an even greater involvement of state authority. The "backing" invariably consists of a government guarantee (indeed, since Sumerians first used gold-backed bronze coins), thus the government gains control of the coverage ratio.
With respect to savings and investment, you must dissave money in order to acquire physical capital. If your investments still get to count as money, well, that is private sector leverage right there. It's fine as long as private sector leverage can increase - but of course this leverage is exactly what leads to inflationary bubble markets. The problem with the neoclassical view is exactly that the neoclassical model you implicitly espouse does not differentiate savings and investment.
.: Semper Absurda
That is incorrect. Gold is not fiat, fiat means "by mandate". Gold is a commodity currency chosen by free markets. It was a currency before any government existed. Even in countries without government gold was the currency. Government's _hate_ gold as a currency, because it restrict their ability to create money to finance their doings. However people like gold for the exact same reason. Other commodity currencies have existed: cows, cigarettes, rocks, leafs, diamonds, you name it. Gold and silver beat all of them and became the world's reserve currencies because of it's physical properties, nice value/weight ratio and ideal scarcity.
In fact, the dollar existed before government adopted it as money. The government looked around searching for what was the most often used and most reputable coin, and found the silver dollar.
Initially, gold and silver were simply stamped to declare that it had some specific weight. But this failed because people just cut off bits of it around the stamp. So people came up with a way to put a stamp all around a piece of gold to prevent this, and this became the coin. Further improvements like milling the edges prevented people from filing around the coin. This was all done by entrepreneurs.
Gold-backed does not require government involvement at all. Before the federal reserve, you could go to the bank with your gold, deposit it and they would give you a bank note in return. You could exchange the bank note for goods, and the carrier of the note could go to the bank and redeem it for gold. The government was not involved in this. There is a complication with gold-backed currencies, which is fractional reserve. If a bank prints too many notes, more than they have gold for, and people get wind of this, they can get their gold out and bankrupt the bank (this is known as a bank run). So the free market can and does get rid of banks that do this, and people naturally adopt the bank notes from the most reputable banks. This is exactly how the paper dollar came to be, as a bank note from the federal reserve. The government gave the FED a monopoly and prevented other bank notes from being used. Having the monopoly, they did print more notes that they had gold for, and eventually defaulted and stopped redeeming the notes. If other bank notes would have been available, people would have simply switched, and the FED would have had a limit to the amount of fractional reserve they did.
Also note that the dollar is not the first fiat currency in America, the previous one was called the continental, and went to 0 like all fiat currencies do, only to be replaced by (you guessed it) gold and silver. We are merely repeating an already failed experiment.
With respect to saving and investment. Money is just a tool, that facilitates exchange between people. Saving does not mean saving money, saving means accumulating capital. Leverage is not required, an investor simply accumulates capital by buying stock, commodities, machines, etc... It is perfectly fine (and natural) for the amount of capital in the country to increase, yet maintaining the amount of money the same.
The real industrial value of either silver or gold is negligible, when compared to its price. It is as susceptible to market manipulation as any other currency. If it was not backed up by the governments, its "free market" value would have been almost zero.
May Peace Prevail On Earth
Sorry, but even a cursory study of history reveals that there has never been a currency other than informal debt systems without the imposition of state authority. Gold has no special value; unless governments are collecting taxes in gold, rather than "in kind" (i.e. as land output), gold coins are not used for transactions. Indeed, why would medieval farmers producing ~1.8 person-years of food per year, accept gold, unless they can use to pay taxes or others are already accepting it? I recommend Peter Spufford's Money and its Use in Medieval Europe - check it out from the library and make your own conclusions, but don't just assert ideological conclusions as facts.
If physical capital grows while the money base does not, then the money supply is decreasing. The absolute amount of money may be unchanged, but the effective amount goes down. The result is worse and worse income inequality in a context of ever higher interest rates (interbank and treasury). Eventually, currency availability is insufficient for everyday use and economic agents revert to barter, informal debts or form new currencies which are weak enough to be useful. This process is exactly what led to the decline of gold as a medium of exchange in Western Europe during the Middle Ages.
