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Bitcoin exchange rate reached $100 USD per BTC

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Re: Bitcoin exchange rate reached $100 USD per BTC

#521

Earlier quoted context omitted.

Yeah, apple is obviously so much more valuable than bitcoin because having computers in prettier cases or phones with prettier user interfaces is incalculably more valuable than access to a provably fair and reliable financial system not captive to the global banking cartels or their crony governments. This place is really starting to depress me.

Are you seriously trying to say Bitcoin has more value than a multi-billion dollar consumer company? Lol.

Not just any multi billion dollar consumer company, a descending and overvalued one that never really contributed anything I see as particularly worthwhile at any rate.

Re: Bitcoin exchange rate reached $100 USD per BTC

#522
post #155
post #150

Earlier quoted context omitted.

Oh, I was going to write about Freicoin. It seems like an incredibly fascinating concept and I'd really like to see an online economy emerge around it. Do you use it?

Why would anyone opt in to demurrage?

How is that demurrage any different from inflation, though? I have to invest my cash in things just to get it to maintain the value it has now.

Re: Bitcoin exchange rate reached $100 USD per BTC

#523

Earlier quoted context omitted.

> "In fact we see deflation in specific markets like housing which helps to clear out the bad decisions and mistakes and set the base for future expansion." Periods of asset deflation after over-investment/economic distortions may act as a balance, but it isn't "good". Having your net worth halved is crippling. > "The simple fact is that no economy and social order has ever imploded due to deflation" No economy implo…

I'm actually genuinely curious what research and theory you are referring to, and I wouldn't know where to start looking. Could you give me some pointers?

You could start with Friedrich Hayek and the Austrian school if you're interested in a serious defense of anti-Keynesianism.

Note: I'm not saying I agree with them, just answering your question.

Re: Bitcoin exchange rate reached $100 USD per BTC

#524

Some people here seem to think that this is temporary, that sometime in the future Bitcoin will stabilize into a glorious future global currency -- never mind the new class of cryptobarons it will have created from its inner circle, through shameless hoarding. My question is, what then will happen when Bitcoin stabilizes, that is, when the time to new coin mined approaches practically infinity? Let's assume the globa…

Deflation generally benefits almost everyone. Things get cheaper and cheaper over time, while the amount of money you make stays the same. Technology is a beautiful example of this. Almost every year technology gets cheaper and cheaper, and better and better for the same amount of money spent. And of course this is great for everyone and I don't think many would dispute that.

Imagine a world where that wasn't true. Imagine you had to spend more and more every year just to get the same quality of phone or computer or TV. Now ideally, and depending on what's causing the inflation, your income would increase at exactly the same amount and so it wouldn't make a difference. The same quality TV would cost the same percent of your wage in 1960 as it would in 2013.

But with deflation it's the opposite. Your income will (on average) remain the same, since the amount of money in the economy hasn't changed and it's being divided over the same number of people. But prices will go down due to the economy growing, increasing efficiency, technological improvements, and all that good stuff.

You may see a slight flaw in my argument. Presumably the same amount of stuff is being produced in both economies, regardless how the currency is changing in value over time, and presumably there are the same amount of people to receive all the stuff being produced. So how can people in the deflationary economy be richer, on average, than people in the inflationary one?

Well on average, they aren't. Inflation as you are talking about it is caused by the money supply increasing. Usually due to the government printing more. Whoever gets the money first is suddenly richer, because prices haven't increased in response to inflation yet. The amount of money they have relative to everyone else has increased. Therefore everyone else has become poorer relative to them.

Only on average does everything stay the same, but it's a zero sum game where for one person to benefit, someone else has to lose. The amount of goods in the economy hasn't changed. But the person with more money (obtained through printing money) gets a bigger piece of the pie and therefore everyone else gets less.

Inflation is just a really confusing, inefficient, and indirect form of wealth redistribution. Whoever gets the printed money obviously gets to benefit from it, and everyone else is therefore poorer, including your entrepreneurs and investors and consumers and everyone else.

The only way this isn't true is if the money is distributed perfectly equally so the percentage everyone has is exactly the same as before. However this is not the case in the real world at all.

