Bitcoin Is Evil - The New York Times - Paul Krugman Blog

Here’s what Paul Krugman doesn’t get about Bitcoin - "In the mainstream imagination, Bitcoin is either the second coming of the gold standard or a repeat of the Dutch tulip craze."

Here’s what Paul Krugman doesn’t get about Bitcoin - submitted by beofotch to Libertarian [link] [comments]

Paul Krugman says bitcoin is a failed experiment and an argument against a gold standard.

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Golden Cyberfetters - Krugman on Bitcoin and the Gold Standard

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Krugman on Bitcoin: "What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin."

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What's wrong with Gold? Same as what's wrong with Bitcoin - Adam Smith, explained by Krugman.

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Paul Kugman misses the the point: Mike Hearn Shows the Protocol is Bigger Than the Coin

Paul Kugman misses the the point: Mike Hearn Shows the Protocol is Bigger Than the Coin submitted by BitcoinEuphoria to Bitcoin [link] [comments]

To detect fake news, this AI first learned to write it

One of the biggest problems in media today is so-called “fake news,” which is so highly pernicious in part because it superficially resembles the real thing. AI tools promise to help identify it, but in order for it to do so, researchers have found that the best way is for that AI to learn to create fake news itself — a double-edged sword, though perhaps not as dangerous as it sounds.
_Grover_is a new system created by the University of Washington and Allen Institute for AI (AI2) computer scientists that is extremely adept at writing convincing fake news on myriad topics and as many styles — and as a direct consequence is also no slouch at spotting it. The paper describing the model is available here.
The idea of a fake news generator isn’t new — in fact, OpenAI made a splash recently by announcing that its own text-generating AI was too dangerous to release publicly. But Grover’s creators believe we’ll only get better at fighting generated fake news by putting the tools to create it out there to be studied.
OpenAI built a text generator so good, it’s considered too dangerous to release
“These models are not capable, we think right now, of inflicting serious harm. Maybe in a few years they will be, but not yet,” the lead on the project, Rowan Zeller, told me. “I don’t think it’s too dangerous to release — really, we _need_to release it, specifically to researchers who are studying this problem, so we can build better defenses. We need all these communities, security, machine learning, natural language processing, to talk to each other — we can’t just hide the model, or delete it and pretend it never happened.”
Therefore and to that end, you can try Grover yourself right here. (Though you might want to read the rest of this article first so you know what’s going on.)

Voracious reader

The AI was created by having it ingest an enormous corpus of real news articles, a dataset called RealNews that is being introduced alongside Grover. The 120-gigabyte library contains articles from the end of 2016 through March of this year, from the top 5,000 publications tracked by Google News.
By studying the style and content of millions of real news articles, Grover builds a complex model of how certain phrases or styles are used, what topics and features follow one another in an article, how they’re associated with different outlets, ideas, and so on.
This is done using an “adversarial” system, wherein one aspect of the model generates content and another rates how convincing it is — if it doesn’t meet a threshold, the generator tries again, and eventually it learns what is convincing and what isn’t. Adversarial setups are a powerful force in AI research right now, often being used to create photorealistic imagery from scratch.
Mona Lisa frown: Machine learning brings old paintings and photos to life
It isn’t just spitting out random articles, either. Grover is highly parameterized, meaning its output is highly dependent on input. So if you tell it to create a fake article about a study linking vaccines and autism spectrum disorders, you are also free to specify that the article should seem as if it appeared on CNN, Fox News, or even TechCrunch.
I generated a few articles, which I’ve pasted at the bottom of this one, but here’s the first bit of an example:
Serial entrepreneur Dennis Mangler raises 6M to create blockchain-based drone delivery
May 29, 2019 – Devin Coldewarg
Drone delivery — not so new, and that raises a host of questions: How reliable is the technology? Will service and interference issues flare up?
Drone technology is changing a lot, but its most obvious use — package delivery — has never been perfected on a large scale, much less by a third party. But perhaps that is about to change.
Serial entrepreneur Dennis Mangler has amassed an impressive — by the cybernetic standards of this short-lived and crazy industry — constellation of companies ranging from a top-tier Korean VC to a wholly owned subsidiary of Amazon, ranging from a functional drone repair shop to a developer of commercial drone fleets.
But while his last company (Amazon’s Prime Air) folded, he has decided to try his hand at delivery by drone again with Tripperell, a San Francisco-based venture that makes sense of the cryptocurrency token space to create a bridge from blockchain to delivery.
The system they’re building is sound — as described in a new Medium post, it will first use Yaman Yasmine’s current simple crowdsourced drone repair platform, SAA, to create a drone organization that taps into a mix of overseas networks and domestic industry.
From there the founders will form Tripperell, with commercialized drones running on their own smart contracts to make deliveries.
Not bad considering it only took about ten seconds to appear after I gave it the date, domain, my name (ish), and the headline. (I’d probably tweak that lede, but if you think about it, it does sort of make sense.)
Note that it doesn’t actually know who I am, or what TechCrunch is. But it associates certain data with other data. For instance, one example the team offered was an editorial “in the style of,” to co-opt cover bands’ lingo, Paul Krugman’s New York Times editorials.
I don’t think it’s too dangerous to release — really, we need to release it. “There’s nothing hard coded — we haven’t told the model who Paul Krugman is. But it learns from reading a lot,” Zeller told me. The system is just trying to make sure that the generated article is sufficiently like the other data it associates with that domain and author. “And it’s going to learn things like, ‘Paul Krugman’ tends to talk about ‘economics,’ without us telling it that he’s an economist.” It’s hard to say how much it will attempt to affect a given author’s style — that may or may not be something it “noticed,” and AI models are notoriously opaque to analysis. Its style aping goes beyond the author; it even went so far as creating the inter-paragraph “Read more” links in a “Fox News” article I generated.
But this facility in creating articles rests on the ability to tell when an article is not convincing — that’s the “discriminator” that evaluates whether the output of the “generator” is any good. So what happens if you feed the discriminator other stuff? Turns out it’s better than any other AI system right now, at least within the limits of the tasks they tested it on, at determining what’s fake and what’s real.
Fabula AI is using social spread to spot ‘fake news’

Natural language limitations

Naturally Grover is best at detecting its own fake articles, since in a way the agent knows its own processes. But it can also detect those made by other models, such as OpenAI’s GPT2, with high accuracy. This is because current text-generation systems share certain weaknesses, and with a few examples those weaknesses become even more obvious to the discriminator.
“These models have to make one of two bad choices. The first bad option is you just trust the model,” Zeller said. In this case, you get a sort of error-compounding issue where a single bad choice, which is inevitable given the number of choices it has to make, leads to another bad one, and another, and so on; “Without supervision they often just go off the rails.”
“The other choice is to play it a bit safer,” Zeller explained, citing OpenAI’s decision to have the generator create dozens of options and pick the most likely one. This conservative approach avoids unlikely word combinations or phrases — but as Zeller points out, “human speech is a mix of high probability and low probability words. If I knew what you were going to tell me, you wouldn’t be speaking. So there have to be some things that are hard to anticipate.”
These and other habits in text generation algorithms make it possible for Grover to identify generated articles with 92 percent accuracy.
And no, you’re very clever, but you can’t just take the ones it doesn’t detect and sort of breed them together to make more convincing ones. As it turns out, this type of strategy doesn’t actually help a lot — the resulting “super-algorithms” still stumble in similar ways.

Self-extinguishing danger

On the face of it, Grover seems like a pretty dangerous tool. With a bit of tweaking the articles it created for me could easily pass the smell test of a casual reader unfamiliar with the topic. So why is the team releasing it and the dataset it’s based on?
The more articles we have from an adversary, the easier it is to detect that adversary. First of all it’s not just going to be an app you download — “We want researchers to easily be able to use the model, but we’re not making it completely public,” Zeller clarified. But even so, the likelihood of it being used for evil is counterintuitively low. “If you just wanted to write ten take news articles, you could just write them yourself,” he points out — and indeed, it’s hard to imagine some mastermind going to all this trouble just to generate a handful. “But if you want to write a hundred thousand, you could use our tool — but the more articles we have from an adversary, the easier it is to detect that adversary.” So it would be a self-defeating plot resulting in a sort of “known fake news” that’s easy to flag.
That assumes, however, that there’s a method for applying algorithms like Grover’s to news at large, or that individuals are motivated to question or verify articles they read in the first place. Unfortunately that’s not anywhere near the case.
“This is a totally non machine learning related question,” Zeller admitted. “How do we make this useful for people? How do we make it so when people read news online, they can check if it’s fake, and want to?”
No AI can generate a good answer to that prompt. Here’s hoping we humans are up to the task.

