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Nobel Prize-Winning Economist Says Bitcoin 'Ought to be Outlawed' (cnn.com)
Bitcoin "is drawing harsh criticism from Wall Street investment firms," writes Slashdot reader rmdingler -- and even from some prominent economists. CNN reports:
The harshest assessment came from Nobel laureate Joseph Stiglitz, who said that bitcoin "ought to be outlawed. Bitcoin is successful only because of its potential for circumvention," he told Bloomberg TV. "It doesn't serve any socially useful function." Robert Shiller, who won a Nobel for his work on bubbles, said the currency appeals to some investors because it has an "anti-government, anti-regulation feel. It's such a wonderful story," he said at a conference in Lithuania, according to Bloomberg. "If it were only true."
Wall Street titans were getting in on the action, too. Goldman Sachs CEO Lloyd Blankfein told Bloomberg that the currency serves as "a vehicle for perpetrating fraud." Billionaire investor Carl Icahn said on CNBC that it "seems like a bubble." The digital currency previously attracted the derision of JPMorgan boss Jamie Dimon, who called it a "fraud" that would "eventually blow up." Warren Buffett has warned of a "real bubble."
Wednesday the price of bitcoin shot past $11,000 -- just ten days after rising past $8,000.
Wall Street titans were getting in on the action, too. Goldman Sachs CEO Lloyd Blankfein told Bloomberg that the currency serves as "a vehicle for perpetrating fraud." Billionaire investor Carl Icahn said on CNBC that it "seems like a bubble." The digital currency previously attracted the derision of JPMorgan boss Jamie Dimon, who called it a "fraud" that would "eventually blow up." Warren Buffett has warned of a "real bubble."
Wednesday the price of bitcoin shot past $11,000 -- just ten days after rising past $8,000.
" Bitcoin is successful only because of its potential for circumvention,"
Like cash?
Whereas Goldman Sachs is a vehicle for what exactly?
Companies making big bucks out of traditional currencies are upset when a currency they're not making big bucks out of appears on the scene, totally unpredictably!
Yes, of course Bitcoin is a scam. But that isn't all there is to it, there is a need that it fills: we currently lack any kind of digital cash. Banks and other payment processors are currently taking about 3% of all the money spent on the internet, and this is an enormous amount of money that's just disappearing with virtually no return. A lot of internet vendors with thin margins jumped on the Bitcoin bandwagon for just this reason.
What we really need, of course, is a real government-backed digital currency. I can think of a few reasons why this hasn't been implemented yet, but it will happen eventually.
First they ignore you, then they laugh at you, then they fight you, then you win. - Mahatma Gandhi
We're at step #3 now.
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Neither do you, or just about anybody else brought up in this conversation.
This is my signature. There are many like it, but this one is mine.
Goldman Sachs CEO Lloyd Blankfein told Bloomberg that the currency serves as "a vehicle for perpetrating fraud."
If anyone should know about perpetrating fraud, it would be Lloyd Blankfeind. And his buddy Jamie Dimon as well.
The fraud that is being perpetrated is not Bitcoin but the fiat money cranked out by scammer governments that seem to think they can do anything they want to to the public, including ruin the concept of money itself. Bitcoin is connected to nothing? What is the dollar connected to now? Huh? Less than nothing. Bitcoin at least is limited and if the dollar is accepted now it is only because people want to accept it. There is no basic "value" to it. It is not connected to gold. It is not connected to national economic output. I feel a good deal of the interest in bitcoin comes from it being a vote of no confidence in the phony, scam financial system that the finance and investment community and governments have worked so hard to create. Oh, and Schiller and others are terrified that this possibly disruptive technology will obsolete their knowledge base, prizes, and destroy their income. They no more get it than Buffett got microcomputers or the internet.
E Proelio Veritas.
Goldman Sachs CEO Lloyd Blankfein told Bloomberg that the currency serves as "a vehicle for perpetrating fraud."
Well he would know...
JPMorgan boss Jamie Dimon, who called it a "fraud"
Ditto
It happened several times already. But the hype pulls it right back up, and people love it, because on every crash, you buy em because you know the stupid hypers will pull it up again.
Stiglitz believes those who endeavor to protect their rights such as privacy must be doing something illegal. It's the old "it shouldn't matter if you have nothing to hide" defense of infringing on civil liberties. He also claims bitcoin has no societal value - the fact people are using it in society is prima facie evidence he's wrong about that as well.
