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What Bitcoin shows us about how money works

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Re: What Bitcoin shows us about how money works

#61

Post by cmroanirgo »

Lol. Although many good and seemingly well-reasoned arguments, the author forgot that you can only place a value on something if it is traded for something else. (eg BTC to USD, or chickens to potatoes). It is the ratio that gives the value and also depends on what side of the trade you're on.

"A sudden random jolt downward in bitcoin price prompts many people to try to sell it and worsen the situation,"

This sentence makes no sense because the "bitcoin price" is actually the BTC/USD ratio. You can trade in other ways.

My final, roll-on-the-floor-laughing moment was the description of dollar as a measure of utility:

"If the utility measured by a single dollar fluctuated a lot, that would mean that the number in your bank account would suddenly miscount the utility of all the work that filled it"

This happens every single day. Every government and bank in the world devalues your current bank account (aka inflation), so that you have to work harder (ie, increase your utility) to receive the same benefit.

"If you’re not willing to have a fluctuating bank account, BTC does not make transactions easier. It forces you to make more transactions."

That's precisely why government provided currencies are also worthless! All of us are running around like chickens without their head, hoping to get 'more money' just to survive! Currency is enslavement IMHO.

Re: What Bitcoin shows us about how money works

#62

Post by nugget »

maxfurman wrote: post #54
AstralStorm wrote: post #25

Earlier quoted context omitted.

Bitcoin wallet can be seized and the transactions are traceable and public, so a sufficiently determined actor can figure out who has it and how much. Then enforce their cut with violence.

I would quibble with this, depending on how we define "seized". My understanding is that your coins cannot be transferred unless the transaction is signed by your private key. So, authorities could seize the computer that has the private key on it, or, as you say, use violence against a known individual, but they have no way in-network to take your wallet. Compare this with the central banking system where government…

The NSA was able to infect air gapped Iranian computers 100 ft underground that only a handful of individuals had access to. I doubt any hot wallets are really out of Government reach given enough time and attention. A cold wallet with offline multi sig - more likely.

Re: What Bitcoin shows us about how money works

#63

Post by ypeterholmes »

cmroanirgo wrote: post #61

Lol. Although many good and seemingly well-reasoned arguments, the author forgot that you can only place a value on something if it is traded for something else. (eg BTC to USD, or chickens to potatoes). It is the ratio that gives the value and also depends on what side of the trade you're on. "A sudden random jolt downward in bitcoin price prompts many people to try to sell it and worsen the situation," This sentenc…

Well said. I was also struck by the author's core argument- that Bitcoin will never be stable because nobody can manipulate its value. Seems to me the opposite is true; the fact that nobody can directly manipulate supply will provide the type of stability our current fiat currency sorely lacks.

Re: What Bitcoin shows us about how money works

#64

Post by UncleEntity »

danield9tqh wrote: post #33
osrec wrote: post #18

Earlier quoted context omitted.

"Burning dollars" can be done in other ways. For example, the powers that be can issue less debt going forward, which would shrink the money supply.

This makes sense to me, that's something I hadn't thought of so thanks for sharing. But I still don't see how it differentiates BTC from USD. Because issuing any debt in the first place would inflate the value. So then when you stop issuing debt, the value would get deflated to what it would have been originally. I think this is how the Fed tries to control deflation as well. They print more money, not to distribute…

Most of the money in existence doesn't actually exist, it is an illusion created through fractional reserve banking.

If the Fed wants to inflate the currency they print more and 'give' it to banks who create even more on top of this and if they want to deflate the currency they can simply change the minimum reserve value so less money is created out of thin air by the banks. Totally oversimplifying here but that's the general idea.

Anything short of 100% reserve banking and you have illusionary money in existence that gets spent just as well as a paper bill but with no actual paper bill backing it.

Re: What Bitcoin shows us about how money works

#65

Post by jganetsk »

meri_dian wrote: post #56
jganetsk wrote: post #53

Earlier quoted context omitted.

Monetary policy is just not that effective, overall. The Fed is not putting money into anyone's hands. It's just making bank balance sheets replace higher-interest paying asserts (Treasury bonds) with lower-interest paying assets (bank reserves) in the hopes that more lending will happen. But it won't. Fiscal policy is necessary. http://neweconomicperspectives.org/2012/01/mmp-blog-31-funct...

But that's not an answer to my question. I'm asking if - regardless of how policy is being executed now - money were distributed throughout the economy, would that accomplish the goals of monetary policy more effectively than the way it is traditionally carried out?

Distributing money to the economy = fiscal policy.

Re: What Bitcoin shows us about how money works

#66

Post by grandalf »

RobertoG wrote: post #47
grandalf wrote: post #24

Earlier quoted context omitted.