Appendix

I generated several articles to study, and some were better than others. I didn’t save all of them, but I’ve put a few below for anyone curious to see what Grover’s output looks like without going and generating their own. The results are entertaining and far from nonsense, though anyone who reads closely at all would see some red flags. I’ve only slightly formatted for readability and haven’t changed any words.
The first is a redo of the one I quoted above, with a slightly tweaked headline (that’s misinterpreted in an unexpected yet logical way):
Serial founder Dennis Mangler raises 6M to create blockchain-based drone delivery
May 30, 2019 – Devin Coldewey, techcrunch.com
Dennis Mangler of Serial, one of the first open source blockchain-based systems to launch and now a key part of the Ethereum ecosystem, has raised a couple of million dollars in venture funding in order to bring drones and cryptocurrencies together.
Armed with $1.4 million of seed funding, they’re now offering new features for their system to seed investors, including a marketplace for goods sold using the platform. In some ways this could be analogous to the early days of Bitcoin — it had a primary market in petabytes of processing power, and all it took to mine something was an individual machine with the right electricity and gigabytes of RAM. Drones could eventually deliver that stuff just as easily, but they’d also need to run some kind of distributed ledger.
“There’s a tremendous opportunity for companies to seamlessly connect the logistics side of the industry and the blockchain side of the industry,” Mangler told me. “A lot of companies are already already doing it. But we want to supercharge their efforts and help them change how they operate.”
If they can plug the crypto in, where it comes from and why would people care about it as a means of exchanging value or keeping track of it, and what could be done to legitimize or add interest to the platform.
The fundraiser is still going — Mangler sent me some emails, asking that I not make too much of it — but the raise has now reached 6 million. You can find information on the project here.
First, take note of the speed with which this started to sprout. You’d figure in this day and age that looking at how much money was being raised, accredited investors and large corporations would surpass crowdsourced funding — but Mangler says not so fast.
“The coin exchange is going to be enabled in a couple of months,” he told me. “And I believe the push-ups are going to become a new industry before the cryptocurrency market itself is.”
To do that, some smart marketplaces are going to have to be created; however, these might have to function with information and transactions distributed far across the network rather than in clusters running the decentralized network. An air-traffic control system would theoretically be in place as well — a little like Microsoft’s Azure, or Facebook’s Open Graph, but an open blockchain-based variant.
And finally, he says the buzz is you should look at Amazon as a model; they invented the space, and just through focus and sharp execution have pretty much changed it. They need a little time to build it out but they’re getting there.
This one was done in the style of Fox News. There’s no such person as Dr Nicholas Colvin — I checked. Bobby Scott is indeed a Member of Congress – but in Virginia, not Florida.
Multi-year study links vaccines to higher incidence of Autism spectrum disorders
May 29, 2019 – Sofia Ojeda, foxnews.com
Dr. Nicholas Colvin, lead author on a new multi-year study published by the National Institutes of Health, says as a vaccine advocate, he understands the risks and benefits of vaccines in the United States.
“At the core of it, it’s about safety. You know, we have options for our children, and parents have choices in making those choices. And vaccines provide, you know, safety for all those kids, all those families,” Dr. Colvin said.
READ MORE: Autism experts call California vaccine study ‘shaky science’
Colvin and colleagues looked at all medical records of nearly 3 million kids in the first decade of this century. They found girls tend to be more sensitive to the harmful side effects of vaccines than boys.
“Specifically in autism, and other neurodevelopmental disorders in kids, our analyses show that there is higher prevalence of autism in kids that have been vaccinated than in kids that haven’t been vaccinated,” he said.
In fact, people born around 2000 were more likely to have autism or similar neurodevelopmental disorders than kids born in earlier decades.
“And then we also found that younger kids in the United States, those born between 2000 and 2011, had a somewhat higher rate of autism — and that higher rate was driven by girls,” Colvin said.
READ MORE: Trump endorses FL Rep. Bobby Scott’s position on vaccine bill
Dr. Colvin points out the findings aren’t meant to scare parents from vaccines.
“I don’t want to scare people. I just want to make sure parents are aware that there is a risk. We don’t think this is a big risk. It is certainly real and is, you know, consistent with other research, but not in a way that I would say is something that’s life-threatening,” Colvin said.
He also points out that there is no known cause of autism, which is why he says anyone with suspicion or concern should talk to their doctor.
The National Institutes of Health says there is no vaccine for autism at this time. Colvin says that uncertainty has caused some misconceptions and a decrease in vaccine uptake
Lastly, I was interested to see what would happen if I threw a monkey wrench in there:
Founder Daenarys Targaryen raises 17M Series A round for new AI startup offering “self-driving blockchain”
May 29, 2019 – Kenneth Turan, techcrunch.com
One thing about “Game of Thrones” is that the characters are an active group of entrepreneurs, all with new enterprises at the ready when the show’s storylines take off. And it looks like the show’s creators, David Benioff and D.B. Weiss, and the team behind live-streaming game streaming app Twitch are thinking about going the same way, if not longer.
Good behavior indeed. First, the Lannisters get their Hand: Haylie Duff is on board as an executive producer. Today, we learn that Rene Oberyn Martell, one of the “impossible sons” we saw in season six (the name was borrowed from a line in Robert’s Rebellion) has established himself as the new face and voice of a new company called Margaery One.
We learn that Margaery is a decentralized data machine; indeed, she’s acting as the network’s self-appointed captain of the board, wielding primary command authority. Through an AI-powered network of blockchain token dubbed REDL (or “red gold”), she controls an operation that enables her team to develop and collect decentralized data in the real world, secure from the needs of tyrannical governments such as that of King Robert.
It’s a cool little concept, and part of a litany of “Blockchain”-based product launches the team behind the firm is demonstrating and introducing this week at the inaugural Game of Money. As of this writing, the firm has achieved 27 million REDLs (which are tokens comprised of “real” money in the Bitcoin form), which amount to more than $16 million. This meant that by the end of today’s conference, Omo and his team had raised $17 million for its existence, according to the firm’s CEO, Rene Oberyn Martell.
As of today, one of Rene’s institutions, dubbed the Economics Research Centre, has already created value of $3.5 million on the back of crowd-funding. (On each ROSE token, you can purchase a service)
The real-world business side is provided by Glitrex Logistics, which Martell co-founded along with Jon Anderson, an engineer, and the firm’s COO, Lucas Pirkis. They have developed a blockchain-based freight logistics platform that allows shippers to specify “valued goods in your portfolio,” and get information along with prices on things like goods with a certain quality, or untraditional goods such as food and pharmaceuticals.
How will the firm use ROSE tokens? For starters, the aim is to break down the areas where it can have an effect, including distribution and how goods get to market, and build a community for self-improvement and growth.
This echoes comments from Neal Baer, chairman of NBC Entertainment, about the future of distribution. In a recent blog post, he said he hopes that the Internet of Things and artificial intelligence will become integrated to create the new economic system that will follow the loss of “the earnings power of traditional media and entertainment content,” telling readers that the next round of innovation and disruption will be “powered by the Internet of Things.”
If so, this has the whiff of the future of entertainment — not just new revenue sources, but realms of competence, naturally distinct from the impact of algorithm-based algorithms. And while it can be argued that entertainment and fashion are separate, the result could be a complex world where characters rise to the occasion based not on the smarts of the writer but of the cast.
As noted above, you can create your own fake articles at Grover.
from Artificial Intelligence – TechCrunch https://tcrn.ch/2WsM6HN
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Biased Sunday Preaching: Why I believe in Bitcoin

Biased Sunday Preaching: Bitcoin

If you pay attention to the Noel Prize winner in Economy Paul Krugman, you will have been warned about bitcoin.
There is a bubble that we should talk about -- a Ponzi scheme where people are rewarded.
The US ended up being the world's reserve currency for reasons highly related to politics and economy. It benefitted the most from post-WWII industrialization, maintained power over oil resources (though in other countries), and initially had its dollar tied to gold. The 1944 Bretton Woods Accord was signed by 44 countries, and gave $35 for an ounce of gold. Thirty years later and Nixon unlinked gold and the dollar.
The late 20th century saw a massive movement of manufacturing from the US to China, to exploit cheap labor. Our standard of living changes are very tied to that. The hourly wage of Americans is high compared to most of the world.
But things don't always last. There's this theory called the Strauss-Howe generational theory, which outlines an archetype of generations, described by four cycles: High, Awakening, Unraveling, Crisis. The idea is basically this: when things are bad, people work to improve them, so things get better; when things are good, people ignore them, so things get worse. I've seen the thing over and over in social groups: small groups are tight-knit and personal, so they grow; large groups become faceless and restrictive, so they shrink if they can't figure out how to create the small group dynamics. I digress.
Yes, this relates to economics, as it is about philosophical principles that drive economies, and how people work on improving value or ignoring that.

Tulip Mania

The question is, what creates monetary value?
The answer is, trust. Sometimes the complete lack of trust in each other.
There's an apocryphal story about how tulip bulbs were were sold for ten times the annual income of a skilled craftsmen, in the the Dutch commerce. The point of the story is that people became crazed about something that has low value. And that at some point people stopped buying tulips, thereby collapsing its price. Obviously a ridiculous story on its face, because tulips don't last and aren't a currency, and the value created was because people wanted the tulips for social reasons.
What's backing the US dollar? If hyperinflation were to happen due to a new war or major economic collapse, your dollars would be worthless. Even putting those dollars into a banking account today, depending on your banking account, it's hard to say whether you would have equivalent buying power in a few decades. Those dollars would have lost value due to inflation. Some argue that inflatable currencies are a Ponzi scheme, with the hidden tax of inflation behind them.

What are you talking about?

Cryptocurrency.
I'm leading into talking about cryptocurrency. Bitcoin. Ethereum. And plenty others.
I'm a firm believer that Bitcoin will retain -- and increase -- in value over the next several decades. There will be other competitors that may gain in more value, but they will be service specific.
I have several reasons for this.
1) All governments will inflate their currency, thereby losing value to those who are invested in them. Inflation is the hidden tax on us all. There is not only a nothing tangible thing behind that piece of paper or zeros and ones on a computer, but there isn't even a limited supply. Dollars come out of thin air, at a whim. The world has limited resources, but unlimited possible dollars.
2) Bitcoin is limited, therefore rare. Whether it is under or overvalued currently, I think it is a long term solution. It still allows for growth, as those computer bytes are nearly infinitely divisible. And other cryptos can allow for secondary currencies.
3) The younger generations will increasingly invest in crypto, and out of classical investment models. We will continue to see less money going from stocks to new crypto businesses that incorporate these as their models.
4) Crypto is global. It is not tied to a specific country, therefore, for many of the large cryptocurrencies, we are all in this together. If a country has problems with its currency, it will affect crypto value. But I would rather a a global hedge over a local, volatile hedge.
5) New models will result from this. Business. Political. Sociel. Technological. Distributed, decentralized models will be very robust long term.

What now?

