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Bubble, Bubble, Fraud and Trouble

nytimes.com

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Re: Bubble, Bubble, Fraud and Trouble

#11

Post by jrcii »

wz1000 wrote: post #4
mortenjorck wrote: post #2

> Bitcoin, by contrast, has no intrinsic value at all. This comes right after a paragraph describing how the US dollar has no intrinsic value other than the fact that it is the required currency for paying US taxes and that the Federal Reserve stabilizes it through the money supply (Modern Monetary Theory would argue these two points are effectively the same, but I digress). Does this mean fiat currencies have intrin…

> Does this mean fiat currencies have intrinsic value? If so, how is this value more 'intrinsic' than the value a network gives a cryptocurrency? Because you are required to pay taxes. > although Modern Monetary Theory would argue the two are effectively the same Actually, if I understand correctly, MMT would argue that a central bank has very little control over money supply(other than in the rare case of acting as…

> a central bank has very little control over money supply(other than in the rare case of acting as a "lender of last resort")

https://en.wikipedia.org/wiki/Fractional-reserve_banking

Re: Bubble, Bubble, Fraud and Trouble

#12

Post by eggbrain »

We've heard about Bitcoin being a bubble and having no intrinsic value the entire duration of its existence -- so much so that Paul making these his main arguments feel like traveling back to ~2013 when it was "bubbling" then.

If people use Bitcoin and believe it has value, it _gives_ it value and credibility, in the same way that diamonds have value, even though they are no longer "rare".

When people stop using Bitcoin, or stop believing it has value or is worthy of value, any "bubble" state it has will burst.

My main question when reading this article was: when a major technological change or shift happened in the past few decades, did people realize at the time the potential, or did they make articles like this saying that the technology was a bubble? All it makes me think of is this famous Newsweek article: http://www.newsweek.com/clifford-stoll-why-web-wont-be-nirva...

I'm not saying that Cryptocurrencies will be the next internet (maybe it will be the next big .com crash), but entrepreneurs who become rich will be the ones that at least took the risk to believe (for better or worse).

Re: Bubble, Bubble, Fraud and Trouble

#13

Post by otoburb »

Ftuuky wrote: post #7

"It’s a nifty trick. But what is it good for?" The last time Krugman said this it was about the internet. “The Internet’s impact on the economy has been no greater than the fax machine’s….ten years from now, the phrase “information economy” will sound silly. (1997)”

To be fair, this isn't the first time this quote been dredged up from the past to be used against him as it pertains to Bitcoin.[1]

So while it's fun to pile onto Krugman once in a while, since cryptocurrencies are more closely related to monetary and economic concepts, he clearly feels more confident about this particular assertion.

Whether he's right remains to be seen.

[1] http://www.businessinsider.com/paul-krugman-responds-to-inte...

Re: Bubble, Bubble, Fraud and Trouble

#14

Post by gooseus »

mortenjorck wrote: post #2

> Bitcoin, by contrast, has no intrinsic value at all. This comes right after a paragraph describing how the US dollar has no intrinsic value other than the fact that it is the required currency for paying US taxes and that the Federal Reserve stabilizes it through the money supply (Modern Monetary Theory would argue these two points are effectively the same, but I digress). Does this mean fiat currencies have intrin…

Well, your quote seems to be writing off Bitcoin, not cryptocurrencies in general... but I don't understand this logic that keeps being put out.

The most powerful government in the world with long established laws and multiple powerful institutions guarantees USD as "legal tender for all debts, public charges, taxes, and dues."[0] and has been stable for decades, if not centuries.

The concept of cryptocurrencies didn't exist 10 years ago and bitcoin hasn't been stable for more than a few years, probably only months and is guaranteed by a computer network controlled primarily by machines running in China[1].

If a solar flare brings down the internet, all cryptocurrencies are immediately worthless, and that's assuming they'll ever be widely accepted for goods and services. So long as the US government is functional USD will be accepted for all goods in services.

That is the difference in "intrinsic value", as far as I see it.

[0] https://www.law.cornell.edu/uscode/text/31/5103

[1] https://blockchain.info/pools

Re: Bubble, Bubble, Fraud and Trouble

#15

Post by [deleted] »

mortenjorck wrote: post #2

> Bitcoin, by contrast, has no intrinsic value at all. This comes right after a paragraph describing how the US dollar has no intrinsic value other than the fact that it is the required currency for paying US taxes and that the Federal Reserve stabilizes it through the money supply (Modern Monetary Theory would argue these two points are effectively the same, but I digress). Does this mean fiat currencies have intrin…

[deleted]

Re: Bubble, Bubble, Fraud and Trouble

#16

Post by ThomPete »

> Bitcoin, by contrast, has no intrinsic value at all.

