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Why Bitcoin Will Fail As A Currency

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Re: Why Bitcoin Will Fail As A Currency

#31

Post by po »

reedlaw wrote: post #22
po wrote: post #18

Earlier quoted context omitted.

When you're dead all your savings are worthless (to you), so your likely to spend most of them before then. If that were true, why would there be so much debate around the estate tax? Warren Buffet is a rarity. Most people want to pass money down through generations rather than spend it as they near the end of their lives. Taxes on inheritance encourages spending and charitable giving. Some consumption cannot be post…

You seem to suggest in all these cases that spending is inherently good. Estate tax = incentive to give away. Inflation = incentive to buy now. I understand this is one of the core concepts of Keynesian economics. But there exists an alternative school of thought that posits that inflation causes volatile business cycles and central banks are inefficient at allocating resources. Success of a bitcoin-based economy wou…

True, I do believe that money flowing from one person to the next (i.e. spending) encourages progress and opportunity. I think those are (on balance) good things. I think it's good to have some convection in the pool.

I don't want a central bank to 'allocate resources' but I don't mind when Wall St. closes due to panic selling or the market closes when someone blows up a skyscraper while everyone figures out wtf that means. I think sports are better with referees. Kill-the-man-with-the-ball is only fun for the biggest guy. Football is a better game.

What we have right now is great but I also don't think Bitcoin is going in the right direction. If you think bitcoin will be less volatile than the overall economy now think about how much easier it would be to corner a market in BTC than USD. Think about how easy it will be to buy off a politician. I don't think democracy can survive under bitcoin.

Re: Why Bitcoin Will Fail As A Currency

#32

Post by btilly »

teodesian wrote: post #21
tatsuke95 wrote: post #19

Earlier quoted context omitted.

The average human was far, far poorer 200+ years ago, in relative terms. The fact is, modern banking and capitalism have created massive amounts of wealth for a vast proportion of the population. Evolution of our economic system has led to where we are now for a reason. It's not perfect, but we aren't going back to the days of measuring your net worth on a stick. Every time we have a crash or downturn, people begin t…

You must remember, however that money != wealth. The money supply of a nation in no way represents the wealth generation going on in an economy. Printing an extra dollar does not mean the users of dollars became wealthier, it simply redistributes the existing wealth. Barter is also another factor that creates wealth, yet does not have anything to do with the monetary system. Our growing wealth in many ways is in spit…

Here is a basic economic fact for you. In periods of mild inflation, people have an incentive to invest money, which leads to growth. In periods of deflation (like the Great Depression) people have an incentive to put money under the bed and wait for it to appreciate. Therefore deflation is horrible for economic growth.

Thus money supply does not represent wealth generation, but controlling it does affect wealth generation in a pretty significant way.

As for your comment about the 70s, the wealth of this country has gone up dramatically. However there has also been a sharp increase in inequality. Thus causing a small number of people to see wealth rise a whole lot. Whether or not the middle class has wound up better or worse is a subject of debate among economists. (The subject is not nearly as simple as you might think. We think of "inflation" as an absolute number but it is not. The inflation that you experience is relative to the goods that you purchase, and middle class or poor people purchase a different bundle of goods than rich people do.) In any case the result is that it is clear that wealth generation has been humming along very nicely.

My personal belief is that the underlying cause of the increase in wealth disparity is the continual drop in the top income tax rate, the reduction of the number of tax brackets, and the increase in the tax rate on the average person. (The effective tax rate on the richest people is now below the median tax rate!) This has limited how much tax policy redistributes money between socio-economic groups.

Whether this is a good or bad thing is a political debate for another time. But it is a real thing.

Re: Why Bitcoin Will Fail As A Currency

#33

Post by fryguy »

acangiano wrote: post #14

The article makes a series of well known criticisms, but there are a few issues with it. 1. If a BTC were to be worth $2M, you'd simply trade microcoins which would be worth $2. Or even nanocoins for micropayments. 2. Bitcoin's quasi-anonymous nature will be highly desirable to many people, including very large criminal organizations who'll definitely be moving those coins. 3. A large number of early adopters joined…

He is not saying what you think he's saying for #1. He's saying that if in 10 years or whatever, 1 bitcoin is worth $2M, why would you ever spend your 1 bitcoin now when it's going to be worth so much money in the future. This means people are going to horde, or it's not going to become so big.

