Bitcoin and positive vs. normative economics • Hacker News Board

Re: Bitcoin and positive vs. normative economics

#161

Post by [deleted] » Sat, Dec 28, 2013, 9:30 PM UTC

slurry wrote: post #125

natrius wrote: post #51

Earlier quoted context omitted.

We weren't in imminent danger of hyperinflation. I think mass adoption of Bitcoin will cause hyperinflation. If every merchant you patronize today accepted Bitcoin, would you rather have Bitcoin in your bank account or dollars? I'd rather have Bitcoin. They're easier to transfer, they can't be counterfeited, and their supply can't be manipulated. If every merchant accepts Bitcoin and every consumer agrees with my log…

Inflation is a function of money supply and velocity. If everyone adopted bitcoin, the velocity of the dollar would approach zero. Which means that inflation would go down, not up. And yes, I would rather have my [savings] account in a hard, non-inflationary currency. On the other hand, I can only earn interest when someone is willing to take a loan in the currency and pay interest on it. And I am not about to take o…

[deleted]

Re: Bitcoin and positive vs. normative economics

#162

Post by slurry » Sat, Dec 28, 2013, 9:31 PM UTC

prutschman wrote: post #142

slurry wrote: post #125

Earlier quoted context omitted.

Inflation is a function of money supply and velocity. If everyone adopted bitcoin, the velocity of the dollar would approach zero. Which means that inflation would go down, not up. And yes, I would rather have my [savings] account in a hard, non-inflationary currency. On the other hand, I can only earn interest when someone is willing to take a loan in the currency and pay interest on it. And I am not about to take o…

> I am not about to take out a loan in a hard currency when perfectly good inflationary currencies are easily at hand. Assuming the interest rates are the same, I'd agree. Would they be?

> Assuming the interest rates are the same, I'd agree. Would they be?

I doubt they'd be the same in either nominal or real terms. But that's a side issue.

You could already do what you're talking about with gold. A bank could offer gold savings accounts that pay interest on gold loans. They don't do it. Borrowers are deflation-averse and no one wants to deal with the exchange rate fluctuations.

BTC has some legit uses (like buying unjustly banned consciousness-expanding products over the internets) but the built-in deflationary death spiral in its design pretty much ensures that it will never be a serious full-spectrum parallel currency, much less a replacement for the dollar and euro.

Re: Bitcoin and positive vs. normative economics

#163

Post by peterjancelis » Sat, Dec 28, 2013, 9:32 PM UTC

paul wrote: post #159

I'm most bullish on bitcoin when I read articles such as this one, and most skeptical when I read the thoughts of the bitcoin believers. It's truly the most interesting technological development in years, if only because it reveals how little anyone really understands money or economics. Here's another interesting (though imperfect) way of thinking about bitcoin: it's a decentralized corporation, where bitcoins are o…

Exactly. Bitcoin is the first autonomous corporation.

Re: Bitcoin and positive vs. normative economics

#164

Post by davidy123 » Sat, Dec 28, 2013, 9:33 PM UTC

coldtea wrote: post #119

bdcravens wrote: post #6

1) Bitcoin mining has a pretty horrible carbon footprint. ("but so does ..." doesn't eradicate this argument) 2) similar to the author's point that advocates can't tell the difference between "store" and "medium" of value, I can't tell you the number of arguments I've gotten in with people who equate a "store of value" to be the same thing as the "increase in value" 3) It's a 1% wet dream. Make money, potentially hid…

> 1) Bitcoin mining has a pretty horrible carbon footprint. ("but so does ..." doesn't eradicate this argument) From a logical standpoint, "so does X" (e.g gold mining) very much does eradicate this as an argument against BitCoin, unless there is some Y which has less carbon footprint than either. If there is not, then the carbon footprint it's an necessary evil, and a constant through all similar systems.

What's the carbon footprint of an elected government creating more money?

Re: Bitcoin and positive vs. normative economics

#165

Post by shimon » Sat, Dec 28, 2013, 9:33 PM UTC

Aqueous wrote: post #69

atmosx wrote: post #45

Earlier quoted context omitted.

You seem pretty accustomed to economics. Can you explain how exactly or why would anyone buy any items (that's what currencies are for after all) using a deflationary currency? Then again, it's not a design a flaw - as I once thought - it's a clear choice: Why would anyone would want to own a non-deflationary asset? :-) So actually, in my view, BTC as a currency is already failed. No one will be eager to buy online (…

It depends on how fast the deflation happens. BitCoin is not all that useful as a currency right now because it's value is so volatile. This is because it is subject to huge increases in demand as it spreads to more places across the globe. It is not hindered by any export controls or borders, which means it can "infect" whole nations/societies/cultures in lumps, as we saw recently with China, sparking a huge jump in…

How does the volatility of BTC make it desirable for merchants to accept it? Either they hold BTC and are exposed to the volatility, or they convert to a fiat currency and are exposed to some transaction fees.

