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Krugman on BitCoin

krugman.blogs.nytimes.com

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Re: Krugman on BitCoin

#101

Post by IanDrake »

cbr wrote: post #86
IanDrake wrote: post #63

Earlier quoted context omitted.

In economics people win for their work, not their winning personality. Krugman won for "his analysis of trade patterns and location of economic activity" - http://www.nobelprize.org/nobel_prizes/economics/laureates/2... Hayek also won the Nobel Prize and would undoubtedly disagree with almost everything Krugman believes. He won for "pioneering work in the theory of money and economic fluctuations and for their penetr…

The executive order you link to has not been in effect since the 70s.

That's not the point. The point is that the government can make it illegal to own gold by executive order anytime it wants.

Re: Krugman on BitCoin

#102

Post by alttab »

jbooth wrote: post #22
nandemo wrote: post #17

Earlier quoted context omitted.

If Bitcoin ever becomes a successful, liquid currency, it will have been partly thanks to the current speculators. They're the ones "mining" the bitcoins. They're taking the risk. In a way, it's similar to gold miners of old. They would invest money in digging and mining for the chance of finding gold. They were in it for the profit. Still, it did benefit other people since there was more gold available for both util…

I think the point isn't about speculators, it's about hoarders. If it becomes a successful, liquid currency, it will be in spite of those hoarding. Coincidentally, with the market looking like it does, at an individual level it's absolutely the right thing to do to hold them, or at best to slowly diversify out, while still not using it for much purchasing. As long as it seems like the right move to hoard them, and th…

Upboat. The guy left with all the bitcoins has a lot of bitcoins. What else?

Re: Krugman on BitCoin

#103

Post by anigbrowl »

danenania wrote: post #46
endersshadow wrote: post #23

Earlier quoted context omitted.

That's not exactly an apples-to-apples comparison. But, to answer your question, "Does this cause people to hold onto their money instead of buying computers, tvs, and iphones?" The answer is yes (with qualifiers). Many late adopters are late adopters because they are holding out for a cheaper price for those goods. From personal experience, I've done this very thing (waiting for prices to come down on a TV before I…

"The answer is yes (with qualifiers). Many late adopters are late adopters because they are holding out for a cheaper price for those goods. From personal experience, I've done this very thing (waiting for prices to come down on a TV before I bought it). I put that money into something with a higher return for the time being." But you could have kept waiting and prices would have kept falling. Eventually you spent yo…

But you could have kept waiting and prices would have kept falling. Eventually you spent your money anyway. This seems to indicate that it wasn't the situation of falling prices that prevented you from buying a TV, since that never changed, but some external factor.

Prices don't fall linearly, in many cases, but hit a floor representing the cost of manufacturing and distribution. Then, different brands have different price decay curves. Finally, the price decay of a given good has to be offset against the buyer's utility function. In practice, I don't sit there and calculate everything out; I start with a budget and a list of manufacturers I prefer, and then look for the best products that fit within those constraints.

Re: Krugman on BitCoin

#104

Post by BarkMore »

alenlpeacock wrote: post #92

There's another argument against fixed currencies like bitcoin that should resonate with the hackernews crowd, and it's this: A currency with inflationary pressure incentivizes investments into new enterprises. A currency with deflationary pressure, instead, discourages investment outside of banking. Here's why. With a slight inflation, money slowly loses value. Even if you put it in the bank and earn interest, it lo…

A counter-argument is that people invest in new enterprises even when the banking real interest rate is positive.

Re: Krugman on BitCoin

#105

Post by jarek »

icebraining wrote: post #76
jarek wrote: post #24

Earlier quoted context omitted.

I'm not sure I see the value of a pure digital currency, anyway. My dollars are digital when I want them digital (paycheques, moving between accounts, bill payments), and physical when I them physical (ATM withdrawal, quick cash IRL transactions).

And non-existent when the organization holding them for you (e.g. Paypal) decides to freeze your account.

The organizations holding them for me are chartered banks regulated by the government of my country, if they decide to allow freezing the amount I have larger problems.