.: Semper Absurda
I recommend the origins of money by Carl Menger. Here you can have it for free.
It explains exactly what you are asking: why a farmer would accept gold as method of payment with or without government, and how a society naturally goes from barter to adopting gold (and other commodities) as money by simple voluntary exchanges.
Mises then elaborates on this by explaining interest rates time preference and inflation, though Mises is not entry level material.
A counter example of your "tax" theory: Ireland had no government between 700 and 1700, and their currency was gold.
You can make up as many rationalizations as you want, but the archaeological fact is that gold was extremely scarce in Europe by the 700's, primarily due to balance of trade. For a time, the Europeans were able to trade slaves east to Byzantium and Arabia in exchange for gold, and indeed except for Byzantine nomismata (solidii) and Arabian mancusii (dinars), themselves scarce, there were essentially no gold coins in Europe.
Coinage didn't take off in a big way in Europe until after the tenth century, when the silver penny (denarius) became widespread. At one time, there were as many as 500 independently operating currencies within Western Europe, each stamped by a particular mint. These did not trade at unity; since common folk could not assay metals, a putative silver (or gold) coin was worth only the trust given to the name or sign stamped upon it.
Your claims about Ireland are a bit absurd. The many feudal lords and the church all exerted significant "state" authority in Ireland during the Middle Ages, including the power to tax. Many of the medieval mints in Western Europe were operated by the church, which was no less a government then was the Carolingian Empire.
If you want to read about classical growth theories which actually have predictive capacity (unlike those you follow, which predict equalization of income across all counties) I suggest you read Robert Lucas. That's actually not entry level material though, and multivariable calculus is required.
.: Semper Absurda
Sorry, I don't read chicago school economics or Keynesians. I might as well read witchcraft lol.
If you wish to read actual economics, I suggest another nobel prize winner: Hayek, or the more recent Rothbard.
Your analysis on how coinage came to be is correct, and it was done privately, not by governments. Coinage did have a big impact in the adoption of gold and silver as currencies.
Mises, "human action" does a much better job than Robert Lucas about predicting and explaining recessions, and does not resort to imaginary math models that don't apply to real world. You can also get that for free, but it is a hard read.
I see you have swallowed the Keynesian pill. You need to read outside the narrow band of Krugman-approved scholars to even begin to understand why what you stated is nonsense. Money is being created to make the QE payments. It's as simple as that.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
Oh dear, someone is following the political propaganda tank that pretends to be the Austrian school of economics. University of Chicago *is* the Austrian school, the real one. The one where all the Austrians fled Nazi Germany and lots of them found their way to Illinois. After all, Hayek was an integral professor at U of C.
The math of neoclassical economics, Chicago, Keynes, etc, really all came out of the Austrian school anyway--at least Menger's theory of value and price. That's the sad part of today's Austrians, they don't actually understand their own history. The whole point of the Austrian school was that it was supposed to be "scientific" and "mathematical", the physics of social science, with immortal theories that stretch space and time because they are part of the fabric of reality. So when I see today's Mises followers, I cannot help but cringe. They take the political conclusions of the 19th and early 20th century folks, who were never really arguing this stuff anyway, and disregard the actual economic theories.
It is funny though, when the original Austrians and the Chicagoans met for a summit and Mises called Friedman a socialist. But by that point Mises was obsolete. Menger, the father of neoclassical economics, had been fixed up by Keynes who in turn has been fix by many others. (Really, the break was Marshall. Marshall fixed Menger, by writing almost the exact same material only better. Keynes was two academic generations later, directly from Marshall). Rothbard's work was theoretical porn based on the idea that all humans are self preserving profit seekers. It is interesting to see the logical conclusions of the first neoclassical Austrian premises so that we know they are totally bunk. The first person with that theory said for that to work it required a big, giant whale to be the untouchable, unquestionable sovereign. Hobbes.
Why do I bring this up?