Perhaps the transaction fees turn out to be lower than those for credit cards, in which case BitCoin maybe becomes an alternative payment network.

Re: Bitcoin and positive vs. normative economics

#166

Post by olefoo » Sat, Dec 28, 2013, 9:33 PM UTC

natrius wrote: post #97

maxerickson wrote: post #85

Earlier quoted context omitted.

The bitcoin supply can't be trivially manipulated. It's still vulnerable to computational attacks (no matter how impractical they may be) and miner collusion.

Agreed, but I think both the computational attacks and miner collusion are on a similar level of difficulty as printing passable counterfeit dollars.

So someday we might see the secret service enforcing rules about how much computing capacity any one entity can control; to prevent collusion attacks on widely used cryptographic ledger systems?

Re: Bitcoin and positive vs. normative economics

#167

Post by wdr1 » Sat, Dec 28, 2013, 9:33 PM UTC

Articulate wrote: post #152

It is deplorable that he used the word "evil" to describe Bitcoin. He fails to point out that Bitcoin is a system and of course it is possible for individuals to use this system to achieve some personal nefarious goals; but we have literally watched banks knowingly gamble huge sums of money in the centrally banked system and the whole system came crashing down. The decentralized nature of Bitcoin will not allow a few…

> It is deplorable that he used the word "evil" to describe Bitcoin.

Krugman is clearly an intelligent man, but in his public writing he has a habit of declaring things he doesn't like as "evil."

Given we know he's not stupid, I assume it's to increase the attention he receives. Based on the re-shares from my left-of-center friends, it tends to work.

Re: Bitcoin and positive vs. normative economics

#168

Post by pdonis » Sat, Dec 28, 2013, 9:35 PM UTC

ubernostrum wrote: post #118

pdonis wrote: post #57

Earlier quoted context omitted.

What's the point of a store of value if ultimately it cannot be exchanged for something else? One can also turn this point around: what requires the store of value to be the same thing as the medium of exchange? The store of value must be convertible into the medium of exchange, but that doesn't mean they have to be the same thing. Yet Krugman blithely assumes that they must be: "To be successful, money must be both…

he doesn't even bother to mention that very few people actually use dollars as a store of value: people don't keep their retirement funds in cash under the mattress. Individual people, perhaps not. But the US dollar is the most widely-held reserve currency in the world, followed by the Euro. Wikipedia states that approximately 2/3 of reserve currency holdings are dollars.

You're assuming that reserve currency holdings are stores of value. I'm not sure I buy that assumption, since central banks use those reserves to manipulate the monetary system in a number of ways, not to store value. Also, as far as I can tell, the total amounts in these holdings are small compared to the total amounts held in stocks, real estate, gold, and other non-monetary stores of value.

Re: Bitcoin and positive vs. normative economics

#169

Post by salient » Sat, Dec 28, 2013, 9:36 PM UTC

I've never agreed much with Krugman's theories, but at least he understands a thing or two about economy. However, what I've always found him to be always clueless about is - technology. You have a better chance finding a more insightful tech article from a random tech blogger than from Krugman. He always misses the point. Without exception. I don't know even why he keeps doing this to himself. He just ends up embarrassing himself.

How can Bitcoin, a technology, that has shown so much promise, in many other ways besides being "money" (which some still disagree it is), be "evil"?

Also, as someone else has mentioned, he says FIAT money is backed by men with fun, and Bitcoin by "nothing" (another point where he shows just how little he understands technology in general), yet Bitcoin is the "evil" one?

Re: Bitcoin and positive vs. normative economics

#170

Post by anonbanker » Sat, Dec 28, 2013, 9:39 PM UTC

cynicalkane wrote: post #62

smtddr wrote: post #9

>>BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions. So basically it brings an ability to the middle-class that normally only the top 1% have. We know wealthy people use tax loopholes(and a few of them, laundering) and... why do…

The rich are not exempt from tax monitoring and transaction monitoring. Actually, a lot of monitoring targets exclusively large accounts and transactions.

I know I personally avoid monitoring by storing my assets in trusts with formal equity in foreign (I'm in Canada) LLC's that manage said assets. Myself, I own no property, I'm legally homeless [1], and one of my LLC's gets a tax credit for owning a homeless shelter. I strongly argue to anyone around me that If you owe taxes, you should pay them. I don't tell them that you can avoid owing taxes, and it's not considered tax evasion.

Bitcoin makes a lot of this even more complex, and as more people start using/trusting it for larger transactions, it'll be quite difficult to know who actually owns what. I might not even need half my loopholes anymore.

1. just like this guy: http://blogs.wsj.com/wealth/2008/05/19/the-homeless-billiona...