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The political case for a blanket cryptocurrency ban

stephendiehl.com

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Re: The political case for a blanket cryptocurrency ban

#251

Post by biztos »

thorwasdfasdf wrote: post #155

>> "Bitcoin is the textbook speculative mania for our time" This misses the point of bitcoin entirely. People need to understand Bitcoin solves a problem: a very big problem. This problem was caused by the gov and fed defaulting on it's obligation to maintain a stable currency. As a result, cash can no longer be used as a store of value. And by artificially suppressing interest rates, the fed/gov has eliminated yet a…

Sure, people are using Bitcoin as a store of value, but I think a lot of those people think it will just keep going up.

Which is not a super rational thing to believe about an asset whose value has no relation to anything in the real world, and nothing to prop it up but the people who believe the same thing.

Bitcoin is up something like 800% for the year. It might be up another 800% in six months! Or it might go down to $10000! Or $1000, $100, $10 -- any of these would make exactly as much sense as the ~$60K we see right now.

Taxes aside, that strikes me as a pretty volatile place to be storing your value. Not everybody has the option of USD or CHF but still... it sure does look like a speculative bubble. (For actual "mania" maybe see NFT's instead.)

Re: The political case for a blanket cryptocurrency ban

#252

Post by frockington1 »

carlosrg wrote: post #208

Is it just me or some people are starting to lose their mind over Bitcoin and crypto? The visceral hate it is getting seems out of place, and the arguments are getting more desperate (now we should ban crypto?) Don't know if that's the case with the author, but from what I've been seeing in social networks and such, it looks like some people have decided crypto is an alt-right thing (not true) and we should "cancel"…

Highly likely its all media and propaganda driven. After passing $2 trillion in 'covid relief' and shooting for another $4 trillion in 'infrastructure', work will need to be done to keep consumer confidence in fiat

Re: The political case for a blanket cryptocurrency ban

#253

Post by kortilla »

lmilcin wrote: post #241
DickingAround wrote: post #53

This article seems to intentionally ignore the core reason for cryptocurrencies; escaping inflation and control. The article then proposes to use the law to bring those people back within the control of fiat and government oversight. I no longer think the environmental argument is really plausible here. Clearly crypto mining is emitting using a lot of power and some of that is CO2. But the competition is fiat; backed…

> Clearly crypto mining is emitting using a lot of power and some of that is CO2. All of it is CO2. Let me explain. When you burn energy for bitcoin mining, you don't just use capacity of your local energy producer, you are delaying removal of legacy power producers. Before a particular power producer (for example burning coal) can be turned off, the capacity must be created from other sources (for example renewable)…

> This assumes that introduction of new renewable sources of energy is independent from bitcoin mining. As far as I know this is true.

It is not. There are marooned renewable energy sources (dams) that have had limited usage (the dams being mainly for flood control) until miners came along. Building high capacity transmission lines to them wasn’t economical.

Re: The political case for a blanket cryptocurrency ban

#254

Post by hakesdev »

lamontcg wrote: post #249
hakesdev wrote: post #169

Earlier quoted context omitted.

This. 100%. Bitcoin (like gold since the gold standard ended) is just a "check" on Fiat currencies and can act as insulation from central banks that issue too much money too quickly. Fiats will continue to exist alongside bitcoin/cryptos, they'll just eventually have to "compete" a bit more (i.e., not be printed so readily by gov'ts) or else they'll become significantly less relevant.

Bitcoin is like a decentralized banking system with no controls at all against a systemic bank run. No FDIC or Fed. It has been small enough that a single Billionaire could bail it out when it got into trouble. Once you hit the point where it'd take > $10B's to bail out Bitcoin it is going to unwind eventually in a bank run/panic. This time is not different, and those who fail to understand the past are doomed to rep…

If you don't understand why competition in monetary commodities is a good thing then... I don't have any time for you.

Re: The political case for a blanket cryptocurrency ban

#255

Post by blululu »

This feels overly specific. Implementing something like a Pigovian tax is standard practice where negative externalities are concerned. There is no need for an outright ban if properly taxed. There are also much larger negative externalities to cryptocurrency than CO2. Ransomware payments are a clear cut example that a ban might not even address and are easy to tax.

Re: The political case for a blanket cryptocurrency ban

#256

Post by kipchak »

thebean11 wrote: post #197
kipchak wrote: post #176

Earlier quoted context omitted.

I think gold makes more sense if you think of wealth as useful largely as a status indicator in the conspicuous consumption sens or peacocking. A gold necklace displays wealth and presumably status in the same way designer clothes or a luxury car does. Beaver pelts or cars wear down over time though unlike gold, and the amount of crypto one holds is hard to display ostentatiously, at least for now. BAT, Steemit or cr…

There is a lot more "paper" gold than physical gold in jewelry or gold bars. The overwhelming of gold and gold derivatives are not using it to signal their status.