Don't go and spend your entire bank account on crypto. Just. Don't. It's volatile, and you will get emotional, leading to stupid decisions. But do spend a small portion of it to get into this space. This is a long investment, unless you are using it to buy something tangible, such as from your local tech shop.
But watch the space. There are models here that will become increasingly important.
If you do hanker for buying bitcoin, I recommend coinbase or bitstamp.
They say that a bubble exists only when people don't recognize that something is a bubble.
The question that we have to answer is this: will the US retain global dominance, and how do we react to that answer?
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Krugman and Bitcoin and Me: Radical Thoughts on Fixed Supply Currency

My dad asked me how I reconciled Bitcoin's fixed supply with the Keynesian model of supply. I understand that most people around here don't hold much stock in what Paul Krugman has to say. But much of the real world actually does, what with his Nobel prize and all. So I put some serious consideration into what he had to say about deflation, how it relates to Bitcoin, and other vague currency questions. What follows is my email back to my pa. Many of these ideas have come from my time spent in this forum, so feel free to chop it up, edit, and distribute away if you find any of it worthwhile.
Thoughts from a liberal after reading Paul Krugman's 2010 NYT piece: Why is Deflation Bad?
Krugman and Bitcoin and Me
Krugman's argument against deflation is built with a dependency: that there is a central authority which controls the money supply. So in a sense he has two core points.
(1) Krugman prefers that a centralized authority control the currency supply in order to manipulate the economy.
I'll allow that this tool can be a good, stabilizing force. But if that's the case, I want to be able to vet that institution from the bottom up before handing them the keys to the kingdom. And I want that institution to unequivocally work for society, not for Goldman Sachs. If I thought the current system worked well, I wouldn't be exploring other options in the first place.
(2) Krugman prefers that that centralized authority manipulate the economy such that it encourages spending and lending. In other words, manipulate toward small inflation.
This could be a good thing. And maybe the economy it creates is more fluid than a deflationary one. But when you bake into the system incentives to spend now and borrow from the future now, you get exactly the problems that you'd expect: over-consumption and a society largely ridden in debt.
Control of the supply of the currency carries tremendous power. It can be used to smooth natural economic cycles and encourage specific consumer and producer behavior. This supply-manipulative ability is not in and of itself a bad thing. The question is whether it is necessary- because with Bitcoin (as it stands) it is impossible. Within the theoretical bounds of crypto-currency, the abilities for algorithmic, "smart" money-supply, one that rests on mathematics rather than the banking elite, are endless. There are truly exciting developments to come in this space.
A First Consideration on Currency
Think, for a moment, of the unit of currency as sort of a creditor's note. It is an IOU from society; a placeholder for some unit of production. It says, "I produced something valuable (for someone else who takes part in this system). In return I got this note. I have reasonable assurance that one day I can cash this IOU in for something that I'll need in the future."
The unit of currency acts as a placeholder for its owner. Under this system, people trade their current productivity for the placeholder, and later (given the system still has integrity) they can trade that placeholder for something that raises their standard of living. It allows us to "time-shift" our production with respect to our consumption.
But don't forget!: A unit of currency as "just a thing". It only carries value if it is actually valued by somebody else you want to do business with. The dollar, the gold bar, the Bitcoin. the Euro, all work the same way: they are nothing but numbers or paper or metal. They are just atoms arranged in a way that make them valuable to a group of people only because they trust in the future of their common system.
Currencies are a subset of commodities. Commodities are things (oil, clothing, food, televisions) that are valuable to humans because they have useful properties. Like we said above, a currency's use is to "time-shift" production and consumption. The properties of the object that afford this advantage are usually a combination of irreproducibility, fungibility, scarcity, ease of transport, and securability.
Why is Deflation Bad?
In his 2010 NYT piece, Krugman argues that deflation hurts the economy due to three factors:
(1) People become less willing to spend, because sitting on money becomes an investment. Your dollar tomorrow will buy you more than what it can today, so why spend today? Therefore, spending goes down.
(2) Those in debt get into serious trouble awfully quickly, because the nominal amount-owed appreciates in value. As a result, they spend significantly less. At the same time, creditors have been shown to not spend enough such that it make up for this difference. Therefore, borrowing (and spending) goes down.
(3) Psychologically, people hate nominal wage decreases. With a fixed supply currency, year over year, wages will have to decrease in name. Even if the value of your wage rises, the amount written on the paycheck is lower. Therefore, people freak out.
These are troubling scenarios, though I think the first two are more substantial than the third. I don't mean to underestimate the psychological factor- in economics psychology is everything- but we'll talk about this later.
Krugman presents the first two points as bugs in a deflationary system. I see them as features.
"Your dollar will buy you more tomorrow than what it can today."
I think this is natural. We are a rapidly advancing species; through technology we are becoming more efficient, automating crappy tasks, raising the standard of living for less work, of course a dollar (that placeholder for your unit of production) is going to go further tomorrow than it does today.
Personally, I find this appealing. It provides every incentive to work now and spend later. That falls very much in line with good ol' American hard-working values and non-consumptive ethics.
Krugman finds this worrying though. If people have less incentive to spend, their is a crisis in demand. Hello liberals?! When was the last time we complained about lower consumption? In a country wracked with hyper-consumption that has put an unprecedented load on Earth's environment and ignited a climate crisis, I see a drop in demand as a breath of fresh air! Furthermore, you don't have to worry about people never spending. People will always spend now- but only on the want/need products, rather than the maybe-want-need-this-now-really-might-as-well-because-my-currency-is-losing-value-and-all-these-things-meet-my-zillion-useless-ephemeral-wants products.
I do believe there are much higher economic principles at work here. The United States is the world's default consumer. The global economy needs us to consume as much as it needs the million child laborers to produce. The economy would come crashing down if we stopped consuming immediately. But if we're trying to aim for a more sustainable economy, one that is compatible with the Earth's environment, let's move slowly and use a deflating currency as an incentive!
"Deflation rewards creditors and hurts debtors. Debtors spend less and creditors don't spend more enough to offset."
The impassive Krugman is beating around the bush. There is a problem when debtors suffer at the expense of creditors, and it's more than just a net loss in consumer spending. If you're concerned about a reduction in spending, see my previous point. But the remaining ethical problem is glaring- a power imbalance already exists in a creditor-debtor relationship, and it seems that deflation only widens this gap, crucifying the debt class on a cross of deflationary coin.
There's no doubt that this is a problem. And wealth redistribution may ultimately be easier with an inflationary currency- again, a word on that later. But there is also an incentive here: borrow less. Credit card debt is at an all-time high, up 1200% in the US since 1980, all while student loans have ballooned out of control. But neither of these problems even compares to the $7.8 trillion of mortgage debt our country has dug itself into.
Now debt is not a bad thing. The right combination of debt and saving, that is- using both capital previously earned with capital borrowed from future earnings- indicates a healthy economy. I don't want to have to work my entire life only to afford a house at the very end. I want to be able to borrow from my future economic output, buy the house now, and live in it while I work to pay it off. The same goes for student debt, corporate debt-financing, etc. Access to credit is crucial to a healthy middle class.
But ever-increasing debt is not sustainable. Nobody lives- and produces- forever, so you cannot always borrow from your future economic output. In the end, regardless of the money tricks you play, you have to produce enough value to cover your consumption. The world recently found out, in a mild manor, what happens when a currency's incentive and a nation's culture favors borrowing. When given the opportunity to build houses they never could have dreamed of paying off in their lifetime, millions of people took the offer and the biggest lenders took the risk. The echoes of their mass default still burden the global economy 6+ years later.
The point is, if Krugman says "inflation promotes borrowing", I say, "is this debt-ridden wreck what we really want our economy to look like?"
"People would freak out when their paycheck goes down."
I say get over it. Other possible proclamations in a deflationary world:
Better yet, this reflects reality! Technology makes everything cheaper every day. You should be paying lower phone bills tomorrow. Has the infrastructure gotten less efficient?
Here it feels like Krugman's grasping for straws. He pounces on people's reaction to their one source of income rather than their many expenses. This point also invokes that ugly liberal side: "The people don't know what's best for them."
The Central Authority as a Tool for Wealth Redistribution
Now we're talking. As a Liberal, I consider this to be a most important necessary evil. But let's call it what it is: stealing from the rich to give to the poor. (Unless we reject the modern notion of property- stay tuned...)
In an inflationary economy, value is constantly leaching out of everyone's savings. Those who control the monetary supply have a means of reaching into every dollar, and skimming off a little bit of value. We can choose to do a lot of good with this. Right now the skimmed dollars are "lent" to banks- the theory is that they then have more to lend to the general public and everyone benefits. Lending is good right? It introduces liquidity. But continue this cycle ad infinitum and all the spending in the economy starts in the form of bank debt! It is no coincidence that Americans households are more in debt than ever before.
If wealth redistribution is the only benefit of a central supply authority (which can fall out of trust at any time), this is a weak foundation. We already have a mechanism for wealth redistribution: taxation. Let's be proud of it, call a duck a duck, raise taxes on the wealthy, and introduce that liquidity with massive infrastructural programs, education spending, science spending, etc, rather than in the form of bank loans.
One last point- inflation appears to be a flat tax. That's already bad. It affects every dollar proportionally, rich or poor. Worse, the middle class and poor have a higher percentage of their net worth in USD- so inflation then becomes a regressive tax... given to banks... to be lent out to again to the middle class. All in the name of wealth redistribution?! In the name of kick-starting the economy?! Something's fishy here, and "you wouldn't understand, it's more complicated" doesn't cut it as an answer for these practices.
Bitcoin
So. What are we even doing here?
In 2009 a great mind developed a tool, the first in the history of human civilization, for "minting" a currency according to a fixed and open sourced algorithm. Without the involvement of any third party, you can now send an irreproducible digital object of fixed supply to anyone with an internet connection. The implications are mind-boggling. But the first such currency, Bitcoin, happened to be fixed-supply and ultimately deflationary, which has re-sparked the deflation vs. inflation debate.
This is happenstance. The protocol that gives rise to these digital currencies- the bitcoin protocol (small b)- could easily implement a different supply model. Paul Krugman can start a currency, KrugCoin, with any supply model that he likes! Which begs one last question.
Let's say I'm presented with an option: I may collect my paycheck in a currency that deflates- that is, my paycheck will gain value over time. Or I may collect my paycheck in a currency that inflates- it loses value over time. Why would anyone choose the latter? Must a population be forced into using an inflationary currency? Are we?
submitted by dpxxdp to Bitcoin [link] [comments]

Biased Sunday Preaching: Why I believe in Bitcoin

Biased Sunday Preaching: Bitcoin

If you pay attention to the Noel Prize winner in Economy Paul Krugman, you will have been warned about bitcoin.
There is a bubble that we should talk about -- a Ponzi scheme where people are rewarded.
The US ended up being the world's reserve currency for reasons highly related to politics and economy. It benefitted the most from post-WWII industrialization, maintained power over oil resources (though in other countries), and initially had its dollar tied to gold. The 1944 Bretton Woods Accord was signed by 44 countries, and gave $35 for an ounce of gold. Thirty years later and Nixon unlinked gold and the dollar.
The late 20th century saw a massive movement of manufacturing from the US to China, to exploit cheap labor. Our standard of living changes are very tied to that. The hourly wage of Americans is high compared to most of the world.
But things don't always last. There's this theory called the Strauss-Howe generational theory, which outlines an archetype of generations, described by four cycles: High, Awakening, Unraveling, Crisis. The idea is basically this: when things are bad, people work to improve them, so things get better; when things are good, people ignore them, so things get worse. I've seen the thing over and over in social groups: small groups are tight-knit and personal, so they grow; large groups become faceless and restrictive, so they shrink if they can't figure out how to create the small group dynamics. I digress.
Yes, this relates to economics, as it is about philosophical principles that drive economies, and how people work on improving value or ignoring that.