Re: Bitcoin exchange rate reached $100 USD per BTC

#525

Some people here seem to think that this is temporary, that sometime in the future Bitcoin will stabilize into a glorious future global currency -- never mind the new class of cryptobarons it will have created from its inner circle, through shameless hoarding. My question is, what then will happen when Bitcoin stabilizes, that is, when the time to new coin mined approaches practically infinity? Let's assume the globa…

There are a few replies here that seem to be reacting negatively to the OP due to the tone of the submission instead of the content. To be clear, deflation is categorically bad for a currency. It's terrible, like great depression terrible. The reason it's bad is that deflation makes it more profitable to do nothing than to invest. When this happens, people react by not spending money. The market dies. While inflation…

Why is deflation bad?

Let's look at a single-currency country first. Prices fall. Including wages. Credit is tight - money appreciates without being invested and borrowers have to repay debts in more expensive currency tomorrow, making them more likely to default [Fisher]. People with money benefit - the rich get richer and the banks hoard capital, refusing to make loans. Inflation fuels asset bubbles as the economy over-invests; deflation fuels the opposite as the economy starves itself.

Yes, we have seen deflation. The U.S. and U.K. both experienced crippling deflation in the 1930s [1]. Before that, remember the American populist movement's "Cross of Gold" speech [2]? That wasn't a reaction to an inflationary gold standard. The euro zone offers a more contemporary view of the effects of deflation, as does my Switzerland [3].

Uncertainty in the future path of deflation that is more toxic than deflation per se. The U.S. grew through the Great Deflation in the 1870s and Japan has had mixed real effects from its almost two decade deflation [Morana]. Theoretically, if deflation proceeded at a steady clip, markets could accommodate (Milton Friedman advocated for an economy deflating at the real interest rate [Friedman]).

But what if we have two currencies, e.g. U.S. dollars and Bitcoin? Argentinians have a choice between black market (or "blue") dollars and an available but inflating peso. Tellingly, Argentinians buy dollars primarily for overseas vacations [4]. This is an example of a bad currency (the peso) and a good (the greenback). The Argentinians still execute the bulk of their transactions in pesos, not dollars.

Deflation is not likely to be Bitcoin's death knell, but rather a ceiling on its usage. A deflating Bitcoin will crimp transaction demand for the currency as spenders shift preference to more easily borrowed and spent dollars. Sellers would respond in kind (or, alternatively, sellers who respond in kind would gain market share).

Caveat: if Bitcoins are treated as a financial asset, for speculating versus spending. If so, deflation would proceed un-checked, with speculators driving out the transaction value of the currency. That said, gold has survived both deflation and speculation, so this isn't a fatal blow either.

[Fisher] http://www.jstor.org/stable/10.2307/i332559 The Debt Deflation Theory of Great Depressions (1933)

[1] http://www.amazon.com/gp/aw/d/0143116800/ref=redir_mdp_mobil... See Norman Montagu; British depression

[2] http://en.m.wikipedia.org/wiki/Cross_of_Gold_speech

[3] http://www.ft.com/intl/cms/s/0/1c23c088-60c3-11de-aa12-00144... Swiss central bank moves to weaken franc (June 2009)

[Morana] http://www.icer.it/docs/wp2004/Morana29-04.pdf (2004)

[Friedman] http://www.amazon.com/gp/aw/d/1412804779/ref=redir_mdp_mobil... The Optimum Quantity of Money (1969)

[4] http://blogs.ft.com/beyond-brics/2013/01/17/argentinas-blue-... Argentina’s “blue” dollar blues (January 2013)

Re: Bitcoin exchange rate reached $100 USD per BTC

#526

Earlier quoted context omitted.

Central banks and average people have vastly different goals. Also, large investment banks don't seem to keep their immense wealth in gold.

Large investment banks don't really exist anymore :-) http://www.guardian.co.uk/business/2008/sep/22/wallstreet.mo... "Morgan Stanley and Goldman Sachs, the last two investment banks left standing, will become traditional bank holding companies, marking the end of an era for Wall Street. The Federal Reserve's surprise announcement, which came at 2.30am London time, places the banks under the supervision the bank regu…

This point is utterly irrelevant to jonkee's point. For all intents and purposes MS and GS are large investment banks.

Re: Bitcoin exchange rate reached $100 USD per BTC

#527
post #397
post #341

Earlier quoted context omitted.

