Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’ • Hacker News Board

Re: Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’

#71

Post by IceyEC » Mon, Mar 10, 2014, 5:04 PM UTC

baudehlo wrote: post #70

vijayboyapati wrote: post #42

- It's false that bitcoin isn't a means of payment. People DO use it as payment. - It's false that it's not a medium of savings. It has reservation demand which is the only reason it has a price. It does not matter that it has "no assets in it", whatever that confused statement means. The dollar also no longer has any asset backing. The medium of savings role exists while people perceive there is value in holding a m…

| It's false that bitcoin isn't a means of payment. People DO use it as payment. But places that accept bitcoin aren't holding on to it. They transfer immediately to local currency (because their suppliers can't be paid in bitcoin). So currently* bitcoin is more a means of money transfer than it is a currency in itself. * This might eventually change if suppliers are willing to accept bitcoin too.

I accept Bitcoins for advertising on TorSearch. I then pay my hosting costs in Bitcoin.

Re: Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’

#72

Post by shawabawa3 » Mon, Mar 10, 2014, 5:04 PM UTC

bru wrote: post #50

skywhopper wrote: post #32

Earlier quoted context omitted.

Ponzi's not really the right word for either thing. The huge growth of debt is a sign that inflation has been too low for too long in too many places. As long as the ECB and the Fed treat 2% as scary-high inflation, paying back debt becomes far more difficult. To start solving the debt problem, the central banks should start targetting 4-5% inflation for a decade or so, and allow it to go a little above the target, r…

>In contrast, Bitcoin is a deflationary currency This is IMHO the strongest argument against Bitcoin and the reason why a long-term economy could not depend on it. The problem with cryptocurrencies is the impossibility to control the monetary mass.

> The problem with cryptocurrencies is the impossibility to control the monetary mass.

Not really. It is designed so that no individual can control the rate of inflations, however if it is in the vast majority[1] of miner's interests it can be changed.

  [1] If a small majority of miners changed inflation it would cause a massive chain fork

Re: Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’

#73

Post by Aqueous » Mon, Mar 10, 2014, 5:05 PM UTC

pessimizer wrote: post #46

Aqueous wrote: post #35

at times like this i wish the supporters of bitcoin hadn't wedded themselves so thoroughly to libertarian ideology. they've turned this into a ideological debate when in fact it should just be treated like a cool new technology that could benefit everyone. i say this as someone who thinks bitcoin has the power to change the world but also believes that markets need regulation in order to prevent massive destruction d…

>that said roubini is completely wrong about btc, just like krugman, and both need to change their thinking about what constitutes a currency. Care to explain why, or is this just your self-affirmation mantra?

No need to be snarky. BitCoin is clearly already being used as a currency - it is being used in exchange for goods and services as a form of liquidity. This means it is a store of value, it is a medium of exchange, and while it isn't yet a unit of account - as others have said here, this seems to just be a matter of adoption. Of course things aare priced in dollar when the dollar remains the world reserve currency.

This idea that a currency needs all features of historical currencies to be considered a currency is ridiculous, and doesn't accommodate a "start-up" currency which is something we've never seen before - at least not globally. At the very least the definition of currency ought to change to something like: "A currency possesses at least 3 out of 5 of these qualities."

None of these qualities are permanent, unchanging qualities. That seems to be the other critical mistake economists are making - failing to see the forest for the trees. That comes from an institutional mindset where only governments (or government-connected organizations) can issue currency and so currency has the aura of permanence.

Re: Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’

#74

Post by splintercell » Mon, Mar 10, 2014, 5:06 PM UTC

carsongross wrote: post #49

Bitcoin is almost exactly the opposite of a ponzi scheme: http://en.wikipedia.org/wiki/Ponzi_scheme "A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the individual or organization running the operation. Operators of Ponzi schemes usually entice new investors by offering higher returns t…

Any rising investment, if seen in a proper timeframe(with proper rationale) could appear to be a Ponzi scheme.

For example between Feb 2009 to Sept 2012 the price of Apple stock went from $100 to $700. Did the profits of Apple go to 7 times in this time? Not really.

But if you were to only see Apple's stock in this timeframe, AND don't understand Apple's business model, but merely heard that Apple's stock is rising and you should invest in it, then it would appear that older investors are being paid off at the expense of the newer investors.

Noriel Roubini could also very specifically perceive the question about bitcoin as "I heard a lot of my friends are getting rich through bitcoin, should I invest in bitcoin to profit from it?", and then he gives the answer that he gave.

Re: Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’

#75

Post by joepie91_ » Mon, Mar 10, 2014, 5:07 PM UTC

maxerickson wrote: post #68

joepie91_ wrote: post #52

Earlier quoted context omitted.

I don't see how a deflationary currency is a problem. As far as I can tell, the only ones who benefit from the "money has to be in constant circulation" adage, is those who gain a profit off every transaction made. Money is meant to be a representative token to make trading easier; I fail to see how it makes any sense to "encourage spending" in itself.

A really big factor is that people get upset when the number describing their wages goes down. Businesses are also disinclined to lower their prices (this isn't a rule, sure businesses lower prices, it's a description of long term aggregate behavior). Both of those things are things that must happen for an economy to function with a deflationary currency.

> A really big factor is that people get upset when the number describing their wages goes down.

I doubt whether that is still the case in a (hypothetical) economy that is largely deflationary. In the current context, sure - but to me that seems largely a result of people being used to inflation, and I doubt that that association lasts if inflation is no longer the standard situation.

> Businesses are also disinclined to lower their prices (this isn't a rule, sure businesses lower prices, it's a description of long term aggregate behavior).

Can you elaborate on that?