Re: Why Bitcoin Will Fail As A Currency

#34

Post by kruhft »

kd0amg wrote: post #20
benihana wrote: post #15

Earlier quoted context omitted.

Every single criticism of Bitcoin I've seen is based on the assumption that it will fail because it's not a fiat-based currency. They list Bitcoin's features as the reasons it will fail. They talk about the past 200 years of central banking and seem to forget the thousands of years of human economy before governmental central banking, when money was actually backed by a scarce resource.

Maybe we've been seeing different criticisms, but the ones I've seen don't just complain that it's not backed by fiat -- they complain that it's not backed by anything.

I think it's getting backed by all the people that are putting money into it.

Re: Why Bitcoin Will Fail As A Currency

#35

Post by rwmj »

seles wrote: post #28

This whole hoarding argument is bogus: it assumes bitcoin will fail because bitcoin will be so successful that people will hoard.

Read the article again. It assumes everyone will hoard because they think there's a chance bitcoin might become successful (and in the meantime there's not a lot to spend bitcoins on anyhow).

But this hoarding is exactly what creates a bubble, and the lack of anyone spending means that there will never be mainstream shops using it, so it will never have worth.

Re: Why Bitcoin Will Fail As A Currency

#36

Post by puredemo »

knieveltech wrote: post #27

The number 1 reason why bitcoin will fail: Silk Road (et al) have handed legislators all the ammunition they need to go after it with a vengeance. All of what's coming next has happened before. Think e-gold, act II. Simply put there are no incentives (and massive disincentives, both perceived and real) for any government to tolerate financial transactions in anything other than fiat currency. The more popular the ser…

It'll still thrive in all the countries that don't legislate against it, and in the black markets of those which do.

Re: Why Bitcoin Will Fail As A Currency

#37

Post by tptacek »

kruhft wrote: post #34
kd0amg wrote: post #20

Earlier quoted context omitted.

Maybe we've been seeing different criticisms, but the ones I've seen don't just complain that it's not backed by fiat -- they complain that it's not backed by anything.

I think it's getting backed by all the people that are putting money into it.

That's the same kind of backing tulips had.

Re: Why Bitcoin Will Fail As A Currency

#38

Post by 3am »

reedlaw wrote: post #22
po wrote: post #18

Earlier quoted context omitted.

When you're dead all your savings are worthless (to you), so your likely to spend most of them before then. If that were true, why would there be so much debate around the estate tax? Warren Buffet is a rarity. Most people want to pass money down through generations rather than spend it as they near the end of their lives. Taxes on inheritance encourages spending and charitable giving. Some consumption cannot be post…

You seem to suggest in all these cases that spending is inherently good. Estate tax = incentive to give away. Inflation = incentive to buy now. I understand this is one of the core concepts of Keynesian economics. But there exists an alternative school of thought that posits that inflation causes volatile business cycles and central banks are inefficient at allocating resources. Success of a bitcoin-based economy wou…

That doesn't have the slightest thing to do with Keynesian economics.

Re: Why Bitcoin Will Fail As A Currency

#39

Post by [deleted] »

knieveltech wrote: post #27

The number 1 reason why bitcoin will fail: Silk Road (et al) have handed legislators all the ammunition they need to go after it with a vengeance. All of what's coming next has happened before. Think e-gold, act II. Simply put there are no incentives (and massive disincentives, both perceived and real) for any government to tolerate financial transactions in anything other than fiat currency. The more popular the ser…

[deleted]

Re: Why Bitcoin Will Fail As A Currency

#40

Post by matthewcford »

acangiano wrote: post #14

The article makes a series of well known criticisms, but there are a few issues with it. 1. If a BTC were to be worth $2M, you'd simply trade microcoins which would be worth $2. Or even nanocoins for micropayments. 2. Bitcoin's quasi-anonymous nature will be highly desirable to many people, including very large criminal organizations who'll definitely be moving those coins. 3. A large number of early adopters joined…

I personally think that BitCoin as a concept is too big to succeed. It will scare governments and they'll ban trading in it.
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