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When a bubble bursts, it's not just about some people, but it brings down the whole economy. I can't believe people have already forgotten what CDO has done to
by thkim 9y ago
When a bubble bursts, it's not just about some people, but it brings down the whole economy. I can't believe people have already forgotten what CDO has done to this economy. Bitcoin & cryptos are financial weapons of mass destruction. Any responsible government ought to outright ban them all already.
- creaghpatr 9y agoLike student loans, bubble speculators will want government compensation, or need it via welfare/Medicaid/tax writeoff etc most likely the tax write offs
- fragsworth 9y ago> Bitcoin & cryptos are financial weapons of mass destruction. You need to explain this. Many of us just think it's a good replacement for gold and other precious metals. Is gold a "financial weapon of mass destruction"?
- thkim 9y agothat's a valid question. three reasons why bitcoin & crypto is NOT like gold and very dangerous. 1) limited supply: drives up price enormously. almost endless. minimal supply, infinitely increasing demand. depending on how far this will go it can potentially suck up all liquidity in the world. 2) no authority, no price stabilization, meaning extreme volatility that adds fuel to vol & price rise, 3) ease of access: anyone can buy with a dollar, also fueling to vol & price rise. how bitcoin will end looks very ugly to me in any case. either collapsing a global economy or bringing an unprecedented global inflation
- jstanley 9y ago> 1) limited supply [...] 2) no authority [...] 3) ease of access But there must be something bad about it as well, right?
- deleted 9y ago[deleted]
- nopinsight 9y agoI’m curious. How would it bring about global inflation since almost all of bitcoin is not really used for getting goods/services and people need to exchange real dollars/yen/etc to drive up its price? Doesn’t it actually suck out liquidity from other assets and drive down inflation of other assets?
- thkim 9y agobitcoin's price increase creates inflation because it makes holders wealthy. inflation is not a bad thing when driven by fundamental growth (value creation). bitcoin is not creating value.
- afsina 9y agoAll your points are positively good things. 1- Limited supply prevents money printing and inflationary theft. Besides there are many coin alternatives and a BTC can be divided to a hundred million units. 2- No `central` authority is a big plus (probably the best property of it). Once crypto coin pass its infancy, the volatility will be much lower. 3-Ease of access. Another superb property.
- thkim 9y ago1 - money printing is not crony capitalism like what bitcoin creators tout them to be. it is a method of stabilizing value. when used wrong it can destroy economy (venezuela, zimbabwe), but that is a question of politics (voting wrong people). bitcoin or crypto's decentralization is NOT a solution to this problem. also bitcoin is particularly problematic because it gained traction. value is simply sum of people's belief. when other coins gather enough followers then it will similarly be a problem, but not at the moment. 2 - this is false. if you know how currencies work you will know that this whole "decentralization" makes no sense. central authority is required for a currency because price needs to be stabilized. unlike what some people believe, bitcoin will not "self-stabilize" because currency stabilization has nothing to do with how many people use it. currency stabilization works by an authority dictating how much it should worth and manipulating market towards it. this is not some conspiracy, it is a protection provided for all currency users. not only bitcoin offer zero protection (completely exposed to vol risk), but also it is not really decentralized as 40% of entire bitcoin owned is owned by 1000 people only. 3 - yes, this is a good property. so there should be a state sponsored coin.
- patrickk 9y ago> either collapsing a global economy Barely anyone uses bitcoin as a percentage of the world's total population, this isn't even remotely feasible today, or likely even in five years.
- thkim 9y agous economy is big so bitcoin feels like a noise right now. in other countries, it is a real threat. it's going to take some years until us feels the heat, but by then it will be too late.
- fosco 9y agoit is far easier to transfer 10 million dollars wworth of bitcoin than it is 10 million of gold. this comparisons are _not_ doing either bitcoin nor gold justice. bitcoin is far more liquid, accessible and usable than gold ever will be. I will start calling it Internet Liquid Gold... because while the transactions might be slow, being able to transfer it across continents multiple times back and forth is possible before someone can go to their version of fort knox and put actual gold in a truck.
- tomtimtall 9y agoPeople don't move gold around. They trade gold IOU's which can be transferred faster than bitcoin, with far lower fees.
- SyneRyder 9y agoOccasionally they do move gold physically, like when Germany moved $27 Billion of gold from the United States & France back to Germany: https://www.cnbc.com/2017/08/23/germanys-central-bank-just-shifted-50000-gold-bars-held-overseas-due-to-cold-war-fears.html https://www.cnbc.com/2017/08/23/germanys-central-bank-just-s...
- nybble41 9y ago> People don't move gold around. Precisely, because it's slow and expensive. If you're going to hold out transfers of IOUs in place of actual gold, that can work for any commodity; a Bitcoin IOU would function just as well as a gold IOU. As a practical example, most Bitcoin exchanges allow transfers between members instantaneously and without any notable fees. Of course, that reintroduces a trust relationship. The point of having actual gold in-hand, or actual bitcoins recorded on the blockchain, is that the transfer is completed and effectively irreversible. You don't get that with IOUs.
- mortenjorck 9y agoWould the analogy to gold IOUs then be the Lightning Network?
- jlawer 9y ago
- pjc50 9y agoNo, it's a "barbarous relic" in the words of Keynes, which is why it's not really used as currency any more. There are real reasons why the world went off the gold standard.
- nine_k 9y agoYes, because governments want to print fiat money to finance their debt. It has a nice side effect of moving more money into spending / investment, because inflation eats savings. Instead of gold, people buy homes and stock.
- afsina 9y agoOr, Keynes was wrong and he is responsible with all the boom and bust cycles and inflationary theft.
- apalmer 9y agoSerious question, Keynes was born in the late 1880 and didnt publish anything until 1900s... we had boom and bust cycles long before this. How do you explain that?
- afsina 9y agoYes there were other boom and busts. But Keynes makes sure of it. According to Hayek (and many others), Keynesian spending policies are not a solution to unemployment or economic crises. On the contrary, they are a real threat to economic stability.
- kareldonk 9y agoI have the explanation here: https://blog.kareldonk.com/on-money-bitcoin-and-cryptocurrencies-in-general/ https://blog.kareldonk.com/on-money-bitcoin-and-cryptocurren...
- ringaroundthetx 9y ago> I can't believe people have already forgotten what CDO has done to this economy. Good news, crypto is still two orders of magnitude smaller
- Simon_says 9y agoToday it is. Check back next week.
- hectorr1 9y ago> I can't believe people have already forgotten what CDO has done to this economy. Collateralized Debt Obligations - every word in the acronym screams credit. A CDO is an instrument that guarantees you a cash flow based on debt. A guarantee for you is an obligation for someone else. Chains of these guarantees and obligations is what enabled the housing bubble. The breaking of these chains caused the Great Recession. As far as we know, the crypto bubble is not highly leveraged. One Bitcoin is worth one Bitcoin. It could trade for $1 or $1 million, but you are never obligated to take the offered price as a buyer or seller. Yes, it's complex. But it is technically complex, not relationships-obligations complex.
- thkim 9y agoyou're thinking leverage is only way to pose a system risk to economy. it is not. leverage amplifies the risk, but just because there is no leverage that does not mean risk is not exposed to the system. when consumption goes down, business gets affected.
- neuro_imager 9y agoYes, because governments and their financial sector cronies have a history of brilliant financial decisions that benefit their citizens.