The idea of intrinsic value should die. It's fundamentally a complete misunderstanding of what value is based on. FIAT currency and Bitcoin have value as long as people believe it has value.

Value isn't some objective criteria it's a highly subjective one, what one considers valuable another might not. depending on what we are talking about, you can then add some more solid criteria such as utility, scarcity, trust in the future and so on. Depending on what context value is to be understood in you get various fluctuations in price and then finally you have some exchange between two parties where the price is agreed.

Re: Bubble, Bubble, Fraud and Trouble

#17

Post by jdoliner »

mortenjorck wrote: post #2

> Bitcoin, by contrast, has no intrinsic value at all. This comes right after a paragraph describing how the US dollar has no intrinsic value other than the fact that it is the required currency for paying US taxes and that the Federal Reserve stabilizes it through the money supply (Modern Monetary Theory would argue these two points are effectively the same, but I digress). Does this mean fiat currencies have intrin…

> US dollar has no intrinsic value other than the fact that it is the required currency for paying US taxes

That's extrinsic value. A pretty simple test you can apply to figure this out: would the value still exist if you were all alone on a desert island? Food has intrinsic value, you'd still value food in this case because you still need to eat. Dollars do not, they're no good without another entity to give them to. Same for bitcoin. Mostly the same for gold although there are some uses of gold as a metal.

So bitcoin is a bubble, in that it has no intrinsic value, and the same is true of dollars. The important question is which of these bubbles is going to burst first.

Re: Bubble, Bubble, Fraud and Trouble

#18

Post by cableshaft »

gooseus wrote: post #14
mortenjorck wrote: post #2

> Bitcoin, by contrast, has no intrinsic value at all. This comes right after a paragraph describing how the US dollar has no intrinsic value other than the fact that it is the required currency for paying US taxes and that the Federal Reserve stabilizes it through the money supply (Modern Monetary Theory would argue these two points are effectively the same, but I digress). Does this mean fiat currencies have intrin…

Well, your quote seems to be writing off Bitcoin, not cryptocurrencies in general... but I don't understand this logic that keeps being put out. The most powerful government in the world with long established laws and multiple powerful institutions guarantees USD as "legal tender for all debts, public charges, taxes, and dues."[0] and has been stable for decades, if not centuries. The concept of cryptocurrencies didn…

If a solar flare brings down the internet (presumably you mean via EMP), the amount of USD wealth that would be lost would be equally if not more catastrophic, because most of it is not kept in physical bills, but in 1's and 0's on computer systems as well.

"In fact, economists estimate that only 8 percent of the world's currency exists as physical cash. The rest exists only on a computer hard drive, in electronic bank accounts around the world." https://money.howstuffworks.com/currency6.htm

Edit: Looks like the percentage is a bit higher if you're talking just USD.

"All told, anyone looking for all of the U.S. dollars in the world in July 2013 could expect to find approximately $10.5 trillion in existence, using the M2 money supply definition. If you just want to count actual notes and coins, there are about U.S. $1.2 trillion floating around the globe."

https://money.howstuffworks.com/how-much-money-is-in-the-wor...

Re: Bubble, Bubble, Fraud and Trouble

#19

Post by JumpCrisscross »

ThomPete wrote: post #16

> Bitcoin, by contrast, has no intrinsic value at all. The idea of intrinsic value should die. It's fundamentally a complete misunderstanding of what value is based on. FIAT currency and Bitcoin have value as long as people believe it has value. Value isn't some objective criteria it's a highly subjective one, what one considers valuable another might not. depending on what we are talking about, you can then add some…

> FIAT currency and Bitcoin have value as long as people believe it has value

This argument precludes any rational discussion of the price of Bitcoin. Bitcoin at $50,000? Correctly priced, because people feel like it! Bitcoin at 50¢? Correctly priced, because people feel like it!

Contrast that to national currencies, where fundamental relationships between rates, real GDP and other factors relating to the economy can be measured, forecasted and compared. Two informed people can have a reasonable debate about the price at which one should trade a U.S. dollar for Japanese yen or Canadian dollars. Two informed people cannot have a reasonable debate about the price at which one should trade a U.S. dollar for a Bitcoin.

In that sense, it's sort of like gold. Unlike gold, Bitcoin doesn't have millennia of heritage grandfathering in an informal consensus [1].

[1] http://www.mining.com/what-a-roman-centurions-pay-says-about...

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