171–180 of 209 posts
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Except that there are markets where Euros are the currency. Can you actually name a market where weights of gold or other metals are used as currency without first looking it up?
Yes, there are gold dealers all over the place. You might get a lousy deal, but the currency exchange at the airport will give you a lousy deal on a pocket full of Euros, too.
The fundamental flaw is not with bitcoin, but with people. At the beginning of march, I told all of my friends that Bitcoin was worth more than it was selling for, for many of the reasons listed in the post. It's essentially inflation proof; supply of bitcoin is not going to outstrip demand. I reasoned, then, that long term, the value is likely to go up. This is great if you're planning on spending any bitcoins as cu…
> The important thing to remember is that this currency is not inherently worthless. Yes, it is. Like all fiat currencies, Bitcoins (as distinct from the physical artifacts in which some of them might be housed) have no inherent value, only the value that results from the fact that some people are currently willing to accept them for other things. > As long as people will still accept and trade in bitcoin, Bitcoin wi…
The Bitcoin craze is without a doubt one of the most insane things I've lived through. I feel badly for all the late arrivals who are (anecdotally) dipping into long term savings and levering up to buy them. The dynamic is identical to me between this, the NASDAQ at 5000, and the Case Schiller index just under 190. Maybe some economists out there are trying to be polite, but this is just nuts. Best regards to those i…
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IMHO, this isn't a failure. We know that it's not going to be a business-as-usual currency. Easy credit is an incentive for business; inflation is an incentive for consumers. Governments have much better control over that. BC is better understood as a commodity market with a simpler financial instrumentation. Instead of trading contracts for goods, you are able to trade the good itself, at internet speed and scale. T…
Except that Bitcoin is not a commodity (as the term is commonly understood) because it has no use other than as a currency.
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Bitcoin is a commodity backed by Mathematics with the convenience of transfer of ownership through electronic rather than physical means. When the last coin is mined in 2140 the point of deflation might hold if it was a currency, but it's not. It is a faith based value store based on supply and demand, just like gold, which has next to no useful properties other than being shiny, non-tarnishing, conductive AND PEOPLE…
Bitcoin isn't backed by anything. "Backing" is also grossly misunderstood in general. Any "Backing" a currency has can generally be thought of as an put option on something fungible. For example, gold will never drop below $10-$20 per Oz because of the industrial/jewelry/etc uses people find for it. However, that "backing" only makes up a small percent of the price of gold.
It's unusual in that it does have a cost of creation - the expense of the machinery and power required to mine a bitcoin. So it does have a "base value" of a sort, you just can't redeem it.
Think about it this way. People spend hours arguing about this, but in reality which would you actually want to use? The currency that will increase in value if you don't spend it or the one that decreases? That is, can you make any argument of why it would be rational for you yourself to not use bitcoin, all else equal?
This fundamental flaw is absolutely glaring to anyone who has any understanding of economic history -- and it's amazing to me how many technologists willfully disregard several centuries of accumulated experience. Because of their built-in deflationary spiral, Bitcoins can never meaningfully be used as a medium of exchange: it will always be tempting to keep your Bitcoins in your pocket and let them appreciate instea…
> it will always be tempting to keep your Bitcoins in your pocket and let them appreciate instead of using them for needed goods and services.
What's wrong with this? If you choose to take a choice which actually makes you better off, how is that a bad thing? Shouldn't people saving/investing their money be encouraged?
>And certainly, no one will take on debt denominated in Bitcoins.
They would if the interest rates became low enough to make up for deflation. As you claim, more people would save a deflating currency, which will further push down interest rates (since when people save money they usually invest it or put it in a bank which loans 90% of it back out.)
Inflation necessarily makes everyone worse off. The person that prints money can now buy more goods. But the amount of goods in the economy doesn't change. So there is less for everyone else. It's effectively a very confusing and indirect method of wealth redistribution.
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According to Wikipedia [1]: Whether deflationary spirals can actually occur is controversial. Now I'm not an economist, but I have yet to see a solid, intuitive argument as to why deflation is necessarily a bad thing for Bitcoin. Suppose the value keeps going up, and a few years from now it's at $1,000 / bitcoin -- lots of poeple have been buying bitcoins wherever they can, and not spending them. Well, at some point…
I have yet to see a solid, intuitive argument as to why deflation is necessarily a bad thing for Bitcoin So deflation is a general decline in prices which usually caused by the reduction in the money or credit supply (in Bitcoin’s case it’s the Money Supply). However if prices are falling through deflation then, you’re not incentivised to spend because; you’re going to get a better deal tomorrow. Now as currencies ar…
People not spending money is generally a good thing. There are more resources to go around for everyone else and other people can afford more things with the same amount of money. Most people who save money invest it, which benefits the economy in the long term.
>In order for an economy to get out of the deflationary trap and to counter deflation, fiat currencies can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation.
This hurts everyone though. Everyone has the same amount of money they did before, but suddenly everything costs more. No wealth is actually created by doing this, the same amount of goods are in the economy. But the person who gets the printed money buys a bunch of them, and then has a larger share of the pie, leaving everyone else with less.
Yes bitcoin has a mechanism for creating new currency, but this was a necessary evil in order to distribute the first bitcoins relatively fairly. It doesn't actually benefit anyone to give free bitcoins to some people just for running their computers a lot.
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On the flipside, doesn't this also incentivize vendors to accept BTC?
no, because if persons with BTC hoard them as a value store rather than spending them as a currency, the merchant won't see (significant) spending from BTC holders.
This fundamental flaw is absolutely glaring to anyone who has any understanding of economic history -- and it's amazing to me how many technologists willfully disregard several centuries of accumulated experience. Because of their built-in deflationary spiral, Bitcoins can never meaningfully be used as a medium of exchange: it will always be tempting to keep your Bitcoins in your pocket and let them appreciate instea…