Because appeals to the Austrian school ala Mises.org is not economics. It is an identity, and identities are not truth.
So back to currency:
I find it curious, paulpach, that you keep almost making the point. Money is fictitious, a social accounting measure, but you don't take it to its conclusion, which is that since it is so, it should be done unconstrained by arbitrary agents like metal. You said it yourself "people chose gold and silver because it had the right level of scarcity". Absolutely. And per capita income before the commercial revolution in europe, particularly before the industrial revolution, always Mathusianally crashed back to $500 of 1990 USD, or so. Population growth was minimal. And then wealth and population exploded, and the distance and speed of trade exploded. Can you actually say something with the "right level of scarcity" is still true to today? Dear, that is a faith based view.
You repeated that governments with fiat always defaulted. Aside from the correct statement that all currencies are degrees of fiat, and that state power always dictated the worth of coinage, there's a popular book out called "This Time is Different". The authors ultimately failed in their assessment, but had a key point:
All governments with high debt defaulted. Wait, no, it was all governments with high debt that wasn't true fiat. Nearly all governments will eventually need to take on high levels of debt. The only ones that default are the ones that run out of money. The only ones that run out of money are using bullion or pegged currencies or owe money in currencies not their own. As long as a government has the sovereignty to tax, and has fiat, it can never default.
Now, you are correct that the highest growth in the US was during the gold standard, 1890-1913. This is partially because of gold, but partially in spite of it. We also had the longest economic recession thanks to gold, from 1873-1879. And we had a general economic malaise in many ways in the interceding years.
The second highest growth was during 1948-1965. Also the days of gold. But it was
I read that book long before I was educated in economics, and even then, twenty pages in, I had stumbled across two errors so large it undermined the entire thesis. I can only remember one of them, which was that he stated "supply is demand", which is a dangerous economic premise to operate from. It's so tastily close to the truth in so many instances, that it is like changing lanes using only the side mirrors. A fatal accident, a fatal mistake.
That you would attribute his point to Krugman displays a great degree of ignorance, or minsunderstanding at best. Krugman believes what you do--that the Fed is creating new money. Bernanke believes it too. This is why they do it. But unfortunately it does not create any new money at all. This is because existing treasury securities are also money. reve_etrange is correct: the Fed is actually cashing out institutional savings accounts, and because that removes interest bearing assets from the private sector, it is effectively reducing the money supply--though is marginally adding liquidity in the process.
Only because the farmer knows that the state backs and taxes that gold. He cares little for the gold of foreigners except as a commodity, which is beyond his ability to do commerce, so it's no good.
The state liked gold because it could monopolize it fairly easily, (easy to spot, easy to meld, not too little but definitely not too much) and looked so good that it conveyed the kingly authority. Gold crowns. One term to mean both coins and headgear, and served the same purpose: to further suggest divine right and leviathanism. As the kids would say: fat stacks, yo. It was the best bling labor could provide. From spinner rims, to a gulfstream, or a black amex etc. It all lead to royal or lordly credibility. This was later true for Senators or emperors, and again for feudal lordlings, who had by this point also adhered to tradition, but that tradition was merely to augment their swagism.
Clearly, your definition of "private" includes an armed church which levied tithes as well as legally immune feudatories who, yes, controlled armies and levied taxes. The monetarii of the Middle Ages were counts and bishops, not free mansi or merchants.
.: Semper Absurda
Krugman thinks QE is inflationary, as does Bernanke, despite all evidence to the contrary. Their positions on QE are well known, though apparently not to you.
Now look, if something looks like a duck, walks like a duck and quacks like a duck, I call it a duck. Reserves and securities are both non-convertible, dollar-denominated financial assets which represent public debts, earn interest and which can be used to make purchases. If you swap one for the other, the only possible effect on the money supply is via the difference in the interest rates. Securities pay higher interest, ergo swapping them for reserves can only reduce the net financial assets of the private sector.
Are bald assertions to the contrary all you have? Obviously, no one is paying you to forecast inflation.
.: Semper Absurda