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Bitcoins: The Second Biggest Ponzi Scheme in History

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Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#271

Post by cheald »

gutnor wrote: post #268
NikolaTesla wrote: post #180

Earlier quoted context omitted.

Agreed on your first point. (no sarcasm intended) Are you saying that a currency that cannot be controlled (e.g. the money supply controlled by something like a federal reserve) is more dangerous than one that is?

Just to reply in my own words without being labelled as "having my stake in the Keynesian camp". I don't know what that means (not exactly anyway) but that does not seem like a compliment here on HN. I'm a regular IT guy, unless I create a hot startup I will always be a guy whose influence can only be measured by statisticians. With that out of the way. I don't want to live in a country or principally trade in a curr…

I suspect most people here will be in the Keynesian camp; folks heavily invested in Bitcoin probably aren't (specifically, most folks who tend to be heavily free-market/hardline capitalist tend to favor Austrian economics), but I would be surprised if that's the majority position. Other than a small bump in the 1970s, we've more or less been operating on Keynesian economic policy since FDR.

Inflation and deflation only really impact you when a) your wages get out of sync with cost-of-living prices, or b) you are borrowing or lending money (or just have cash sitting around that isn't being utilized in any fashion). If your wages and prices all fell to 1/10000th of what they are today, your purchasing power (in terms of hours worked per loaf of bread gained) would remain the same.

Deflation would harm your ability to (responsibly) take on debt. But, it's arguable that our current economies are so heavily debt-fueled because of our inflationary policies, as well, so it's worth keeping in mind as a variable when processing the concept that deflation = less borrowing. Deflation is scary to Keynesian economists because the Keynesian model only works when people aren't significantly saving anything beyond what they invest - that is, their money is all either spent on goods, or is loaned to other people. Holding money in an inflating economy is irrational since it is constantly losing purchasing power; thus, since it is in your best interest to spend your money as soon as you make it (either on goods and services, or by investing it somewhere that will offer a return greater than the rate of inflation), money keeps on rolling around in the economy.

The theory is that once people start socking away money in their mattresses, you get recession or depression. Deflation would encourage lending (either directly or through investment), but since it discourages borrowing, people may end up unable to find people to accept their money, and the economy grinds to a halt.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#272

Post by pretense »

ubernostrum wrote: post #153
NikolaTesla wrote: post #123

Earlier quoted context omitted.

The real danger of Bitcoins is not its volatility, but its potential to illustrate the downside of all fiat based currency when compared with something like Bitcoins whose money supply does not fluctuate based upon the needs of a few. If that fact ever reaches the consciousness of enough people worldwide, watch out.

I hate to say this, but at this point when I see someone use the words "fiat currency" unironically, I also expect to hear an argument about gold fringe on a flag, and other similar easily-repeated cargo-cult phrases/arguments against whatever the person doesn't like. One of the real dangers to Bitcoin is precisely that sort of public image.

But doesn't your non-ironic use of "cargo cult" permit unbridled use of other meme-like absurdities ad nauseam?

Like, now, I'm free to accuse you of being a secret agent of the notorious hacker group named Anonymous, infiltrating this site under an assumed pseudonym. And worst of all, I could make that claim non-ironically, if I so desired.

Do you see how ridiculous this is all becoming?

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#273

Post by bushido »

fthssht wrote: post #204
bushido wrote: post #137

Earlier quoted context omitted.

This is among the most ridiculous statements I have heard about how the markets work. Its actually the exact opposite, the lesser the people the lesser the fluctuations/volatility. And this is not just about the markets, it applies to most things. ex: 1. Single drug company selling the life changing drug = High near-fixed-global price | As soon as more drug companies can sell increase price competition, higher varian…

Those examples are a joke. What about the volatility of big cap vs small cap stocks. Isn't that more relevant than suitors and relationships?

1. The point on suitors and relationships was meant as a joke but is a relatively easier example to use when explaining a concept to the layman.

2. Big cap vs Small Cap != Necessarily More Relevant (its relevant to the principle of volatility, but requires more complex understanding. This understanding is absent for the OP of comment thread I replied to - to explain further the presence of market makers, prop desks/professional traders, institutional block trades, quant. systems, availability to borrow shares to short, short sqeezes etc. that are present in large cap equities/futures/opts markets reduce volatility and skew the data towards the hypothesis that more owners reduces volatility. A number of these influencer's make the topic relatively more complex to understand for a layman and the people who feed them information aka news media).

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#274

Post by gutnor »

ashray wrote: post #7

The analysis in this article is so flawed that it's hard to take it seriously. A more balanced analysis might have helped. Sure, bitcoin has several terrible characteristics that have been exposed over the past few weeks (volatility, tons of speculation, new users don't understand wallet security, etc.) But to insinuate with absolutely zero understanding that the creators of bitcoin did this to get rich is just plain…

> Sure, bitcoin has several terrible characteristics that have been exposed over the past few weeks (volatility, tons of speculation, new users don't understand wallet security, etc.)

