Krugman on BitCoin • Hacker News Board

Re: Krugman on BitCoin

#201

Post by mcantelon » Wed, Sep 07, 2011, 9:10 PM UTC

mousa wrote: post #146

mcantelon wrote: post #114

Earlier quoted context omitted.

Fiat currencies discourage saving by gradually stealing the value of the saved money via inflation. Theft isn't essential to trade: people will still innovate and exchange without being coerced into doing so by the systematic devaluation of their previous economic contributions.

I don't think there is any reason to encourage saving money. Living within your means, yes, investing, yes, but saving under your pillow, especially if you had a non-inflating currency, isn't good for the economy. Even if it should be encouraged, it doesn't matter the logic of it, people won't accept making less and less money over time. Non-fiat currency + population increase makes that inevitable.

>Living within your means, yes, investing, yes, but saving under your pillow, especially if you had a non-inflating currency, isn't good for the economy.

It's good for the individual if investment opportunities aren't adequately regulated.

Re: Krugman on BitCoin

#202

Post by kevinpet » Wed, Sep 07, 2011, 9:18 PM UTC

alttab wrote: post #99

theschwa wrote: post #87

Earlier quoted context omitted.

Collecting a currency wouldn't be a problem if there was some type of Bitcoin bank. These people who are hoarding the currency could put their Bitcoins in the bank for a promised interest rate, and in the mean time the bank could loan out the money to borrowers for new investments, thus growing the economy. I'm also not sure how much Krugman has looked at the price of Bitcoin. Every time I've looked at the price it c…

I think you need to read more about bitcoin. First, having a centralized bitcoin bank defeats the purpose of a peer-to-peer system entirely. Your identity is no longer anonymous. Second, providing interest to those that hold their bit coins in this bank must provide some facility for the bank to be able to give out bit-coins they didn't previously have (fractional reserve banking). Due to the mining nature of bit-coi…

Bitcoin is not designed to be anonymous. From bitcoin.org: "While the Bitcoin technology can support strong anonymity, the current implementation is usually not very anonymous."

Re: Krugman on BitCoin

#203

Post by Tichy » Wed, Sep 07, 2011, 9:20 PM UTC

Tichy wrote: post #10

It seems a bit premature to judge that way. For example now that the exchange rate is slowly falling, more people might be considering to part ways with their BTC. So things might eventually settle down. It is still very early days. Also, I suspect few people realize that they should not hold on to their normal money because governments will continually seek to devalue it (that seems to be the takeaway from the artic…

Why the downvotes? Because it is about BitCoin.

Re: Krugman on BitCoin

#204

Post by icebraining » Wed, Sep 07, 2011, 9:31 PM UTC

Duff wrote: post #198

icebraining wrote: post #150

Earlier quoted context omitted.

Yes, that's why I chose that example. The thing is, currencies are and have always been a commodity with many traders. Bitcoin being treated as a commodity does not prevent it from being a currency.

A penny is made of zinc, but not all zinc is a penny. A square is a rectangle, but not all rectangles are squares. Scott is on the right path -- there's some sort of threshold where a substance is more valued as a transaction medium than for its intrinsic value.

But Bitcoin has no intrinsic value. So what's the threshold there?

Re: Krugman on BitCoin

#205

Post by michaeldhopkins » Wed, Sep 07, 2011, 9:34 PM UTC

euroclydon wrote: post #200

danielsoneg wrote: post #122

Earlier quoted context omitted.

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.

Wow, for all I've read about Austrian Economics, I've never heard that simple yet devastating argument.

Just to be clear, it's an argument against fiat currency as deflationary and inflationary shocks occur in those systems. The effects of deflation and inflation over time are countered with market-set interest rates -- higher savings and loan rates in an inflationary period and low-to-negative rates in a deflationary period. Yes, in a deflationary economy a (for example) -5.00% interest rate might be fair and would happen were it allowed.

Re: Krugman on BitCoin

#206

Post by scott_s » Wed, Sep 07, 2011, 9:34 PM UTC

Astrohacker wrote: post #120

Krugman prefers the dollar, which has a supply that is constantly inflated by the central bank. But if the dollar is so good, why do people have to be forced to use it? (You have to pay your taxes in dollars, and you have to accept payments for debt in the form of dollars.) And how come bitcoin adoption has radically grown even though no one is forced to use it?

The dollar is so good because people are forced to use it. It's the currency of the land, which is enforced by the government. Hence, people use it.

That bitcoin adoption has grown significantly does not necessarily mean it will remain as a viable currency in the future.

Re: Krugman on BitCoin

#207

Post by mathmate » Wed, Sep 07, 2011, 9:44 PM UTC

The problem is about finite amount of BitCoins. What happen if you introduce a new coin, SubBitCoin, such that a BitCoin is ten SubBitCoins (the quantity of coins is increased ten fold) and you must pay something for the change. Increasing the cost of changing the coin and introducing in the future a different ratio: A BitCoin is only 9 SubBitCoins eliminate the problem.

Re: Krugman on BitCoin

#208

Post by Steko » Wed, Sep 07, 2011, 9:51 PM UTC

JoachimSchipper wrote: post #178

tptacek wrote: post #168

Earlier quoted context omitted.

To be clear: I'm not saying the original design was a scam. Only its realization as a real system people can interact with and spend money on. This whole system is morally no different than Zynga tomorrow setting up a system to trade options on Farmville tomatoes.

To be clear: I think that some people really do believe that Bitcoin is going to overthrow the monetary system and free us all from the evil government. I also think that quite a few more people believe that Bitcoin can only go up (designed for deflation, right?) "Bitcoin is a scam" is simply not enough to explain stuff from the Bitcoin bulletin to open source GPU mining software - hard work by obviously capable peop…

The people that recommended Madoff's fund to their family and friends were probably well intentioned too. And the fund probably wasn't a Ponzi scheme from the beginning either but in the end a scam is a scam.

Re: Krugman on BitCoin

#209

Post by msbarnett » Wed, Sep 07, 2011, 10:02 PM UTC

mcantelon wrote: post #114

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…

Fiat currencies discourage saving by gradually stealing the value of the saved money via inflation. Theft isn't essential to trade: people will still innovate and exchange without being coerced into doing so by the systematic devaluation of their previous economic contributions.

Inflationary currency does absolutely nothing to discourage saving value, it merely discourages saving value in currency by stuffing it under a pillow, where it does no one any good.

Save your value in assets.

Re: Krugman on BitCoin

#210

Post by maratd » Wed, Sep 07, 2011, 10:04 PM UTC

stevenwagner wrote: post #191

sesqu wrote: post #161

Earlier quoted context omitted.

> In a normal economy, the population is constantly expanding. That may be, but the western world is then abnormal. US population is projected to peak at 2030, and a number of countries already have negative population growth. Exponential growth assumptions should not be made for long periods ahead. http://en.wikipedia.org/wiki/List_of_countries_by_population...

Most people don't seem to realize that when your currency inflates, there are people who get the new money. Inflation=wealth redistribution

You're assuming the government turns on the printing press and then spends some money on some social programs? That really doesn't happen anymore (if it ever did).

Various operations by the Treasury and Fed affect the banks. Then you get a shiny new credit card in the mail. I wouldn't call that wealth redistribution.