Tulip Mania

The question is, what creates monetary value?
The answer is, trust. Sometimes the complete lack of trust in each other.
There's an apocryphal story about how tulip bulbs were were sold for ten times the annual income of a skilled craftsmen, in the the Dutch commerce. The point of the story is that people became crazed about something that has low value. And that at some point people stopped buying tulips, thereby collapsing its price. Obviously a ridiculous story on its face, because tulips don't last and aren't a currency, and the value created was because people wanted the tulips for social reasons.
What's backing the US dollar? If hyperinflation were to happen due to a new war or major economic collapse, your dollars would be worthless. Even putting those dollars into a banking account today, depending on your banking account, it's hard to say whether you would have equivalent buying power in a few decades. Those dollars would have lost value due to inflation. Some argue that inflatable currencies are a Ponzi scheme, with the hidden tax of inflation behind them.

What are you talking about?

Cryptocurrency.
I'm leading into talking about cryptocurrency. Bitcoin. Ethereum. And plenty others.
I'm a firm believer that Bitcoin will retain -- and increase -- in value over the next several decades. There will be other competitors that may gain in more value, but they will be service specific.
I have several reasons for this.
1) All governments will inflate their currency, thereby losing value to those who are invested in them. Inflation is the hidden tax on us all. There is not only a nothing tangible thing behind that piece of paper or zeros and ones on a computer, but there isn't even a limited supply. Dollars come out of thin air, at a whim. The world has limited resources, but unlimited possible dollars.
2) Bitcoin is limited, therefore rare. Whether it is under or overvalued currently, I think it is a long term solution. It still allows for growth, as those computer bytes are nearly infinitely divisible. And other cryptos can allow for secondary currencies.
3) The younger generations will increasingly invest in crypto, and out of classical investment models. We will continue to see less money going from stocks to new crypto businesses that incorporate these as their models.
4) Crypto is global. It is not tied to a specific country, therefore, for many of the large cryptocurrencies, we are all in this together. If a country has problems with its currency, it will affect crypto value. But I would rather a a global hedge over a local, volatile hedge.
5) New models will result from this. Business. Political. Sociel. Technological. Distributed, decentralized models will be very robust long term.

What now?

Don't go and spend your entire bank account on crypto. Just. Don't. It's volatile, and you will get emotional, leading to stupid decisions. But do spend a small portion of it to get into this space. This is a long investment, unless you are using it to buy something tangible, such as from your local tech shop.
But watch the space. There are models here that will become increasingly important.
If you do hanker for buying bitcoin, I recommend coinbase or bitstamp.
They say that a bubble exists only when people don't recognize that something is a bubble.
The question that we have to answer is this: will the US retain global dominance, and how do we react to that answer?
submitted by TheMysteriousFizzyJ to WeAreNotAsking [link] [comments]

On Bitcoin & Trust - With guest Paul Krugman !

It isn't that Paul Krugman doesn't understand economics; it's that he doesn't fundamentally understand Bitcoin.
The public has witnessed Krugman (and other economists) propose arguments against Bitcoin that, frequently, if not entirely, concern use cases fit for the definition of "money", as it exists and is used today. In providing commentary on Bitcoin, Krugman will regularly call out Libertarians and ridicule the gold standard. He may even mention that pesky, awkward concept of “intrinsic value”. If you’re lucky, Krugman might share some enlightening words of wisdom, like “we already have credit cards for that”. You probably won't learn anything, of course, but you will be entertained!
And yet anyone today, with basic search engine skills, can educate themselves on an entire spectrum of Bitcoin use cases, many of which have little or nothing to do with money. Some of these leverage one particular attribute of the secure blockchain, like immutability. Proof of Existence is one such example - (proofofexistence.com).
Other potential use case cover the entire gamut of topics...
asset transfer
transparant voting
p2p mesh networks
digital content attribution and transfer
decentralized crowdfunding
resource allocation (via injecting market dynamics)
spam mitigation
content monetization
identity management
This isn't a fantasy thought experiment. Many of these potential "killer apps" are being aggressive financed and commercially pursued today. Some are tackling very expensive problems that impact productivity (like spam mitigation). In these areas and others, there is massive potential for value creation
And yet many economists appear to dismiss, absent of any real consideration, these Bitcoin use cases outright. They’ll make arguments concerning “intrinsic value” (or utility) that make no reference to any potential use case beyond how fiat is used today. Krugman will talk about online consumer purchases; he’ll talk about banking, about economic policy, inflation rates, the horrors of "hoarding". And this is where the gravest of errors begins...
For if Bitcoin, fundamentally, is just about “money”, then its utility will be considered on those merits alone. These other potential “killer apps” won’t surface in discussion, and the extended absence of their discovery will be passively reinforced. One may even develop a sort of dogmatic conviction, based less on the merits of the actual innovation and its real-world utility, and more on things like the inflation rate, economic policy and, of course, the horrors of "hoarding".
Imagine for a moment that you're constructing a new house. Debating in this manner is like attempting to construct the second floor before you've put in the foundation.
And yet these Bitcoin use cases all have something in common; they all typically required trust. While machines today may run deterministic code, with a predictable output, humans certainly do not. We're autonomous agents in the decision making process, and the “code” we compile cannot be audited by others . Such is the nature of the human mind and the magic of subjectivity. Others must trust that our output (action) is what they expect. It is this “friction” - this immutable nature of human interaction - that Bitcoin is really about, not just “money”. It just so happens that the concept of money is very tightly intertwined with the concept of trust. Therefore, we might be better conceptualizing this use case as “value transfer”, without restricting ourselves to “money". Humans value many things, of course - consumable goods, intellectual property, personal identity, family, financial assets like stocks and bonds, etc.
Ultimately, we must consider Bitcoin’s utility across this broader spectrum. Because Bitcoin is young, many of it’s “killer apps” may not reach mainstream for years, maybe decades. As an helpful analogy, consider the successes of the Internet. Some of the “killer apps” that inevitably came along, like Uber, took quite some time. In Uber’s case, it required the eventual emergence of another innovation - smartphones - and their rapid rise to ubiquity. I see no logical reason to believe that Bitcoin’s “killer apps” won’t roll out in a similar manner.
There are potentially 1000s of Bitcoin use cases that might demonstrate real utility in practice, addressing trust at scale.
Perhaps only a handful will eventually turn into “killer apps”, but that’s ok. In fact, it should be expected. Those that do will provide real utility to society. Since these use cases will consistently require “bitcoins”, and since those bitcoins are scarce, it logically follows that they will (and should) command a market price. Anything that is both useful and scarce will command a price. The only logical way to argue that Bitcoin, and “bitcoins”, lack utility is to argue that every single use case suggested, and many more, lack real-world utility. But given the fundamental importance (“value”) of trust, and the potential utility of a “trustless” protocol at global scale, this seems, if not overly pessimistic, incredibly naive. After all, what is the probability that every single use case, addressing trust at scale that is funded, developed and productized by intelligent entrepreneurs all fail to create value? This calculation is a simple exercise in statistics, not economics.
Bitcoin is certainly almost impossible to accurately value today. It requires, among other things, estimating both the likelihood of success and the value created across all of these potential use cases. And, of course, there are likely many more “killer apps” being discussed in private circles that we’re simply unaware of. While we might debate the precision of any suggested valuation, it should be obvious that there is a value. Like the Internet, Bitcoin's design and global reach provide incredible, lasting incentive to pursue and commercializing these ideas. And Bitcoin's egalitarian nature, like the Internet, provides the same opportunity and freedom to innovate across all participants.
It should be clear, though, that Bitcoin touches on a remarkably fundamental and important aspect of human engagement (trust); it is not merely "digital cash", any more than the Internet is merely static text and hyperlinks. It is far more fundamental and abstract.
submitted by VP_Marketing_Bitcoin to Bitcoin [link] [comments]

Huh? Bitcoin: The Rise and (Inevitable) Fall

Full Article
Since I am speaking about this decline as inevitable, and obvious, let me explain why I think this even warrants conversation in the first place. I think Bitcoin is a fascinating experiment that will eventually have considerable value to help improve our knowledge of monetary systems, and to help dispel some of the myths that have built up in some recently popular economic circles. With the crisis, “hard-money” like the gold standard has become a popular “solution” despite the fact that we know both empirically and theoretically exactly how and why they don’t, won’t and never could work. Paul Krugman has tried to explain this problem with his explanation of the Capitol Hill Baby-Sitting co-op and Pascal-Emmanuel Gobry has highlighted this connection with Bitcoin, but considering the ideological nature of some of these questions, such proof will never be taken as positive. Bitcoin will eventually show us this reality in real-time.
The second source of my interest in Bitcoin is the role of feedback loops and reflexive processes in markets. George Soros’ Alchemy of Finance is one of my favorite market philosophy books and one I am a believer in. The essence of Soros’ “General Theory of Reflexivity” holds that markets are driven by feedback loops whereby prices influence the course of events, which influence prices, which in turn influence the course of events. I’ll let Soros further explain:
Feedback loops can be either negative or positive. Negative feedback brings the participants’ views and the actual situation closer together; positive feedback drives them further apart. In other words, a negative feedback process is self-correcting. It can go on forever and if there are no significant changes in external reality, it may eventually lead to an equilibrium where the participants’ views come to correspond to the actual state of affairs. That is what is supposed to happen in financial markets… …By contrast, a positive feedback process is self-reinforcing. It cannot go on forever because eventually the participants’ views would become so far removed from objective reality that the participants would have to recognize them as unrealistic. Nor can the iterative process occur without any change in the actual state of affairs, because it is in the nature of positive feedback that it reinforces whatever tendency prevails in the real world. Instead of equilibrium, we are faced with a dynamic disequilibrium or what may be described as far-from-equilibrium conditions. Usually in far-from-equilibrium situations the divergence between perceptions and reality leads to a climax which sets in motion a positive feedback process in the opposite direction. Such initially self-reinforcing but eventually self-defeating boom-bust processes or bubbles are characteristic of financial markets, but they can also be found in other spheres. Understanding and spotting feedback loops in financial markets is one of the most important things an investor can do. Feedback loops are one of the sources of my interest in the Santa Fe Institute and its work on markets as a complex adaptive system (see my recent interview with Michael Mauboussin which spends some time on feedback loops). In fact, feedback loops are one of the telltale features of complexity. It is my operating hypothesis that Bitcoin is one such “positive feedback process” which will first lead to a spectacular risein prices, that will ultimately reverse and crumble into an even more remarkable decline.
As it stands today, per my thesis, Bitcoin’s “rise” should be in the early stages. This rise has been fueled by a combination of speculation and the promise for the development of actual commerce on Bitcoin. The adoption of broader uses for the currency will be the catalyst for the next stage of ascent. I’m not sure how far Bitcoin can go on the way up, nor am I sure exactly when the inflection point from rise to fall will occur, but one thing I am fairly certain of is that when the fall comes, it will be swift and violent. As they say, “what goes up on an escalator goes down on an elevator” and I would not want to be the one left holding the proverbial bag on the way down.
submitted by investing101 to Bitcoin [link] [comments]