I have no idea whether that will happen, just trying to express what I think the rational case is for investing in Bitcoin today. Goldbugs / conspiracy theorists have a line of argument where they describe all the fiat currencies that have ultimately experienced corruption and hyper-inflation. So I think it's fair to say that running a fiat currency successfully for more than 500 years is something that is unpreceden…

>"Goldbugs / conspiracy theorists have a line of argument where they describe all the fiat currencies that have ultimately experienced corruption and hyper-inflation" And they are, practically in all the cases wrong. What we see is in history is a mismanagement of the real economy or external factors affecting the currency. They confound the symptom with the cause. When the 'real' economy goes wrong, never mind if yo…

> Of course, you can make a case for gold or similar because it could make easy run away to another place, but that it's not the argument they are pushing normally.

I think this is the aspect of it that applies to Bitcoin. All of the steps along the road to hyper-inflation in a fiat currency may be quite reasonable and may constitute the smartest move using the available tools.

There is also the question of whether currencies should be tied to governments. The risks that (frequent) government failures pose to one of the core purposes of money (storing value) are not costless. Society bears the costs of those risks even though they are hard to measure.

Of course many of the same problems could apply equally (or more) to Bitcoin depending on how the governance process proceeds.

Re: What Bitcoin shows us about how money works

#67

Post by ultraluminous »

meri_dian wrote: post #56
jganetsk wrote: post #53

Earlier quoted context omitted.

Monetary policy is just not that effective, overall. The Fed is not putting money into anyone's hands. It's just making bank balance sheets replace higher-interest paying asserts (Treasury bonds) with lower-interest paying assets (bank reserves) in the hopes that more lending will happen. But it won't. Fiscal policy is necessary. http://neweconomicperspectives.org/2012/01/mmp-blog-31-funct...

But that's not an answer to my question. I'm asking if - regardless of how policy is being executed now - money were distributed throughout the economy, would that accomplish the goals of monetary policy more effectively than the way it is traditionally carried out?

It does answer your question - what you're misundestanding is that "distributing money throughout the economy" is fiscal policy, not monetary policy. That's what the OP meant by "fiscal policy is necessary" and "the government dropped the ball on fiscal policy". The Federal Reserve, as a body, and monetary policy in general by extension, does not posses the tools to enact fiscal policies.

EDIT: oops didn't see OP already clarified.

Re: What Bitcoin shows us about how money works

#68

Post by meri_dian »

ultraluminous wrote: post #67
meri_dian wrote: post #56

Earlier quoted context omitted.

But that's not an answer to my question. I'm asking if - regardless of how policy is being executed now - money were distributed throughout the economy, would that accomplish the goals of monetary policy more effectively than the way it is traditionally carried out?

It does answer your question - what you're misundestanding is that "distributing money throughout the economy" is fiscal policy, not monetary policy. That's what the OP meant by "fiscal policy is necessary" and "the government dropped the ball on fiscal policy". The Federal Reserve, as a body, and monetary policy in general by extension, does not posses the tools to enact fiscal policies. EDIT: oops didn't see OP alr…

But monetary policy is also injecting money into the economy. Both fiscal and monetary do this, but differ in two ways: the nature of the money injected and the way the injection is performed.

Monetary policy increases the money supply itself through the exchange of money for treasury bonds and relies on banks to distribute this "new" money, while fiscal policy redistributes money that already exists (previously collected through taxes) and gives it to active businesses through government purchases rather than to bond holding institutions.

Re: What Bitcoin shows us about how money works

#69

Post by jganetsk »

meri_dian wrote: post #68
ultraluminous wrote: post #67

Earlier quoted context omitted.

It does answer your question - what you're misundestanding is that "distributing money throughout the economy" is fiscal policy, not monetary policy. That's what the OP meant by "fiscal policy is necessary" and "the government dropped the ball on fiscal policy". The Federal Reserve, as a body, and monetary policy in general by extension, does not posses the tools to enact fiscal policies. EDIT: oops didn't see OP alr…

But monetary policy is also injecting money into the economy. Both fiscal and monetary do this, but differ in two ways: the nature of the money injected and the way the injection is performed. Monetary policy increases the money supply itself through the exchange of money for treasury bonds and relies on banks to distribute this "new" money, while fiscal policy redistributes money that already exists (previously coll…

The interpretation that banks distribute that money is wrong. Banks don't lend out reserves: https://www.kreditopferhilfe.net/docs/S_and_P__Repeat_After_...

Re: What Bitcoin shows us about how money works

#70

Post by xapata »

panarky wrote: post #9

> It’s pretty easy to understand that if the government were to suddenly double the number of dollars in circulation, the value of a dollar would go down by approximately half. Just because it's easy to understand doesn't mean it's correct. For example, the US money supply more than doubled in the last 10 years, yet the value of a dollar has not halved. M0 quadrupled in 10 years: https://imgur.com/a/L9mDx M1 tripled:…

> suddenly double

Implying ceteris paribus -- all else held constant. Historical observations are generally not controlled experiments, as we only have one path through time.

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