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Krugman on BitCoin

krugman.blogs.nytimes.com

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Re: Krugman on BitCoin

#121

Post by kbob »

The next hacker currency should keep Bitcoin's strengths, i.e., decentralization and anonymity, and lose its weakness, the fixed supply.

Is anyone working (in public) on the problem of designing a currency that adjusts its supply algorithmically based on appropriate metrics? Sort of a Greenspan-o-matic?

I've thought about this for all of 90 seconds, and it seems like the metric might be some combination of transaction volume, a price index, number of users, and the current money supply.

Re: Krugman on BitCoin

#122

Post by danielsoneg »

johnthedebs wrote: post #100
maratd wrote: post #84

Earlier quoted context omitted.

> Perhaps when Bitcoin reaches supply maturity the value will stabilize I absolutely hate Krugman, but this is Econ 101 and even he gets it right. Bitcoin was a flawed experiment from the start because it has an absolute supply limit. Reaching that limit won't help. It'll make things worse. The money supply needs to expand for healthy economic activity and growth. If it doesn't, weird shit starts to happen. Here's an…

The problem isn't the psychological effects of needing to constantly lower prices – this happens all the time in the tech industry, and everyone in that industry is doing just fine psychologically. Rather, it has to do with the fact that constantly down-shifting prices cause people not to buy nearly as often as they would if prices were stable or slightly inflationary. As a result of that, the economy slows down (som…

The other big problem is that debt loads don't drop along with prices - which effectively makes them rise. Falling prices (which lead to falling wages) + stable debt loads make it far harder for debtors to pay off their debts, which puts even further drag on the economy.

Re: Krugman on BitCoin

#123

Post by gwright »

gwright wrote: post #25
dasil003 wrote: post #6

Earlier quoted context omitted.

Uh, where are the BTC prices on that site? If you want to come across as anything other than a froth-mouthed crackpot hurling ad-hominems at a respected economist, you need to offer up some actual data. Granted, Krugman didn't either, but he's got a reputation to fall back on, you've got nothing.

I'm not sure Krugman's reputation is as reputable as you suggest. Some might even call him a "froth-mouthed crackpot hurling ad-hominems". Not me of course, I wouldn't want to hurl ad-hominems in place of a real argument. Better to appeal to authority.

Sigh. Voted down because of a little humor and the fact that I'm not persuaded that Krugman is a accepted authority on economic matters.

Certain circles of people do view him as an authority, but many others do not. There is no consensus as to Krugman's expertise and so relying on his authority (as opposed to his particular argument on a particular issue) is dubious.

Economics is a difficult field in which to find concensus on many issues and so an appeal to authority in this area should automatically raise eyebrows.

Re: Krugman on BitCoin

#124

Post by sethg »

orangecat wrote: post #117
sethg wrote: post #70

Earlier quoted context omitted.

People who want TVs (or who want to replace their current TVs) will buy one eventually . But if you’re in the TV-manufacturing business, there’s a big difference between a world in which the average TV gets replaced every three years and a world in which it gets replaced every four years.

And if TV prices were rising instead of falling, people would replace them more often?

Why do people line up for things like day-after-Thanksgiving sales? Because they know that the retailer is offering someting they want that will become more expensive later. So yeah, people who want TVs, and who think that TVs are about to become more expensive, will hurry up to get TVs, while those who think that TVs are about to become cheaper will put off their purchases.

In countries that have hyperinflation, you see extreme cases of this: middle-class consumers spend their paychecks as soon as the money is deposited, because they’d rather have anything on hand than cash in the bank.

Re: Krugman on BitCoin

#125

Post by Astrohacker »

wgx wrote: post #2

tl;dr: The soaring value of bitcoin forces those holding currency to hoard it. The Bitcoin economy has, in effect, experienced massive deflation.

Krugman thinks deflation makes things worse. So if bitcoin ends up making things better, that proves Krugman wrong.

Re: Krugman on BitCoin

#126

Post by gwright »

icebraining wrote: post #74
gwright wrote: post #25

Earlier quoted context omitted.

I'm not sure Krugman's reputation is as reputable as you suggest. Some might even call him a "froth-mouthed crackpot hurling ad-hominems". Not me of course, I wouldn't want to hurl ad-hominems in place of a real argument. Better to appeal to authority.

An appeal to authority is only fallacious if the authority is not a legitimate expert on the subject or if the conclusion is said to be true, and not just probable. In this case, an appeal to authority is a perfectly valid way of asserting that a certain conclusion is more probable than the other.