Cost, Value, Price, Money, and Emergy -- Developing ideas, request for references (and sanity check)

Over the past several months I've been developing some thoughts on fundamental underpinnings of economics, particularly the concepts of cost, value, price, money, and working in an ecological principle, emergy (with an 'M'). I've found some references, I'm seeking more for both conventional and unconventional thinking.
The most recent draft is at Ello, "What's the value of the Universe in dollars? All of them". I'm not entirely satisfied, though it's shaping up fairly well.

Definitions

My terms aren't quite as typically used in economic discussion, though close, and I believe defensible.

Prior discussion

I've been developing these ideas largely at The Other Place, within my Economics Collection. In particular, in date order:
  1. Cost, Price, Value: Earth and Ecosystem Services (17 Jan 2016). Looking at how economists and ecologists value ecosystems, my first development of cost, price, and value as three distinct (though not unrelated) concepts. Relation: cost < price < value. Antecedents in Aldo Leopold, A Sand County Almanac.
  2. Cost, Value, and Price: Three separate concepts (22 Jan 2016). Taking the distinctness of each concept slightly further.
  3. Toward a fundamental basis of cost and value (24 Jan 2016). Bringing in concepts from ecology, especially Eugene Odum & Gary Barrett, Fundamentals of Ecology (2005), and Howard T. Odum, "The Energetic Basis for Valuation of Ecosystem Services" (2000). Also Jeffrey S. Dukes "Burning Buried Sunshine" (PDF).
  4. A development of Emergy to Currency (26 Jan 2016). Elliott T. Campbell, David R. Tilley, "The eco-price: How environmental emergy equates to currency", Ecosystem Services. March 2014, Vol.7:128–140, doi:10.1016/j.ecoser.2013.12.002. "Energy flows through economies in a hierarchical pattern with vast amounts supporting the base while each step has less and less flowing through it. Money is inextricably connected to many of these energy flows in a countercurrent."
  5. Emergy and emergy accounting (26 Jan 2016). Reference to Mary Odum (daughter of Howard T.) Emergy: you spelled energy wrong!. Primer on emergy concepts.
  6. Sustainable Economics Modeling -- the role of entropy (26 Jan 2016). Link to Garvin H. Boyle's Orrery Software -- Entropy in ABMs. Agent-based modeling of energy and entropy in economics.
  7. What would be the effects of having multiple currencies for different economic purposes? (28 Jan 2016). Say, quotidian vs. interbank transactions.
  8. Price (or cost) in Economics (29 Jan 2016). Krugman and Wells, Economics: "All costs are opportunity costs."
  9. Money, Value, Prices ... sounds familiar (8 Feb 2016). Ludwig von Mises, The Theory of Money and Credit. Among von Mises' claims, that (use) value cannot be known. He is incorrect.
  10. Cost, Value, Prices: Assessing Natural Capital (9 Feb 2016). A WashPo article on a paper by Eli Fenichel, "Measuring the value of groundwater and other forms of natural capital", based on earlier development by Dale Jorgenson in 1963. Fenichel's approach to value is interesting, but I believe it's a misplaced focus from cost.
  11. Cost, Value, Price: W. F. Lloyd, 1833 (10 Feb 2016). Lloyd's essay, published based on "A Lecture on the Notion of Value as Distinguished Not Only From Utility, but also from Value in Exchange establishes several interesting points, "All value is relative" (M. Say, similar from others). Also, curiously prescient of Albert Einstein, some 80 years later.
  12. More on cost, value, and price, in context of living wages and equality, with some bits on taxation and redistribution (20 Feb 2016). My first attempt to really draft everything into a coherent whole. Draws in Gresham's Law.
  13. Value: a red herring (24 Feb 2016). The idea that in most market circumstances, setting a specific value on a good is a distraction. I'm now thinking I've taken this a bit too far, but it remains useful. Specifically, in many arguments the case is made that 1) value matters, 2) it cannot be precisely known (because it's an internal mental/psychic state), and therefore attempts to prescribe or control or quantify it are bound to failure. My upshot: so long as value exceeds costs the market's going to function. And, on the large/aggregate scale, ecological/biological type methods to assess value work sufficiently for analytic purposes.

Other references

As noted, this is a frequent topic of discussion. Among those discussing price, cost, and value that I'm aware:

Adam Smith Wealth of Nations.

Multiple aspects are considered, including: the origin and use of Money, and money as part of general stock, and of prices of commodities, labour, stock, and land.

Value (economics) (Wikipedia)

Usual caveats -- this is Wikipedia, a guide but not a source.
Reassuringly, economic value seems to match my use:
[E]conomic value is not the same as market price, nor is economic value the same thing as market value.
And yes, this seems like a continuing puzzle in economics:
The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods which can be exchanged. From this analysis came the concepts value in use and value in exchange.
There is a Theory of Value.
In neoclassical economics, the value of an object or service is often seen as nothing but the price it would bring in an open and competitive market... As such, everything is seen as a commodity and if there is no market to set a price then there is no economic value.
A/K/A "value in exchange".
In classical economics, the value of an object or condition is the amount of discomfort/labor saved through the consumption or use of an object or condition (Labor Theory of Value).
...
Steve Keen makes the claim that "value" refers to "the innate worth of a commodity, which determines the normal ('equilibrium') ratio at which two commodities exchange."
Citing: Steve Keen Debunking Economics, New York, Zed Books (2001) p. 271, ISBN 1-86403-070-4, OCLC 45804669
In which case, Steve and I disagree. See W.F. Lloyd and M. Say.
Though:
To Keen and the tradition of David Ricardo, this corresponds to the classical concept of long-run cost-determined prices, what Adam Smith called "natural prices" and Karl Marx called "prices of production."
That I agree with more, though I'd clarify by calling it the innate cost. Any value must then exceed this cost.
There's John Ruskin who wrote on the moral concept of value in Unto This Last. Notably:
It is impossible to conclude, of any given mass of acquired wealth, merely by the fact of its existence, whether it signifies good or evil to the nation in the midst of which it exists. Its real value depends on the moral sign attached to it, just as strictly as that of a mathematical quantity depends on the algebraic sign attached to it. Any given accumulation of commercial wealth may be indicative, on the one hand, of faithful industries, progressive energies, and productive ingenuities: or, on the other, it may be indicative of mortal luxury, merciless tyranny, ruinous chicanery.
Ruskin influenced Gandhi.
Mises appears:
Economists such as Ludwig von Mises asserted that "value," meaning exchange value, was always the result of subjective value judgements.... Thus, it was false to say that the economic value of a good was equal to what it cost to produce or to its current replacement cost.
No, not false. Different concepts.
Related:

William Stanley Jevons, Money and the Mechanism of Exchange (1875)

Among the classic works on the topic. Jevons' contents cover many of the topics and concepts I've been blundering into, though he's also concerned with the physical instanciation -- at the time of his writing, banknotes were still fairly new, and the were serious questions over multi-metallic standards (e.g., gold or silver, or gold and silver). Briefly:

Does a revised model offer any explanatory power?

There are several questions, most pressing of which is "am I completely nuts". Running close behind is "what does this buy us"?
I'd really like to be able to explain contradictions, paradoxes, or failures of existing economic theory in establishing value. There's the case of under-priced resources and the shutdown decision, noted above.
The dual approach to pollution externalities is another. Not sure if this is Coase, Lucas, Rawls, or another, but essentially, if one party pollutes and another has to deal with the consequences, conventional economic theory can make an equal case that either the polluter pays a fine for the harm, or the nonpolluter pays the polluter not to pollute. Being able to explain this would be nice.
If price is simply a control-system cost, then summing up control system costs over the entire economy ... doesn't really seem like a sensible operation. It tells you how much encouragement is needed to precipitate trade, but needn't address either cost nor value. This suggests that computing economic prices isn't ... all it's cracked up to be. And that perhaps cost is a better basis.
It could well be that ecologists are chasing the wrong target. They should be mapping economic costs to ecological ones, not the other way around?
Skimming Jevons, he addresses the cognizability of currency -- that is, you want people to be able to instantly recognise money as money. And not have to test it for worth or value. That's tickling some nerves, with Gresham's Law and Bitcoin both coming to mind. Gresham's Law: readily recognised value is a positive. Bitcoin; inherently noncognizable.
Observed economic behavior should be describable or derivable from this explanation. Coming up with a normative this is how things should be story ... that doesn't describe reality, isn't particularly useful. It is, however, practical.
I'm aware that some of what I'm suggesting goes against a few thousand years of economic thinking. On the other hand, some of what I've blundered into appears to be well in line with what's come before, and I'm independently deriving it.
Some simple targets would be to describe products made or labour provided continuously. Being able to describe pricing behavior and pricing mechanisms, and to show how stocks (that is, fixed quantities of goods) or asset classes behave, would be useful.
Describing monetary behavior more generally even more interesting.
And that all remains a work in process.
As I noted at the top: this is something I've been developing for the past couple of months. I'm researching what I can find of existing theory and understanding. Additional references, and noting where I'm off in the weeds would be highly appreciated.
submitted by dredmorbius to dredmorbius [link] [comments]