Is there any sort of solution to that ? Seems like in order to become a currency, volatility at least will need to be reined in ? All the rest is like meh, no worse than cash and regular transaction on internet. But you can't use a currency seriously (one that does not have a country economy backing it) if its perceived value change that much.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#275

Post by mathattack »

migrantgeek wrote: post #239
shawnz wrote: post #225

Earlier quoted context omitted.

> Bitcoin may recover after a future crash but because nothing is really backing it, it's likely it'll fade into history. When bitcoin was first brought into existence it was worth nothing, and people invested anyway for mostly speculative reasons. Lets assume that at some point in the future it will be worth zero again, once the current batch of investors cash out. Why will it suddenly not have the speculative value…

It'll always have some value and may always be traded. I'm sure people still own and trade pogs but I wouldn't call pogs a currency. When I said that it'll fade into history I meant that sites like Amazon will never accept it. By definition, currency is "the fact or quality of being generally accepted or in use". If it isn't widely accepted, it's just not currency IMO. The primary benefit seems to be anonymity and th…

I'm not so sure about this. That's like saying, "People will always have AOL accounts." Well, eventually they became irrelevant. In addition, there are other ways it could end. Perhaps a government finds a way to shut it down. Or there's some kind of fraud. Or perhaps they become a victim of their own success, and someone else creates a better version.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#276

Post by gnaritas »

NikolaTesla wrote: post #262
gnaritas wrote: post #254

Earlier quoted context omitted.

> If mining additional Bitcoins at present is not economically viable than Bitcoins are not (currently) a fiat currency. Whether Bitcoin can be mined or not has absolutely nothing to do with whether it's a fiat currency or not, so your logic does not follow. Fiat doesn't mean "can easily manipulate". Any currency that isn't backed by (value derived from) a hard asset is a fiat currency. Burning electricity to create…

> Any currency that isn't backed by (value derived from) a hard asset is a fiat currency. (I'm not a gold bug, I could care less about gold, if gold offends, substitute some other tangible commodity) That's my point that Bitcoin is more of a commodity currency and is not (at present) a fiat currency. The fact that the electricity is gone doesn't make any difference. Mining gold requires fuel and labor which is gone,…

I agree it's acting more as gold now, but there's no doubt it's intended to be a currency and as a currency it's inherently a fiat currency. However gold is a hard asset that has actual real world uses outside its monetary value; it's a fantastic metal.

Its limited supply doesn't give it value because it's but one of many crypto currencies[1] and its value is derived only from being the first mover and thus network effects and confidence. That money could easily abandon Bitcoin and flee into another crypto currency any time general confidence in it fails; for example if say LTC or PPC show more stability over time because of their differences from BTC and BTC fails to stabalize over time due to its deflationary nature.

[1] http://coinmarketcap.com/

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#277

Post by gnaritas »

NikolaTesla wrote: post #270
gnaritas wrote: post #255

Earlier quoted context omitted.

Gold isn't a currency, it's a commodity.

Gold can be a currency, called a commodity currency, not a fiat currency.

Sure it can be, and was in the past; but we don't live in those times. Gold today is a commodity.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#278

Post by army »

cynicalkane wrote: post #119
jseliger wrote: post #113

Earlier quoted context omitted.

Money develops out of market exchanges. Money was not used for its own sake initially, but it becomes widely used as money as a result of innumerable transactions within the economy This also doesn't appear to be true: see David Graeber's book Debt: The First Five Thousand Years for his descriptions of how money actually emerges from religious ceremonies and temples, not barter (as most econ books have it) or "market…

I wouldn't trust Graeber, as he is frequently wrong about easily verifiable facts in such a way that it supports his world view. There's no reason to trust a liar when he tries to tell you something you don't know about. My favorite Graeberism is when he describes the founding of Apple: > Apple Computers is a famous example: it was founded by (mostly Republican) computer engineers who broke from IBM in Silicon Valley…

Thanks for reminding me of that quote - it's rare you find some much hilarity packed into a single sentence.

Re: Bitcoins: The Second Biggest Ponzi Scheme in History

#280

Post by migrantgeek »

kylebrown wrote: post #263
migrantgeek wrote: post #216

Earlier quoted context omitted.

I think the point is that people aren't buying bitcoins like I might exchange my money for South African Rand. When I exchange Dollars for Rand, I can more easily use the Rand to purchase goods and services in South Africa. I'm not speculating the Rand will be worth more in 2 weeks time. I just want something more fungible. It seems people who are buying bitcoins now aren't doing so to purchase goods/services. They a…

But bitcoins are more fungible than either USD or CNY, because it is cross-border and "offshore". That's why the Chinese seem willing to pay a premium, because BTC cannot restricted by capital controls. The cross-border, "offshore", unseizable aspect was the biggest reason for my initial interest. Not the potential price gains (I always assumed price would top below $100 and remain a relatively tiny niche currency fo…

How does being offshore make it more fungible?

I cannot buy groceries, pay my mortgage, put gas in my car, etc as I do with the USD right now. Because I can't use BTC as easily as USD it is by definition less fungible.

It also seems seizable. Didn't Silk Road have their stuff taken?

It does seem more safe in BTC form but again to use it for most things requires an exchange back into a popular currency and state actors can easily control exchanges.

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