True, though the paper gold is valuable because someone could potentially take delivery, though that valuation on it's own is likely much less than it's current price if 1934-1970 is anything to go by.

Re: The political case for a blanket cryptocurrency ban

#257

Post by lamontcg »

hakesdev wrote: post #254
lamontcg wrote: post #249

Earlier quoted context omitted.

Bitcoin is like a decentralized banking system with no controls at all against a systemic bank run. No FDIC or Fed. It has been small enough that a single Billionaire could bail it out when it got into trouble. Once you hit the point where it'd take > $10B's to bail out Bitcoin it is going to unwind eventually in a bank run/panic. This time is not different, and those who fail to understand the past are doomed to rep…

If you don't understand why competition in monetary commodities is a good thing then... I don't have any time for you.

If you don't understand why bitcoin isn't [workable] money then... I don't have any time for you.

Re: The political case for a blanket cryptocurrency ban

#258

Post by karpierz »

seibelj wrote: post #201
abakker wrote: post #195

Earlier quoted context omitted.

I never understand the counter-inflation argument...most economists understand inflation is something to be managed, but it is far from proven that target inflation is bad. There are many useful economic properties of inflation. Meanwhile, Bitcoin has undergone such massive speculative appreciation that everything around it has deflated in comparison. As a result, bitcoin is spectacularly less useful than it would ha…

It has never been proven that deflation is bad - Keynesians claim this is the worst thing in the world, but I still have never had it explained to me coherently way deflation is inherently a bad thing.

If your currency deflates, that means a dollar today is worth less than a dollar tomorrow. When you invest money (via loans or buying equity), you trade currency for tangible assets, like stocks or capital.

In order for the investment to make sense, the growth on the asset needs to be larger than the growth of the value of the money, plus risk. So in a deflationary currency, loan interest rates must be higher to be worth it. If loan interest rates are higher, then the cost of doing business increases. If the cost of doing business grows, the price of goods to increases. And when the price of goods increases, this causes the amount of goods sold to drop. This causes the income of the business to drop. Which increases the risk of investment, causing interest rates to go up.

This cycle continues until everyone is holding on to their cash, and no one is spending. The way to break the cycle is to have cash start to lose value, or inflate. Then the interest rates drop, and people start to spend their money.

Another way to think about it is:

Say it costs 1.00$ to make a loaf of bread in 2020. By 2030, there's a robot that can make a loaf of bread for 0.10$ in 2020 dollars. So because society has become more productive in those 10 years, the work you did in 2020 is now worth 0.10$ 2020 dollars. So we can think of a dollar as representing the cost of goods, at the time that you did it. So if you make 1$ worth of bread in 2020, it should be able to buy the same amount of bread in the future. So we inflate the currency 10x, so bread still costs for 1$ in 2030, but now there's 10x the amount of bread to go around, and people make 10x the salary, so for people who are currently making money, bread is 10x cheaper.

Now, you still want some inflation on top of this, since you want to push people away from sitting on money and towards putting that money to productive use. But that's the core rationale.

Re: The political case for a blanket cryptocurrency ban

#259

Post by lmilcin »

kortilla wrote: post #253
lmilcin wrote: post #241

Earlier quoted context omitted.

> Clearly crypto mining is emitting using a lot of power and some of that is CO2. All of it is CO2. Let me explain. When you burn energy for bitcoin mining, you don't just use capacity of your local energy producer, you are delaying removal of legacy power producers. Before a particular power producer (for example burning coal) can be turned off, the capacity must be created from other sources (for example renewable)…

> This assumes that introduction of new renewable sources of energy is independent from bitcoin mining. As far as I know this is true. It is not. There are marooned renewable energy sources (dams) that have had limited usage (the dams being mainly for flood control) until miners came along. Building high capacity transmission lines to them wasn’t economical.

So where and how much of the mining network utilizes this or similar?

We are looking for at least significant portion of 130TWh the mining network currently uses. I just don't see all those old dams adding anywhere close to 1% of that value (although you have a chance to post your sources).

You see, bitcoin mining currently uses 10x the amount of capacity used by Google and 50% of what ALL DATACENTERS IN THE WORLD are using.

https://www.bbc.com/news/science-environment-56215787

Your argument doesn't hold any water (pun intended).

Re: The political case for a blanket cryptocurrency ban

#260

Post by 2421n »

smeej wrote: post #158
DickingAround wrote: post #53

This article seems to intentionally ignore the core reason for cryptocurrencies; escaping inflation and control. The article then proposes to use the law to bring those people back within the control of fiat and government oversight. I no longer think the environmental argument is really plausible here. Clearly crypto mining is emitting using a lot of power and some of that is CO2. But the competition is fiat; backed…

This is such an underappreciated point. U.S. dollars are backed by violence. Bitcoin is backed by math. I don't know what you want backing your money in the world you hope to leave for future generations, but I know what I want backing mine.

And if I force you to give me your decryption keys or make a transfer at gunpoint, will the math still protect you?
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