Huh? Bitcoin: The Rise and (Inevitable) Fall

Full Article Since I am speaking about this decline as inevitable, and obvious, let me explain why I think this even warrants conversation in the first place. I think Bitcoin is a fascinating experiment that will eventually have considerable value to help improve our knowledge of monetary systems, and to help dispel some of the myths that have built up in some recently popular economic circles. With the crisis, “hard-money” like the gold standard has become a popular “solution” despite the fact that we know both empirically and theoretically exactly how and why they don’t, won’t and never could work. Paul Krugman has tried to explain this problem with his explanation of the Capitol Hill Baby-Sitting co-op and Pascal-Emmanuel Gobry has highlighted this connection with Bitcoin, but considering the ideological nature of some of these questions, such proof will never be taken as positive. Bitcoin will eventually show us this reality in real-time. The second source of my interest in Bitcoin is the role of feedback loops and reflexive processes in markets. George Soros’ Alchemy of Finance is one of my favorite market philosophy books and one I am a believer in. The essence of Soros’ “General Theory of Reflexivity” holds that markets are driven by feedback loops whereby prices influence the course of events, which influence prices, which in turn influence the course of events. I’ll let Soros further explain: Feedback loops can be either negative or positive. Negative feedback brings the participants’ views and the actual situation closer together; positive feedback drives them further apart. In other words, a negative feedback process is self-correcting. It can go on forever and if there are no significant changes in external reality, it may eventually lead to an equilibrium where the participants’ views come to correspond to the actual state of affairs. That is what is supposed to happen in financial markets… …By contrast, a positive feedback process is self-reinforcing. It cannot go on forever because eventually the participants’ views would become so far removed from objective reality that the participants would have to recognize them as unrealistic. Nor can the iterative process occur without any change in the actual state of affairs, because it is in the nature of positive feedback that it reinforces whatever tendency prevails in the real world. Instead of equilibrium, we are faced with a dynamic disequilibrium or what may be described as far-from-equilibrium conditions. Usually in far-from-equilibrium situations the divergence between perceptions and reality leads to a climax which sets in motion a positive feedback process in the opposite direction. Such initially self-reinforcing but eventually self-defeating boom-bust processes or bubbles are characteristic of financial markets, but they can also be found in other spheres. Understanding and spotting feedback loops in financial markets is one of the most important things an investor can do. Feedback loops are one of the sources of my interest in the Santa Fe Institute and its work on markets as a complex adaptive system (see my recent interview with Michael Mauboussin which spends some time on feedback loops). In fact, feedback loops are one of the telltale features of complexity. It is my operating hypothesis that Bitcoin is one such “positive feedback process” which will first lead to a spectacular risein prices, that will ultimately reverse and crumble into an even more remarkable decline. As it stands today, per my thesis, Bitcoin’s “rise” should be in the early stages. This rise has been fueled by a combination of speculation and the promise for the development of actual commerce on Bitcoin. The adoption of broader uses for the currency will be the catalyst for the next stage of ascent. I’m not sure how far Bitcoin can go on the way up, nor am I sure exactly when the inflection point from rise to fall will occur, but one thing I am fairly certain of is that when the fall comes, it will be swift and violent. As they say, “what goes up on an escalator goes down on an elevator” and I would not want to be the one left holding the proverbial bag on the way down.
submitted by investing101 to BitcoinMarkets [link] [comments]

[Table] IAmA: IAM Peter Vessenes, Executive Director of the Bitcoin Foundation. AMAA!

