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Thoughts on Bitcoin

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Re: Thoughts on Bitcoin

#191

Post by nilkn »

sliverstorm wrote: post #187
nilkn wrote: post #178

Earlier quoted context omitted.

The argument usually hinges on simple counting: there are only 21 million possible bitcoins, and 21 million is nothing compared to the money supply of other currencies. Therefore, in the end (supposing bitcoin succeeds hugely), the exchange rate must be enormous. So the difference between 1BTC and 0.1BTC is that there are significantly fewer of the former than the latter.

There are only 21 million possible bitcoins, but there are 2.1e15 possible satoshis, which are the only denomination that really matter.

I don't think you're following the argument at all. A bitcoin is composed of satoshis, and the price is additive. Switching units doesn't actually change the price.

Re: Thoughts on Bitcoin

#192

Post by jforman »

jey wrote: post #177
jforman wrote: post #172

Earlier quoted context omitted.

There's a large difference between a currency being used for anonymity and a currency being used for stability and trust (hence the use of "reserve" vs. "anonymous" in my post — I omitted "reserve" in the first sentence).

Hm? Currencies are primarily used as a means to store and exchange value. The other things are secondary features that you may use to do things like pick between two currencies.

Y'all are getting hung up on insisting that Bitcoin is a currency, which nobody is arguing. There are important differences in the use cases that make a currency valuable to society, though. And Bitcoin is a far cry from demonstrating its value beyond the anonymous use case (or speculator use case). It is not stable or trustworthy yet, and will not be used as a reserve currency until making huge gains in both areas.

Re: Thoughts on Bitcoin

#193

Post by ekianjo »

seanmcdirmid wrote: post #189
splintercell wrote: post #186

Earlier quoted context omitted.

> They tried it in Japan, it didn't work. There's a big difference between "trying to make it happen" and "happened despite of them trying to not happen". Deflation/Inflation works fine when governments aren't involved. Point being that if market can predict the inflation and deflation then every contract will account for that. No business will fail because of deflation, because they will purposefully account for the…

Deflation doesn't work period: in the face of falling prices, people will save rather than spend, leading to a vicious cycle. No serious economist would claim otherwise. Deflation wasn't created by the Japanese government; they just didn't do enough to fight it, thinking austerity with its personal sacrifice was the right way to a healthy economy. They were wrong in a big way. Economies must be managed. Arguing wheth…

> Economies must be managed.

Mouhahaha. I give you back your line. They tried it in Japan, Europe, US, Russia, and almost everywhere else and it didn't work. Countless countries sinking in huge public debt, that's hardly a way you build up a strong argument against Free Markets. Free markets and Free economy don't exist anywhere at the moment, period. What you see as a failure is centralized-economic policies at work, with more or less degree of economic freedom depending on where you live. But don't kid yourself : as long as the money supply is controlled (and this is effectively the case when you have a central bank), you are not in a Free Economy anymore.

And of course Deflation in Japan was a direct consequence of the Japanese government actions. Deflation wouldn't occur constantly for x years if there was no policy behind it to sustain it. And you will find many other particularities of Japan markets to be strongly linked to governments policies and disruption in different fields (there was an article on Japan housing on HN a couple of days ago, explaining why housing was so different in Japan... again nothing to do with Free Markets at work).

Re: Thoughts on Bitcoin

#194

Post by aaron695 »

thaumasiotes wrote: post #161
gwern wrote: post #102

Earlier quoted context omitted.

Read the Wikipedia article on Tulipomania, or _Famous First Bubbles_. OP should too, actually, since his comment that > The price of tulip bulbs has yet to recover from its 1637 peak. betrays several fundamental misunderstandings of the tulip market at the time. Of course the top tulip bulbs depreciated. That is like saying 'a patent has never recovered its peak value' or 'Windows 3.1 never recovered its March 1992 p…

That wikipedia article seems to fully support the idea that tulips did "go that high"; it also notes that a legal change transformed tulip futures contracts into tulip option contracts, which enabled the price of tulips to rise substantially without costing speculators extra. It shows a catalog page of the time offering one tulip bulb for over ten times the contemporary annual earnings of a "skilled craftsman". If I…

> Many of the sources telling of the woes of tulip mania, such as the anti-speculative pamphlets that were later reported by Beckmann and Mackay, have been cited as evidence of the extent of the economic damage. These pamphlets, however, were not written by victims of a bubble, but were primarily religiously motivated. The upheaval was viewed as a perversion of the moral order—proof that "concentration on the earthly, rather than the heavenly flower could have dire consequences".[53] Thus, it is possible that a relatively minor economic event took on a life of its own as a morality tale.