A good currency should do a few things:
- Have low "friction" in transactions (in terms of ease, time, and transaction costs)
- Be near-universal in acceptance
- Provide a good store of value
- Be difficult to counterfeit
Bitcoin does very well on the last point and, in some senses, also does well on the first point due to the fact that it is a digital currency.
These properties are generally achieved by currencies through some form of artificial scarcity. Gold, for example, is valued well above its utility in industry.
Bitcoins version of artificial scarcity is poisonous, in the sense that its mechanism invites society to waste resources (electricity, silicon chips) on generating scarce integers no one else has. The world will be far better off once we are using digital currencies with different forms of artificial scarcity.
I think it's hard to argue Bitcoin is treated much as a currency even now, except perhaps by the ransomware authors. Generally it is being purchased as an "investment", which lately bears similarity to some historical crazes and bubbles.
Bitcoin is successful only because of its potential for circumvention," he told Bloomberg TV. "It doesn't serve any socially useful function."
Circumventing governments is a socially useful function. Virtually all modern governments have grown to be far too powerful. Bitcoin represents a small but important struggle against one, small aspect of this power. Likely it will be either squashed or (worse) absorbed, but...maybe not. There's also a vanishingly small chance that people will realize that modern governments need to be massively reduced in scale, focusing on the essential needs of their constituents, rather than the global fantasies of the elite.
Geez, that doesn't sound half bad. Maybe I should become a propaganda writer :-/
Enjoy life! This is not a dress rehearsal.
Technically there is only one correct answer to your question, "What is it backed by?"
... ]
As you know the distributed ledger and transaction mechanisms that provide the blockchain that underpins Bitcoin are derived from compute-intensive functions and are created through the process commonly known as "mining". When Bitcoin was originally introduced, the 'value' of a Bitcoin was set in such a way that it was worth slightly less than the cost of the electricity it would take to "mine the coin". [This was entirely intentional - had this not been done Bitcoin would have immediately suffered run-away "inflation"
However, Bitcoin also has a built-in scarcity model, in which the value given out for mining is being progressively reduced [in fact halved] as more coins are mined. Originally this was set to take place approximately once every four years or so, although with the amount of purpose-built ASICs now operating vast mining farms, it is entirely possible that the four year value has shortened somewhat. Each time the milestone is passed, the value of Bitcoins paid halves. I am not sure if this was done to forestall the effect that Moore's Law would have on mining or done specifically to provide a built-in scarcity value for the coins being mined.
So, in an attempt to answer your question, the "value" backing a coin was originated as the cost of producing it...
What has happened since then is that a raft of different speculators have piled in to Bitcoin and are now treating it like a commodity, not a currency. In other words, different rules apply. Now the driver of "value" to Bitcoin is driven by the perceived scarcity. In this sense the discussions relating to Bitcoin being a bubble are much closer to the market reaction in years past to treating classic cars or rare works of art in the same way. [ In those cases, the thinking was that since it simply wasn't possible to create "more" classic cars, so their scarcity value made them a trade-worthy commodity. This idea may well last for a time with Bitcoin, but - in exactly the same way was true for classic cars and works of art - if the "market" decides that it no longer has an interest in cryptocurrency, then the value will crash.
Detractors point to this and declare that this automatically means that Bitcoin is a fraud. However, it is important to note that we could say the same thing about a $100 bill, or a £100 note if you had one in your pocket. There is no way that the paper/polymers/ink/plastic that comprise the bill or note are worth the currency printed on them. The only reason they have that "value" is because an entire system - propped up by governments and banks - is willing to support them.
It hasn't happened for a long time - perhaps since the end of the Second World War - when we saw a total collapse in a major national economy. [ Although look at the currency in Zimbabwe for an example]. However, in the closing days of WWII, currencies such as the Chinese Yuan devalued so quickly that more money was being printed on recycled newspaper, and it took a wheelbarrow of currency [by volume] to buy a few vegetables. In this regard it would be ignorant and dangerous to argue that there are major differences between Bitcoin and other major fiat currencies.
Bit of a long-winded answer - sorry for that - but in essence the summary is: your question is irrelevant.
Slashdot really needs to either fix this apostrophe problem or at least convert the character to one it can display when we submit comments.
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The amount of bitcoin being used as a currency is diminishingly small, the vast majority is being held by speculators.
If anyone is doubting this statement:
Bitcoin is stuck at less than 10 transactions per second. Total value of all bitcoins is somewhere close to 200 billion USD. This makes Bitcoin practically useless for actual transactions. The ratio of transaction capacity to value just isn't there -- it only works if most of the money sits still the vast majority of the time.
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