Lots of people don't view Krugman as a legitimate expert. His opinions are not universally accepted and so I don't think his authority should be assumed.

In any case, if the underlying argument is valid it really doesn't matter who is making it, right? An appeal to authority is really just a shortcut to avoid the full argument but it only works if the full argument (with no appeal to authority) can be made.

Re: Krugman on BitCoin

#127

Post by ajross »

johnthedebs wrote: post #100
maratd wrote: post #84

Earlier quoted context omitted.

> Perhaps when Bitcoin reaches supply maturity the value will stabilize I absolutely hate Krugman, but this is Econ 101 and even he gets it right. Bitcoin was a flawed experiment from the start because it has an absolute supply limit. Reaching that limit won't help. It'll make things worse. The money supply needs to expand for healthy economic activity and growth. If it doesn't, weird shit starts to happen. Here's an…

The problem isn't the psychological effects of needing to constantly lower prices – this happens all the time in the tech industry, and everyone in that industry is doing just fine psychologically. Rather, it has to do with the fact that constantly down-shifting prices cause people not to buy nearly as often as they would if prices were stable or slightly inflationary. As a result of that, the economy slows down (som…

Exactly. In the bitcoin world, you make more money by not investing the money you have and instead holding onto it in the hopes that you'll be able eventually convert it to a stable currency in the future. That's a disaster. Who, for example, is going lend their precious bitcoins to a risky startup when they can just sit on them and watch them appreciate?

Re: Krugman on BitCoin

#128

Post by theschwa »

jpdoctor wrote: post #115
theschwa wrote: post #113

Earlier quoted context omitted.

I'm well aware of how bitcoin works, and for starters bitcoin isn't completely anonymous. It's semi-anonymous. Secondly, a bank doesn't have to practice fractional reserve banking, they can practice Full-reserve banking. In this case the deposit to the bank is really a loan to the bank, with the bank promising an interest rate on the loan. On your point of interest rate, interest rate can't be truly guaranteed in any…

> they can practice Full-reserve banking. ??? A bank makes money by taking deposits (giving interest) and then lending them out (collecting a higher interest). The reserve percentage is that amount that remains unlent. Full reserve = no loans = no profits = no bank. Edit: Yes, you can practice full-reserve with a negative interest rate, which is effectively a safe-deposit box does (they charge a fee for the box). Tha…

http://en.wikipedia.org/wiki/Full-reserve_banking

Re: Krugman on BitCoin

#129

Post by ansy »

martythemaniak wrote: post #29

What I find far more interesting about BTC is its decentralized and (mostly) anonymous nature, rather than arguments about fixed money supply.

BitCoin is no more anonymous than your IP address. As soon as your BitCoin address can be tied to your identity, such as by trading through a major exchange, your transactions might as well have your name on them.

Like IP, anonymity can be emulated through routing mechanisms. Basically laundering your packets and coins. Tor, the state of the art in this kind of anonymity, is not without faults. And there isn't really an equivalent to Tor for BitCoins that I know about.

Related, I know BitCoin can be run over Tor, but this is not the same as a Tor for BitCoin. This merely protects against traffic analysis to tie your BitCoin account to your IP address.

Tor for BitCoin might look more like a network of wallets that simulated a perfectly noisy economy. If A wanted to pay B, A's coins would go everywhere to B, C, D, E, F and so on. Over time coins would pass in and out of people's wallets until at some point the right number would stick to B's wallet equal to the number A sent. Hopefully, the ones that stick to B's wallet will be a mix of ones that A actually sent and other coins being anonymized by the network.

There are obvious flaws in this design. But hopefully it helps illustrate why BitCoin isn't anonymous and the difficulty of making it anonymous.

Re: Krugman on BitCoin

#130

Post by mcantelon »

rabidsnail wrote: post #98
euroclydon wrote: post #93

Earlier quoted context omitted.

How is it any better when prices keep going up? Imagine you're, gasp , a saver, and one day you decide to buy that hamburger, but now you need five or ten times the money to make the purchase as you did, when you stashed it away twenty years ago.

Inflation encourages the savers to put their money to work (by investing in the stock market, for example) so that the amount of money that they have increases in proportion to the growth of the overall economy. This is a benefit.

It doesn't ecourage you, it forces you. Yet currency is misleadingly sold to society as a legitimate store of value.
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