^ From the same wiki page ^ No idea with the picture you reference where it's from.

The point about economic theory is the market needs to be fluid. It says nothing about crazy people in a small private market(obvious I guess)

The "Tulip" craze seems to me to just be the normal fundamental dogma that you get when people don't fully understand systems. People distorting instances that are not linked to push their views. To me the interesting thing is people 400 years ago also feared financial systems.

Re: Thoughts on Bitcoin

#195

Post by seanmcdirmid »

ekianjo wrote: post #193
seanmcdirmid wrote: post #189

Earlier quoted context omitted.

Deflation doesn't work period: in the face of falling prices, people will save rather than spend, leading to a vicious cycle. No serious economist would claim otherwise. Deflation wasn't created by the Japanese government; they just didn't do enough to fight it, thinking austerity with its personal sacrifice was the right way to a healthy economy. They were wrong in a big way. Economies must be managed. Arguing wheth…

> Economies must be managed. Mouhahaha. I give you back your line. They tried it in Japan, Europe, US, Russia, and almost everywhere else and it didn't work . Countless countries sinking in huge public debt, that's hardly a way you build up a strong argument against Free Markets. Free markets and Free economy don't exist anywhere at the moment, period. What you see as a failure is centralized-economic policies at wor…

> Free markets and Free economy don't exist anywhere at the moment, period.

Right. They haven't existed since the neolithic revolution when we moved from being hunter gatherers to farming and living in cities.

> And of course Deflation in Japan was a direct consequence of the Japanese government actions.

Wow, that is some truthiness there. From [1]

> Deflation started in the early 1990s. The Bank of Japan and the government tried to eliminate it by reducing interest rates and 'quantitative easing', but did not create a sustained increase in broad money and deflation persisted. In July 2006, the zero-rate policy was ended.

So wait...the government was trying to get rid of deflation, but you claimed they were the ones causing it? WTF?

Reasons

* Tight monetary conditions. The Bank of Japan kept monetary policy loose only when inflation was below zero, tightening whenever deflation ends.

* Unfavorable demographics. Japan has an aging population (22.6% over age 65) that is not growing and will soon start a long decline. The Japanese death rate recently exceeded its birth rate.

* Fallen asset prices. In the case of Japan asset price deflation was a mean reversion or correction back to the price level that prevailed before the asset bubble.

* Insolvent companies: Banks lent to companies and individuals that invested in real estate. When real estate values dropped, these loans could not be paid.

* Fear of insolvent banks: Japanese people are afraid that banks will collapse so they prefer to buy (United States or Japanese) Treasury bonds instead of saving their money in a bank account.

* Imported deflation: Japan imports Chinese and other countries' inexpensive consumable goods (due to lower wages and fast growth in those countries) and inexpensive raw materials

Here is the only point (an explicitly libercrazian one) that supports your position:

* Stimulus Spending: According to both Austrian and Monetarist economic theory, Keynesian 'stimulus' spending actually has a depressing effect.

[1] http://en.wikipedia.org/wiki/Deflation#In_Japan

Re: Thoughts on Bitcoin

#196

Post by thaumasiotes »

aaron695 wrote: post #194
thaumasiotes wrote: post #161

Earlier quoted context omitted.

That wikipedia article seems to fully support the idea that tulips did "go that high"; it also notes that a legal change transformed tulip futures contracts into tulip option contracts, which enabled the price of tulips to rise substantially without costing speculators extra. It shows a catalog page of the time offering one tulip bulb for over ten times the contemporary annual earnings of a "skilled craftsman". If I…

> Many of the sources telling of the woes of tulip mania, such as the anti-speculative pamphlets that were later reported by Beckmann and Mackay, have been cited as evidence of the extent of the economic damage. These pamphlets, however, were not written by victims of a bubble, but were primarily religiously motivated. The upheaval was viewed as a perversion of the moral order—proof that "concentration on the earthly…

Seriously, understand what other people are saying (or make some sort of note in your comment that it's unrelated to the one you're responding to).