As it happens I consider the need for a private third-party money transferring organization to be one of the larger failures of North American consumer banking systems, but I digress. It's slowly improving in Canada, I can now do inter-bank digital transfers between my accounts without shelling out $50 for a wire. Maybe in another decade or two we'll get to SEPA level.

Re: Krugman on BitCoin

#106

Post by zach »

sliverstorm wrote: post #82
alenlpeacock wrote: post #79

Earlier quoted context omitted.

When Bitcoin reaches supply maturity, there will be no more bitcoins to mine, making those that are currently held even more valuable, making those who hold them even more inclined to keep hoarding them, no?

Not to mention, as bitcoins are inevitably lost here and there (a deleted wallet.dat here, a hoarder there, a transaction wired to a mistyped address that doesn't exist) the supply of bitcoins will actually shrink.

Wow, that's an excellent point. That doesn't happen easily with gold. People retrieve gold from ships sunk hundreds of years ago.

Actually, is there an efficient way that physical gold or other precious metals can be intentionally destroyed or put beyond use? Has anyone tried to use this technique to corner a market?

What would happen if Hugo Chávez actually got his hands on 211 tons of actual gold and announced he has verifiably shot half of it into the sun? Presumably, you could make money on such an event through the options market.

So it's a great point that it's comparatively easy to do such a thing with Bitcoin. It's even entirely possible to do it by mistake (i.e. a programming error).

Physicality is a fantastic hedge against loss.

Re: Krugman on BitCoin

#107

Post by zerostar07 »

snorkel wrote: post #33

"What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin." Spot friggin' on, Mr. Krugman. Bitcoin's supply limiting design has added a psychological dimension that encourages collecting. Perhaps when Bitcoin reaches supply maturity the value will stabilize but for now its…

He also mentioned that in general any limited commodity such as bitcoin or gold is worse than the current system of currencies.

Re: Krugman on BitCoin

#108

Post by bdr »

1. What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich.

Bitcoin is facilitating transactions. The Bitcoin economy is growing, slowly. There are a lot of people, including funded startups, working on making it useful in more cases. It's far, far too early to say that Bitcoin isn't facilitating enough transactions.

2. Bitcoin hoarding is not due to the fixed total supply, but due to the expectation that the Bitcoin economy will grow. If there was built-in inflation at 3% and the economy was growing at 20%, hoarding would still happen.

3. No matter how much hoarding is happening, there will be some exchange rate from Bitcoins to dollars. The existence of a traded exchange rate is proof that some people think Bitcoins are not undervalued. These people will be willing to spend their Bitcoins.

4. The claim that Bitcoin is worthless because of guaranteed deflation is self-contradicting.

5. Volatility is bad for a currency, but this is an addressable problem. Bitcoin-priced marketplace The Silk Road offers its sellers currency-hedged escrow.

6. Even if it fails as a currency, Bitcoin is interesting and novel as a technological invention. For the essence, see the last paragraph of Hal Finney's insightful email from 2008 (and the surrounding thread): http://www.mail-archive.com/cryptography@metzdowd.com/msg099...

Re: Krugman on BitCoin

#109

Post by danenania »

jeffdavis wrote: post #77
sirclueless wrote: post #20

Earlier quoted context omitted.

Fair enough, but I think most economists would agree that we shouldn't be trying to make savers and fixed-income earners wealthy in the first place. We should make it economically advantageous for the people with money saved up to invest it into the economy.

I've always been suspicious of this "spending is better than saving" mantra. I'm sure it's better in some situations, but I don't think it's better in general. The point of an economy is not to spend money, it's to create more wealth for more people by allocating resources efficiently. If someone "hoards" money, and prices are stable, that person is effectively staying out of the resource-allocation business. It does…

In fact it's not a question of being in the game or out of the game, just a question of time preference. The sole purpose of accumulating money is to eventually spend it. Maybe it will be spent tomorrow, maybe by future generations, but it will eventually contribute to the economy and allocation of resources on whatever schedule and for whatever purpose the owners of the money deem best given their unique situations. The argument in support of inflation is that it's somehow preferable, in the vast general case, for people to spend their money sooner rather than later, and worth using force to accomplish this. It's as presumptuous and arrogant as it is arbitrary, an essentially totalitarian position.
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