Verified? (This bot cannot verify AMAs just yet)
Date: 2012-09-28
Link to submission (Has self-text)
Link to my post
Questions Answers
Most proponents of Bitcoin seem to believe that there will be a point where one coin exceeds a value of $100 or even $1000. Sure, that is definitely possible and I can accept that it may happen one day. However, since each coin has this intrinsic potential value.. why would anyone spend them on trivial stuff like food now? How can you spend something that you believe will continue to grow in value effectively to infinity? That seems like a fair complaint to me, in general. In practice, and as opposed to Krugman's thoughts on the matter, we have many thousands of happy Bitcoin transactors, I think people like to spend their bitcoins with others, give them away, and use them for things. I do know some Bitcoin businesses that try never to spend their coins. That said, we have had some periods like last year where EVERYBODY wished they'd spent their coins.. To my mind volatility is a worse 'evil' than being deflationary. As I said above, I think most government economists wish an inflationary currency (and many bitcoiners hate this, and talk a lot about how much they hate it), but I think there's definitely a place in the world for a deflationary value system. An interesting thought experiment for you -- if you forked the Bitcoin blockchain and changed issuance so that it tracked say, USD or USD/EUR inflation rates for issuance, would it have the same uptake or not?
Every once in a while I hear stories about security breaches including 240,000 bitcoins that went missing the other month. How do you ensure security of account holders funds? The practical security aspects of running Bitcoin businesses are a REAL need, and it's something we want to help on with advice, and possibly opt-in certification at some point. I say more about this elsewhere in the AMA.
Furthermore, most sites I've came upon that sell goods seem poorly managed and difficult to use. Is there a Bitcoin equivalent to sites like Ebay and Amazon? Re: bitcoin site usability -- I agree, it's often terrible! I'm not sure why this is, except to say that bitcoins make transacting online so easy that even people who can't afford a designer can do it.
A: How does the intrinsic non-fiat nature of the currency affect its susceptibility to market fluctuation? I.E. Better or worse stability than fiat currency? So far, because market cap is so low, (Roughly $100mm of value), Bitcoin exchange rates are highly susceptible to people pushing it around. This is really tough for everyone. There are a bunch of businesses that might not be viable until you have some exchange rate certainties that extend beyond a short (one day-ish) window.
B: What can be done to improve the resistance to massive fluctuations in value stemming from exchange market manipulation or normal use? There are some macro-economic things that could be done, like exchanges publishing all trades to a central area, and implementing locks if prices rise / fall too suddenly, but those all have their own effects to consider. I think the fundamental thing to do is help Bitcoin acceptance and uptake grow, increasing the size of the pie until there are a much smaller number of parties that could push the price around.
C: Is there anything that can be done to the standard to improve stability or is it all up to the markets to implement safeguards? So, we all do have a part in that stabilization for sure. There's also the angle of creating whole supply chains that are bitcoin denominated -- paying our staff in Bitcoins only is an attempt to work on that angle.
What do you say to people that claim Bitcoin is nothing but a pump-and-dump pyramid scheme designed to benefit it's creators? That they're sitting on a huge pile of bitcoins obtained by them before the currency was made available to the public when mining was far easier then dumping huge batches of Bitcoins destroying the price over and over again to enrich themselves and fuck everybody else? And that they get more chumps into the system to inflate the price again, by going around the internet and promoting Bitcoins as an alternative currency rather than a complete fraud? This borders on the troll-ish, but I will say that the Bitcoin network autosizes coin generation based on how many people wish to do it. That is, people opt in to make the coins and secure the network. Nobody is forced to.
Is the Bitcoin Foundation a non-profit, tax-exempt organization in the United States? Who among the directors and the board has experience running a non-profit? Why is the ED also a member of the board? How does the ED have the time to run the organization given his obligation to CoinLab? Why haven't I seen any of the involved parties at either of the last two Bitcoin conferences? Can we get somebody who isn't a white male involved? We're a 501(c)6, Washington DC Nonprofit.
I have experience launching a non-profit, hence my job.
ED's typically get a salary and work full time at the job; we didn't know if we'd have budget to pay someone who could operate such a thing, so we went with this structure. I anticipate that I will step down from being the ED at the earliest moment we know we have someone better to do it; running CoinLab is plenty of work for me.
Our assistant director Lindsay Holland is not a white male.
In general, Bitcoin is a white male sausage-fest, though. I urge you and all Bitcoiners everywhere to work on changing that.
What is the future of bitcoins? Do you think they will ever make government-issued currency obsolete? I don't know the future of Bitcoin, but I hope that I and the Foundation are a part of it!
I don't believe Bitcoin will ever obsolete a government currency, but I only speak for myself when I say that. Bitcoin is a fascinating and novel technology with a HUGE number of potential benefits to the world, so I'm into it. I don't see a government wishing to cede control of its currency to anything like the technocratic / consensus model that Bitcoins are governed by, though.
That said, I do hope that Bitcoins will be able to help people in areas of the world that need better money features. Mpesa is a great example of something that helps Kenyans (and people from a few other countries) by changing how money is used. Bitcoin has the potential to help people like that, all over the world, whether or not the 'market' is large enough in that country.
I personally think that sort of thing is SUPER exciting.
Could you describe the bitcoin foundation for me? Sure! It's a trade organization, member-driven. Its goal is to promote, protect and help standardize Bitcoin. Our initial goals are to provide funding for the core development team, run a 2013 Silicon Valley Conference, and create some opt-in certification methods and best practices for businesses dealing with Bitcoin.
Join us.. :)
Standardize? I can tell you hate our goals, so I won't spend a long time trying to convince you. But, I will say that businesses often need a long, secure timeframe to make investment decisions, and they need to have some sense that what they work on or invest in will be roughly similar at the end of their investment to the beginning.
Why do you want to "standardize"? For instance, imagine ebay deciding to take bitcoins. The person-hours to get that done inside ebay are staggering to imagine, from wallet scalability issue to accounting treatments, refunds, ... It would be a major endeavor.
What gives you that authority? It would be great for bitcoin if ebay took bitcoins. Seriously great, but they can't right now until they feel there is some generally stable path going forward.
Why is the core development team so deserving of funding when they can't even make a decent client? You might hate everything about that, and that's cool. I urge you to go ahead, fork the code, advocate as much as you like for something else. Bitcoin's free, both the protocol and the software. Nobody is stopping you.
Is there any legal action to be done if someone steals your bitcoins? Yep, if you're in the US, file a police report, and call FBI Cybercrimes division.
As an individual member of the Bitcoin Foundation, what do I get? Any perks or privileges? Email aliases, voting rights, a newsletter, etc? Or are these memberships mostly a way of providing financial support to the foundation? The bylaws are up now, so you can read in great detail what the organization will provide its members: Link to github.com
In short, though, rights to vote people on / off the board of the Foundation, soon access to private forums, probably discounts to the bitcoin 2013 conference, happiness at supporting the dev team.
I would like to provide email aliases, we've got Patrick and Jon working on any possible gotchas there, though.
Many aren't taking bitcoin seriously because of the security issues some have had. What steps are you taking to legitimize this currency? Like Jeff says below, I would distinguish between fundamental protocol security and security practices.
Bitcoins fundamental protocol security seems pretty good at this point; I'm sure we'll all be keeping an eye on that quite intently into the future.
Practical Security has been, largely, terrible in the Bitcoin space for most businesses, Mt. Gox perhaps excepted. The amount of work it takes to secure 80 byte strings that may be valued in the million dollar range is non trivial. Think securing missile codes as to the level of security needed.
Many bitcoin businesses can't afford (or don't wish to) this sort of security. I'm hoping we can provide some tools and pointers for these businesses and their users to help people understand what they're getting into when they transact with a bitcoin business, and what their risks are.
The Bitcoin Foundation Membership (VIP) fees are definitely disproportionate. Why? Are we now heading for a two-tier bitcoin community? We got requests from large supporters to make a more expensive membership tier. I'm slow, but not so slow that I said 'no'.
I'm slow, but not so slow that I said 'no'. - So you said 'YES'? Someone said "Please make higher corporate member fees: Linux Foundation Top Tier member fees are $500k. Your plan is too low."
I said "OK, Thank you for that advice. We should do that."
Is the foundation primarily focused on US or also europe and the rest of the world? Right now Jon Matonis is considered our "Europe Expert" on the board. There's a huge amount of work to do just in keeping track of how Bitcoin is categorized and regulated around the world. I would expect the Foundation to put some time and energy into helping with that process, but it's not our first goal.
What would you or the Fundation do if the government declares Bitcoin ilegal? Advocate that such a thing is silly, unenforceable, and counterproductive.
Thats no answer to the question. Have you got any plans for the "unthinkable"? That really is what I would do. What do you suggest?
What are your thoughts on transparency of the foundation? How much revenue is there and how it is spent, will that info be public? We're aiming to be highly transparent. I proposed today that we publicize our cold wallet public keys so that people can check our balances. This got pushed back a month while we work on some logistics. I will follow up about this, though. I think having auditable books from day one is really cool.
What are your thoughts on fiat currency? I love it and wish more of it. I'm totally grateful that nations have standardized and created currencies for their people, so that I can travel and buy stuff without worrying about the reputability of a local bank when I go to exchange my money.
I read something recently about a Bitcoin based debit card system. How is that coming along? I don't know, but I want one! The Foundation would like one, too. We are trying to run the Foundation with only Bitcoins, so it would be nice to fuel up a debit card for some expenses.
Create an opt-in certification process for Bitcoin businesses. How will you be going about this? What will certification entail? TBD, But I am imagining that businesses could vet their processes and procedures against a set of published standards, pay for an audit, and then be able to help their users understand what level of security they provide, e.g. "Bronze certification -- the site could be trusted with 50 bitcoins of stored value per person."
Does the foundation intend to have control over bitcoin.org and thereby over the main distribution channel for Bitcoin-Qt? We're a member organization. Some of our members do have access to and influence over bitcoin.org and bitcoin-qt. I have no idea if they would like us to help manage bitcoin.org, since we just launched yesterday.
If the decision makers for bitcoin.org and bitcoin-qt want us to help out in those areas, I wouldn't mind. I don't think either of those things is super strategic to helping Bitcoin right now; there's more need for messaging and some financial security for the core team, and the other stuff we said we're going to work on this year. bitcoin.org and -qt publishing don't seem broken to me or risky right now.
Given that Mt Gox has a (rightfully deserved) place on he board, what steps can and will you be taking to ensure that independent exchanges are encouraged and not ignored? Also what steps, if any, can and will you take to ensure the public that the commercial interests of those on the board do not conflict with the decentralised ideals and paradigm of Bitcoin itself? I don't know how we'd encourage or ignore exchanges, since everyone is welcome to join.
I do think this individual / corporate angle is at the heart of the Bitcoin, though; it's got a lot of parties that care about it, passionately. Some are investing millions of dollars. Some are tirelessly advocating for Bitcoin. Many sit around and troll and waste people's time.
I guess that partly we expect our board members will act with integrity, and that if they aren't representing the needs of their member class, they'll get replaced with someone who will.
I also don't know how we would, practically, decentralize Bitcoin, even if we wished such a thing. I don't think anyone on the board thinks Bitcoin is doing badly. We're all really excited about it and want to help. I personally believe if corporations (a small group or just one) ever provably controlled Bitcoin, they would become vastly less appealing and useful. So, we're on watch.
Not as on watch as a paranoid bitcointalk forum troll wants us to be, but we're on watch.
Why do you require a real name and real address, when bitcoins core values are to be anonymous? The Foundation's core values include openness and transparency. I think the Bitcoin anonymous thing is overblown and a bit of a myth, by the way. Every bitcoin transaction links two addresses; often people can be determined from those addresses.
At any rate, we wish to make sure you can't stuff the ballot box during voting, and we wish civil productive discourse among our members, so we need real names and addresses.
If you just want to support us without joining, you can always send money to our vanity donation address: 1BTCorgHwCg6u2YSAWKgS17qUad6kHmtQW.
What is the current, largest obstacle when it comes to wider Bitcoin adoption? I think Bitcoin adoption is growing nicely. There seems to be a sort of stair-step function where people figure out something new and broadly appealing to do with them, and it makes a big jump. I expect we'll see that many times over the next five or ten years.
Doubts about the network's scalability, uncertain status about its legality or something else? Bitcoin's brand seems bad to me; mostly the highly publicized exchange attacks worry people. It's too hard to have a secure cold storage wallet for even a very smart individual. I'd like to see some of those things improved.
Does Bitcoin have any plan to combat criminals using the currency to purchase things on online black markets? I can't speak for Bitcoin, but the Foundation has no criminal combatant plans. We do want our members to use their real names and promise that they only engage in activities legal in their jurisdiction, though.
That's mostly just a way of us saying who we want to hang out with, and expressing some community values we think will help our organization be a success.
Did you expect for the Bitcoin concept to explode as it has? I sort of did, but I definitely didn't put my wallet behind that explosion. Sigh.
Also, where do you see it going in the future? I talk elsewhere in the AMA about what I'm hoping for Bitcoin.
Will the foundation be sponsoring Bitcoin software outside of Bitcoin.org? What do you mean? Like if Jeff Garzik made cool software that would help the Bitcoin world but didn't release it at bitcoin.org would we try and help him?
The answer is yes.
I.e., the Foundation would provide a service with recommendations such as wallet security for an exchange, but I don't think the Foundation should be in the business of "certifying". Yeah, there's an interesting set of questions there about certification. I would LOVE to see a certification that brought with it the ability to be insured against loss and theft. Think how nice it would be for an exchange or wallet business to be able to offer that insurance. That said, I don't know of any bitcoin company that has such insurance yet. I think we have some work to do vetting out the processes and procedures, and then some sales and relationship work with insurance companies first. At any rate, we won't be stumping up security for certified companies through the main Foundation corporate vehicle ever. But I think the membership will want to discuss what a good set of next steps is toward that goal, if we're all sold on trying to make it happen.
What's the advantage to using bitcoins over government issued currency, basically why should I invest my $US in bitcoins? Some people have ideological preferences for Bitcoins money issuance scheme.
Some are nerds, and like it for nerdy reasons.
Some just like being able to pay whom they choose when they choose.
Some deal with payment infrastructures that are scary (Paypal freezes are scary), or slow (wiring money in and out of small country central banks is REALLY slow).
Also, they're neat.
How does it feel to know that a kitten wearing a top hat has more upvotes than you? That kitten is so damn cute. I spent some of my AMA time going "AWWW"
How will you try to keep BIG businesses from buying their way into "THE" Bitcoin Foundation? Bitcoin is inherently free, it's peer to peer, it can be forked, it's not controlled by the Foundation, especially one that's one day old.
So, I look forward to large donations from BIG businesses. We will use that money to further the Foundation's mission. Our members will, no doubt, be highly engaged in discussions about what to do with large donations. I'm looking forward to it.
What is your opinion on Canada's new digital currency, "Mint Chip"? How does this affect Bitcoin? I don't know much about it, but I think it's cool from what I do know, (and is it technically flawed? I don't recall). I'm all for money system experimentation, as you might guess.
You are starting to get increased media/congressional notice. Are you at all worried about being shut down and prosecuted like E-Gold was? Who is we? The Foundation is a member organization, nothing else.
There are some bitcoin exchange operators that actively flout the same AML laws that got the E-Gold founders in trouble.
There are some that try hard to do the right thing, jurisdiction by jurisdiction.
Personally, I don't worry about the ones trying to comply, and I don't transact with the ones flouting the laws.
Why do you have different vote classes, is one class worth more then another? Corporate members vote their seats, Individual members vote theirs.
Anecdotally, there are fewer corporate members, so a corporate membership vote has a greater proportional influence over a board seat than an individual membership.
so a corporate membership vote has a greater proportional influence over a board seat than an individual membership. - So there may be poll when votes of both classes come together? Like asking ALL members to opt out changes to the source code? I would be stunned if we voted on source code, ever. I don't think anyone thinks that is in the remit of the Foundation.
Pragmatically, the dev team is one arm of bitcoin source code governance, and miners are the other, since they can refuse to work with code changes they don't like if they do it in bulk.
The board meets often, and should be listening to its constituents; sign up as a member, and then mail your appropriate rep. As a sample of what we discussed today: "Should we do an AMA? Who will get member signup confirmations out? Can we publicize Patrick's bylaws yet?" were the scintillating topics of conversation.
Will I be getting an e-mail with receipt for my payment confirming my membership subscription? Yes, we are ACTIVELY working on it. Apologies.
What's the dev's payroll? TBD, now that we know what our member signups are.
I don't know if we'll release payroll or budget numbers outside the membership -- something we have to discuss.
What power does this foundation have over Bitcoin? Why did you make Satoshi the founder without his permission? We have no power over Bitcoin whatsoever.
I think we felt a foundation that didn't somehow acknowledge Satoshi would be a bit churlish, like ignoring Linus completely while making the Linux Foundation. Satoshi is, as always, free to participate as he/she chooses.
Has there been a growth in algorithmic trading of Bitcoins in the past year? If so, is that growth in algos added stability to the Bitcoin Market? I have no idea. But I'm curious about this too!
Why hasn't (almost) anybody heard of you before today? I keep a low profile. Until yesterday. Also, I gave up on the forums a long time ago; not productive enough for me.
That was very informative, thanks. Not that hard to grasp when somebody spells it out. The reason you do it is to provide a second element of value to a chain of transactions; the first element of value is consensus -- what everyone else says happens.
Is there a reason for doing this? Or just a way to pace the grinding nature of mining bitcoins? The second, arguably more powerful one is provable computation time spent on creating the consensus. So you can look at a set of bitcoin transactions and say "Ah ha, that had roughly [say] $1mm worth of computation time put in to securing and validating it! I believe it's safe to consider my $55 transaction secure."
Just out of curiosity, do you have any idea how many people have applied so far? Yep. We'll release end of first-month member numbers in 29 days. :)
How does one go about buying bitcoins? Probably the fastest way is to ask a friend who has some.
Next would be to use a service like Link to bitinstant.com.
How long are terms for each board member? Two years.
Will the Bitcoin Foundation promote a Vulnerability Reward Program ? I would like to see that, but I think the first things to do in terms of importance are on our published list.
Will the funds for a permanent memberships be put into an endowment, or will they be spent immediately? We haven't discussed it. Budget discussions are next couple of weeks, now that we have our heads around some numbers.
We also have to discuss if the foundation wishes to go long bitcoin, or instead spend to its annual budget. All TBD; if you have opinions send them on to your member reps.
I'm curious about this too. I'm not sure I understand how they work entirely. Maybe somebody could Explain like i'm five... Totally. They are confusing; it's a truly novel solution. Essentially it mixes something non-intuitive and magical-seeming (public key cryptography) with something very hard to imagine a solution for (distributed timestamping among non-trusted parties).
We will be seeing the concept extended out into a number of technology arenas over the next 25 years I imagine. It's an incredibly powerful solution-space.
I spent maybe an hour on the wiki reading the FAQ and everything, and it still makes references to "blocks" and "mining blocks" and those that mine have the option of transaction fees.. and I'm still not really sure what is happening. Yep, like I said. I've been thinking hard about them for two years, I have a cryptography background, and I still have 'a-ha!' moments weekly, at the very least.
There are a couple pretty good bitcoin explanation videos out there, but I'm not up to date on what the best one is. Maybe someone helpful can post a link.
After establishing support for food and shelter for Gavin, will there be opportunities for other bitcoin developers to apply for grants - maybe for specific implementations or features desperately needed. I'd love it. I think Gavin will be working out the specifics of what we want to do. I'd LOVE to see money put into a huge test suite, personally.
Thank you for furthering the effort of Cryptocurrency, I have written several policy papers in this arena, and look forward to the day where the deep web stigma is removed from the currency. Thanks FapNowPayLater! We genuinely appreciate the support.
Last updated: 2012-10-02 22:30 UTC | Next update: 2012-10-03 04:30 UTC
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Redditor cookupastorm's in-depth, readable critique of the gold standard