Re: Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’

#76

Post by vinceguidry » Mon, Mar 10, 2014, 5:07 PM UTC

skywhopper wrote: post #32

grej wrote: post #15

And in other news, global debt now exceeds $100 Trillion dollars - up 40% over the last 7 years: http://www.bloomberg.com/news/2014-03-09/global-debt-exceeds... . Which is the bigger Ponzi?

Ponzi's not really the right word for either thing. The huge growth of debt is a sign that inflation has been too low for too long in too many places. As long as the ECB and the Fed treat 2% as scary-high inflation, paying back debt becomes far more difficult. To start solving the debt problem, the central banks should start targetting 4-5% inflation for a decade or so, and allow it to go a little above the target, r…

Bitcoin may itself be deflationary but the problem that presents is being solved by alt-coins. Eventually the crypto-currency ecosystem will iron out the wrinkles, and Bitcoin itself will start to shed some of its bubble-esque valuation as it gets easier to use other crypto-currencies for the same purpose.

People are thinking in terms of the solution rather than in terms of the problem. You shouldn't think of Bitcoin as a thing, Litecoin as a thing, Dogecoin as a thing, and weigh each of these things on their own merits. Instead they're all just competing solutions to the same basic problem.

As problems with Bitcoin surface, the market will gravitate towards other currencies, and the infrastructure will gradually grow to accommodate them so as to provide the same level of services.

It's still a fantastic time to get into crypto-currency. Don't feel like you missed out just because you didn't buy thousands of BTC 2 years ago and saved it till today. The rough and rowdy prospectors are just now giving way to the frontier businessmen, but there's still lots of time and stuff to do until the big players emerge and start wrapping the markets up.

Re: Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’

#77

Post by Aqueous » Mon, Mar 10, 2014, 5:08 PM UTC

joepie91_ wrote: post #65

Aqueous wrote: post #35

at times like this i wish the supporters of bitcoin hadn't wedded themselves so thoroughly to libertarian ideology. they've turned this into a ideological debate when in fact it should just be treated like a cool new technology that could benefit everyone. i say this as someone who thinks bitcoin has the power to change the world but also believes that markets need regulation in order to prevent massive destruction d…

> "at times like this i wish the supporters of bitcoin hadn't wedded themselves so thoroughly to libertarian ideology." "Bitcoin supporters" are not a homogenous group.

Exactly, as evidenced by individuals such as myself. But there is a hardcore contingent of libertarians who are turning this into a crusade against govt regulation, and I, as a BitCoin supporter myself, do not want to be painted by that brush. It makes it easier to attack politically, when we should be discussing BitCoin with technological concerns and on its technological merits so that people aren't blinded by politics when considering it.

Re: Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’

#78

Post by shawabawa3 » Mon, Mar 10, 2014, 5:09 PM UTC

james1071 wrote: post #27

abstrct wrote: post #4

TL;DR: Man spends 5 minutes thinking about Bitcoin on a plane and comes to conclusions which may or may not be correct. Shares them with people because he is super duper important.

Perhaps I could ask you a simple question, then. How would you value a Bitcoin?. I am not looking for a precise answer, but a rough range of what it should be worth. It should be possible to do this for any financial asset.

> How would you value a Bitcoin?

I would go on bitstamp and see what people are trading them for. That would be around ~$620 at the moment.

If you think this isn't a valid way of valuing something then tell me: How would you value a 2 bedroom flat in London? My guess is you would see how much similar flats nearby are selling for (and if you say you would get an expert valuation - how are they getting the value?)

Re: Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’

#79

Post by splintercell » Mon, Mar 10, 2014, 5:10 PM UTC

baudehlo wrote: post #70

vijayboyapati wrote: post #42

- It's false that bitcoin isn't a means of payment. People DO use it as payment. - It's false that it's not a medium of savings. It has reservation demand which is the only reason it has a price. It does not matter that it has "no assets in it", whatever that confused statement means. The dollar also no longer has any asset backing. The medium of savings role exists while people perceive there is value in holding a m…

| It's false that bitcoin isn't a means of payment. People DO use it as payment. But places that accept bitcoin aren't holding on to it. They transfer immediately to local currency (because their suppliers can't be paid in bitcoin). So currently* bitcoin is more a means of money transfer than it is a currency in itself. * This might eventually change if suppliers are willing to accept bitcoin too.

> They transfer immediately to local currency (because their suppliers can't be paid in bitcoin).

That is correct, but the question which arises, why are companies introducing this level of complexity for no reason? Why are people hell bent on paying for goods through bitcoins?

Yes its true that currently its a means of money transfer but there is no reason why companies won't just start holding bitcoins. There is no added utility offered in USD which cannot be offered by bitcoins. Once enough market for bitcoin appears people will switch to holding in dollars.

Re: Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’

#80

Post by maxerickson » Mon, Mar 10, 2014, 5:11 PM UTC

vijayboyapati wrote: post #56

omegaham wrote: post #54

One problem that I think is salient about Bitcoin is that it's just not that useful . It's supposed to be a currency, but no one's actually using it for currency. They're just gambling on it, hoping to take advantage of other people's mistakes to make their own money. It's a zero-sum game, and it's destructive. People are just playing around with the electronic version of Monopoly money. The driving force behind curr…

The fallacy here is that a monetary good requires some separate use. As a money per se, bitcoin is very useful. As I wrote in this thread, it allows the transfer of value to anyone, anywhere in the world without an intermediary. This has never been possible before, and it certainly impossible with the dollar. There are several markets for which this innovation has profound implications

By the numbers, most people need an intermediary to move even a modest amount of bitcoin. They don't have any.

You can say there is no dependence on a single intermediary.

This is a quibble, but I think it's an important one, for example, a lot of the arguments about using bitcoin in Argentina or whatever ignore the part where Argentinians don't have a whole lot of bitcoin to start using.