The wiki page says that there was very little financial damage from the tulip crash. It also says that "There is no dispute that prices for tulip bulb contracts rose and then fell in 1636–37". I responded to the claim that high tulip prices were a myth. The wiki page cited does not support that idea to any degree. And the portion you cite, in particular, also does not support that idea. It says there was little economic damage from the crash, which I acknowledged, but barely mentioned, because it was irrelevant to my point.

The picture, as wikimedia notes, is from the tulip book of P. Cos, which you could read about here: http://www.oldtulips.org/index.php?section=broken&content=ea...

Re: Thoughts on Bitcoin

#197

Post by jaekwon »

seanmcdirmid wrote: post #189
splintercell wrote: post #186

Earlier quoted context omitted.

> They tried it in Japan, it didn't work. There's a big difference between "trying to make it happen" and "happened despite of them trying to not happen". Deflation/Inflation works fine when governments aren't involved. Point being that if market can predict the inflation and deflation then every contract will account for that. No business will fail because of deflation, because they will purposefully account for the…

Deflation doesn't work period: in the face of falling prices, people will save rather than spend, leading to a vicious cycle. No serious economist would claim otherwise. Deflation wasn't created by the Japanese government; they just didn't do enough to fight it, thinking austerity with its personal sacrifice was the right way to a healthy economy. They were wrong in a big way. Economies must be managed. Arguing wheth…

This thread inspired me to write my thoughts down: http://jaekwon.wordpress.com/2013/12/02/the-supernova-theory...

Re: Thoughts on Bitcoin

#198

Post by banachtarski »

Udo wrote: post #118
banachtarski wrote: post #105

Earlier quoted context omitted.

"there isn't anywhere to go for BTC but up" this is utter rubbish right here.

The whole quote is: " > Barring some kind of final(!) crash, there isn't anywhere to go for BTC but up. " That's quite a difference there to what you implied.

The implication is obviously that there won't be a "final(!) crash." This sort of reasoning applies to every penny stock in the market. Am I supposed to read this and then invest in all of them? After all, they will all continuously go up (unless they all go down).

Re: Thoughts on Bitcoin

#199

Post by seanmcdirmid »

jaekwon wrote: post #197
seanmcdirmid wrote: post #189

Earlier quoted context omitted.

Deflation doesn't work period: in the face of falling prices, people will save rather than spend, leading to a vicious cycle. No serious economist would claim otherwise. Deflation wasn't created by the Japanese government; they just didn't do enough to fight it, thinking austerity with its personal sacrifice was the right way to a healthy economy. They were wrong in a big way. Economies must be managed. Arguing wheth…

This thread inspired me to write my thoughts down: http://jaekwon.wordpress.com/2013/12/02/the-supernova-theory...

I think many are putting too much stake in Bitcoin being a currency and not enough in the economy that goes behind the currency; the two are not independent at all.

With USD, you can save/lend it easily (the US government is a very strong debtor of last resort) and likewise borrow through it, oil is traded in it, and so on. Monetary policy is more about ensuring some adequate level of inflation (to push for consumption or effectively invested) + popping any asset bubbles that appear (b/c people are imperfect).

With bitcoin, you get none of that, and given the libertarian bent of the users, nothing centralized will likely arise. So the question is: are individuals good at managing an economy for the collective good? Or will they just look out for their own needs and will it implode in a classic prisoner's dilemma?

Re: Thoughts on Bitcoin

#200

Post by XorNot »

pbhjpbhj wrote: post #124
sillysaurus2 wrote: post #48

Earlier quoted context omitted.

It is indeed all my savings. But I was saving it anyway, so I won't be out in a doghouse if it vanishes. I guess I'm dumb, but at this stage in my life I'd rather have 9.89BTC than $11k. My theory is, everyone's expecting it to crash. So therefore it's more likely to do the opposite. Not much of a theory, but it seems to have been historically true.

> My theory is, everyone's expecting it to crash. // That's how a crash happens isn't it? It's not driven by any wider economic reality beyond the conviction of "investors". If the investors can be convinced that it's crashing then it crashes. That certainly appears to be how manipulative exploitation of short positions occurs.

That's because short positions are defined by using borrowed money. Not only will they lose money in a crash, they will be bankrupted into unrepayable debt by a crash. So if they think it's crashing, they have to sell before a certain price because they do not have the money to cover their position.
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