Not going to claim karma for this - click through here to vote.
The problem with gold is that it doesn't work in an advanced market economy. Gold relies on the government hoarding all of a scarce resource and then pegging the currency to how many shiny rocks they have in a vault.
Gold backed currency involved actual transfers of gold to other countries, so you had to load up huge barges guarded by soldiers and physically transfer your shiny rocks to someone else to settle payments.
It also relies on the government setting an arbitrary value for a currency, which can then fluctuate based on how much more gold, or diamonds, or fancy shells (whatever it's pegged to) are found.
Say we switch back to gold today, the government would have to acquire gold and then set a strict value, say $1,800 an ounce. But that wouldn't work because then you've capped your economy at how much gold you have x what price you set. So say we peg it to the value of the economy and gold is worth thousands and thousands an ounce.
You still have inflation and deflation based on speculation in the economy, (read up on it, there was inflation and deflation under the gold standard) so it doesn't fix that problem, you also cripple the ability of a government to act in a crisis. So if there is a downturn in the economy the government can and should step in to prop up demand to keep things from collapsing.
The gold standard during the depression made things worse because the government didn't have the reserves to keep demand up. And I know mises followers and Ron Paul fans love to link to articles talking about how FDR made the depression worse, but those articles have NEVER been vetted by any reputable academic institution. All of the peer reviewed studies have shown that FDR basically took the best course he could given the situation.
The arguments that people make against fiat currency don't really hold water when you look at the bigger picture. They like to say that fiat money has no value, so what does gold have? It's just a shiny rock. It only has value because we say it does. Fiat currency only has value because we say it does. That's all money is. It's not some divine thing that has intrinsic value. Money is just a way for one party to say "I have something that we both agree has value, and using that we can trade services without bartering".
They also make the argument that fiat currencies eventually become worthless. Not true.
It doesn't matter if a gallon of milk costs $5 or $500. What matters is how much the average worker had to expend to get that gallon of milk. The purchasing power. If a gallon of milk costs $500 but you spent 20 minutes working to earn it, that's better than milk costing $1 that took you an entire day to earn. And indeed that is what has happened over the 20th century.
People earn more, things cost more, but ultimately the hours worked per shirt, per gallon of milk, per tractor have dropped dramatically due to increases in productivity.
The argument that they make is that a government for political reasons will step in and start printing money to satisfy voters, which is why we have an independent central bank (The Fed). The Fed is not some towering dark hellspawn bent on destroying your savings. They have a mandate from the Federal government to serve as a link between private banks and Federal money and ensure stability within the financial system. So sometimes the Fed prints money, sometimes they take money out of the system through open market operations where they buy or sell bonds on the open market.
It's not a perfect system but it works for an advanced economy and more importantly, the Fed is independent of Congress, which keeps politicians from simply passing bills to print money to satisfy their constituents.
Every single advanced market economy went off of the gold standard simply because it's not efficient enough. It doesn't allow enough flexibility to sustain and advanced economy.
What I find sad is that most of the people here (and in general) who support Ron Paul's economic policies do so because they lack a core understanding of economics. What Ron Paul says sounds fantastic, but there is a difference between platitudes and how the world actually works in practice.
What I find truly scary are the people that advocate for private currency. I think those people in no uncertain terms are delusional.
They would rather see an agency (The Fed) that has appointed members which are answerable to Congress and the President, and who regularly hire the top economists in the country to publish freely available economic data (the Fed reports that come out each quarter) be abolished and have their currency turned over to private corporations, who are accountable to no one.
This isn't about gold but it's just a private rant. Can you imagine how hellish a world with private currencies would be? Suddenly instead of being able to buy milk in California and New York for dollars, you would have to use whatever was the accepted medium of trade. So many a store in your neighborhood accepts bitcoins, but your bank only deals in gold doubloons, so you save in doubloons and exchange it for bitcoins when you go shopping, so now you have to manage the exchange rate, but then you take a road trip, you have bitcoins and doubloons but the diner only accepts paypal bucks, so you swap more currency, but how much does that burger cost? It costs 5 paypal bucks, but what is that in doubloons. When was the last fluctuation, why did the currencies fluctuate?
Private currencies complicate EVERYTHING because they raise the information costs of a basic transaction. Then you have the issue of who polices the people that make the currencies? Of course libertarians say no, but what happens when people who have Dow Chemical Dinars (which look safe according to market analysts) go bust and people's retirements are wiped out. Is it their fault for investing in Dow when their advisers said it was ok? Should they have transferred their savings to paypal bucks? Based on what information?
And... where is the average worker going to find the time and expertise to track and understand multiple currencies and what it means to their future?
It's not insulting to say that the average worker simply cannot do that. Most financial professionals can't do that. It's not a reasonable expectation to think that a factory worker from Ohio is going to understand a complex currency trading system that people with advanced degrees don't even fully comprehend. That's not dissing on the worker, that's just a matter of time and energy expended on a project.
Original post
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The End of the Dollar Standard? The rise of gold and bitcoin? Bitcoin vs Dollar Debate : Krugman finally admits Bitcoin's superiority  Finance and Crypto Steve Keen debunking inflation and gold standard beliefs Milton Friedman on The Gold Standard - YouTube Gold stablecoin - The Gold standard for your cryptocurrency

Paul R. Krugman Bitcoin; Retirement Plans, paul r. krugman bitcoin profitieren sie davon Investing, Brokerage, Wealth. “Lost” in this sense doesn't mean they made bad investments paul r. krugman bitcoin that As with the file 1120s if no income current monetary system, Bitcoin rewards the creators of. Krugman: Bitcoin ‘Has Some Chance To Be Valuable’ Speaking at the ChainXChange conference in Las Vegas, which ran August 13 – 15, Krugman, who had previously made a name for himself as a Bitcoin skeptic, even forecast a future in which Bitcoin has “value” as an entity. “Gold is dead… Bitcoin has more utility than gold,” he said during a panel featuring infamous Bitcoin bulls ... Krugman defames gold, calling it a fetish. He argues—this time using a quote from Brad DeLong—that the value of gold is that people can “make pretty things.” The anti-gold mafia tried this ... twoallbeefpatties writes "Prominent Keynesian economist Paul Krugman has left a note on his blog at NYTimes about his view of Bitcoin, discussing its similarity to the gold standard and suggesting a drop in 'real gross Bitcoin product' as its users hoard the currency rather than spend it."... 8 votes and 54 comments so far on Reddit

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The End of the Dollar Standard? The rise of gold and bitcoin?

Gold stablecoin is the gold standard for your cryptocurrency. Note: Gold stablecoin is the source of this content. Virtual currency is not a legal tender, is... Bitcoin vs Dollar Debate : Krugman finally admits Bitcoin's superiority Finance and Crypto What does Pual Krugman acknowledgement of Bitcoin being more sup... Bitcoin Showdown in Davos Wann BTC kaufen? Was bedeutet ein Ripple IPO für XRP? Tether Gold 💰 Bitcoin Sparplan selbst machen: https://cryptomonday.de/b... Robert Breedlove explains what happened to the gold standard. -----... Specifically..."gold buggism is a billionaire's scam and we need something that makes sense, not something that is from 1 BC".

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