There's nothing that happened with BTC between when it cost $14 and now. Comparing it to the shares of Apple that created a whole new consumer industry and substantially changed the information interactions of the whole humankind betrays deep misunderstanding of the question at hand. Bitcoins did not suddenly turned into new way of living, did not produce hundreds of amazingly useful things and did not change how man…

Bitcoin technology allows something that has never before been possible in human history: Two individuals, that never meet in person, can trade with each other without placing any trust in a third party. The implications of this are far-reaching, and will fundamentally shape how governments and businesses operate.

Not really. They still must rely on the Bitcoin peer to peer network, the code behind the Bitcoin clients, and the stability of the Internet. There is still a third party, it's just distributed more widely.

Re: Bitcoin exchange rate reached $100 USD per BTC

#528
post #499
post #477

Earlier quoted context omitted.

Just because people hold money in bank does not mean that the banks will lend people money. In fact, after being bailed out with TARP, many banks did not turn around and increase the amount of lending that they were doing. However, most of them did pay back their lender (the Fed). As with anything, too much of any extreme is bad. Too much inflation or too much deflation. But with fiat currency, it's natural to expect…

> If they don't then the money disappears from the system, but in most booming economic times, more money is created, and eventually more money is printed to provide more base money in order to pay back all that interest. The financial systems works different. You seem to be conflating wealth and money. Money doesn't disappear from the system when someone fails to repay a loan. (Unless you are taking a rather wide, b…

I am talking about M2 money supply shrinking when borrowers default and/or banks fail, as in the great depression -- right?

http://en.wikipedia.org/wiki/Money_supply#United_States

Also I am not sure what mechanism you are describing when you say that central banks pay dividends to their governments. On the contrary, governments like the US use their central banking system to do open market operations on bonds they issue to finance their operations, and usually have to pay interest on that debt. No?

Re: Bitcoin exchange rate reached $100 USD per BTC

#529

Earlier quoted context omitted.

There are a few replies here that seem to be reacting negatively to the OP due to the tone of the submission instead of the content. To be clear, deflation is categorically bad for a currency. It's terrible, like great depression terrible. The reason it's bad is that deflation makes it more profitable to do nothing than to invest. When this happens, people react by not spending money. The market dies. While inflation…

Why is deflation bad? Let's look at a single-currency country first. Prices fall. Including wages. Credit is tight - money appreciates without being invested and borrowers have to repay debts in more expensive currency tomorrow, making them more likely to default [Fisher]. People with money benefit - the rich get richer and the banks hoard capital, refusing to make loans. Inflation fuels asset bubbles as the economy…

With an inflationary currency, you can pay your workers nominally slightly more each year while paying them the same amount or even slightly less in real terms.

With a deflationary currency, you can pay your workers nominally slightly less each year while paying them the same or even slightly more in real terms.

How would the average person on the street react to being told "You've performed really well this year, so we're only going to decrease your salary by 1%. Congratulations on your raise!"?

Re: Bitcoin exchange rate reached $100 USD per BTC

#530

Earlier quoted context omitted.

One problem here is that you're considering the currency as an asset that should appreciate. The argument of most economists today is that currency should not appreciate because it encourages hoarding what is essentially a useless non-good, it's just a token for convenience of value transfer. If real goods appreciate, it's because the value offered by that good to the marketplace has increased, so the market pays a c…

You're just noting the difference between a centrally-managed currency and one that's not. The value of bitcoins tends to move quite a lot lately, so it's like trying to price something in AAPL stock or something right now--you have to peg the value to a slower-moving reference currency. (And that's typically how BTC-denominated goods are priced, for example on the Silk Road the product prices are pegged to the USD.)…

>If I tried to find a gas station that would sell me a gallon of gas for $2USD today I'd be out of luck, but 2-3 years ago I'd be able to go anywhere in America and get that deal.

That illustrates that the price of oil fluctuates. The USD hasn't dropped in value by 50% in the last two years.

Most of currency is fluctuation is fluctuation relative to other currencies. If the price of the Icelandic krona plummets relative to USD and GBP, it doesn't mean that all the prices in Iceland immediately rise to compensate. People in Iceland are still paid in krona and buy things in krona for approximately the same number of krona.

But if the price of BTC rises suddenly, prices do suddenly decrease because at the moment it's just a proxy. There's no real internal market: there aren't people who are paid in BTC and have their savings account in BTC and make their mortgage payments in BTC and buy their food in BTC.

So BTC really isn't like other currencies. It's fluctuating massively even from an internal market perspective.

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