Krugman on BitCoin • Hacker News Board

Re: Krugman on BitCoin

#301

Post by icebraining » Fri, Sep 09, 2011, 1:36 AM UTC

bji wrote: post #298

Duff wrote: post #225

Earlier quoted context omitted.

Intrinsic value is set by the marketplace. Right now, the market perception is that prime numbers (or whatever bitcoins are) are scarce, valuable resources.

Bitcoins are not simply prime numbers. They are account balances in a system that distributes the validation of account balances in such a way that is cryptographically secure, trustable, and decentralized. Provably correct, tamper-proof accounting balance sheets are nothing to sneeze at and it was really a stroke of genius to discover the algorithmic means to create such a thing that is the cool thing about Bitcoin.…

I don't think Bitcoins will achieve prime status either, but not for the reasons you listed:

- Easy of use: this is mostly a matter of software, and I see no reason to believe it has to be difficult to use. With current proposals such as specific tags for websites and such, sending money can be made as easy as inserting someone's email address, the amount and hit "send."

- Unsafe for the sender: nothing in the design of bitcoin prevents the creation of escrow services. It's simply not an issue to be fixed by the currency but by higher level services, just like with other currencies.

- Pseudoanonymity: it's mostly a red herring. When I'm buying from a random Chinese 'shop' through Ebay I won't be able to sue him either. When I'm buying from a reputed shop in my country, I don't need to ask its bank to know who I need to sue.

Re: Krugman on BitCoin

#302

Post by nhaehnle » Fri, Sep 09, 2011, 8:56 AM 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

Inflation does not mean creation of new money. This usage of inflation has become obsolete with the end of the gold standard.

Inflation is by definition a rise in price levels, usually measured by the CPI (whose definition is sometimes subject to debate, but no measure of price levels is perfect; the important thing is to choose one that's reasonable and then stick to it).

Inflation, i.e. a rise in price levels, can then cause an increase of money supply measures, as producing firms take on larger amounts of credit to finance their operations, and this leads to a (rather weak, and only valid over the long run) correlation of inflation and growth of money supply. There are also tertiary effects that can cause both inflation and growth of money supply (such as excessive government deficits). But it's important not to confuse those things.

Re: Krugman on BitCoin

#303

Post by sneak » Fri, Sep 09, 2011, 8:27 PM UTC

kbob wrote: post #142

sneak wrote: post #136

Earlier quoted context omitted.

Most people who use bitcoin don't believe that the fixed supply is a weakness. A lot of us are vastly frustrated at the previous lack of an easy-to-tranact-in pseudonymous INflation-proof currency. The others that were in common use (eGold, Liberty Reserve, and Pecunix) have all become relatively unsafe recently due to their centralized natures. That said, there are bitcoin-network forks out there that remove the max…

How would I find one of the forks?

https://bitcointalk.org/index.php?topic=7500.0

Re: Krugman on BitCoin

#304

Post by nunb » Sat, Sep 10, 2011, 1:42 AM UTC

joelhaus wrote: post #175

sethg wrote: post #61

Earlier quoted context omitted.

If houses got cheaper every year, very few people would want to buy them, and people stuck with mortgages would have a powerful incentive to walk away from them. If cars got cheaper every year, then people would put off buying new cars for longer. If gold got cheaper every year, then a lot of gold coins would be dumped on the market. If everything got cheaper every year, then people with money in the bank (or under t…

> This would lead to factories reducing their production and laying off employees Trade imbalances resulting from an economy run on bitcoins would also decimate most domestic production, so sethg's statement is doubly true. It's the same reason you hear members of congress railing against China's currency peg that artificially deflates the yuan; it makes Chinese exports cheaper to the rest of the world.

Does "deflates the yuan" mean the yuan is deflationary?

In that case its value should get higher and exports should decrease, as happened with the Japanese Yen.

Re: Krugman on BitCoin

#305

Post by nunb » Sat, Sep 10, 2011, 1:47 AM UTC

runako wrote: post #132

danenania wrote: post #42

Earlier quoted context omitted.

"There's a difference between some goods -- electronics -- getting cheaper every year and all goods getting cheaper every year." Which is what exactly? People buy electronics even though they get cheaper every year but they wouldn't buy Xs if they got cheaper every year? Can you give me an example of some Xs?

Houses are a one example. Suppose you're looking at buying a house that's $200k. Then assume that you live in a deflationary environment where all goods get cheaper every year, say by 10%. The immediate conclusion is that in 1 year, the house you want will cost $180k. If you can wait 2 years, $162k, and so on. So while you may eventually buy as the house still has utility, you are likely to delay the purchase as long…

Did you mean the "value of money is going up" in your last paragraph?

Re: Krugman on BitCoin

#306

Post by joelhaus » Sun, Sep 11, 2011, 11:58 PM UTC

nunb wrote: post #304

joelhaus wrote: post #175

Earlier quoted context omitted.

> This would lead to factories reducing their production and laying off employees Trade imbalances resulting from an economy run on bitcoins would also decimate most domestic production, so sethg's statement is doubly true. It's the same reason you hear members of congress railing against China's currency peg that artificially deflates the yuan; it makes Chinese exports cheaper to the rest of the world.

Does "deflates the yuan" mean the yuan is deflationary? In that case its value should get higher and exports should decrease, as happened with the Japanese Yen.

A deflated Yuan allows you to buy more Chinese goods for the same USD[1]. Regarding the second half of your question, you must look at the supply of the currency versus the demand for that currency. It's common for governments to intervene in foreign exchange markets as a means to an end. This makes it a difficult market to invest in, as artificial forces can move the market. Just because there might be a fundamental economic reason for the Yen to appreciate, that doesn't mean the Japanese (or some other) government won't intervene in order to improve their trade balance.

The mechanism that the Chinese government uses to keep the Yuan pegged to the USD, is the purchase of U.S. treasuries[2].

Here is some additional info:

http://fpc.state.gov/documents/organization/65773.pdf

http://www.nakedcapitalism.com/2010/03/on-chinas-currency-pe...

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[1] http://en.wikipedia.org/wiki/Fixed_exchange_rate_system#Mech...

[2] http://www.treasury.gov/press-center/press-releases/Pages/js...