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As an zeroHedge reading, armchair economist i think there are a lot of flaws in that guys argument "Bitcoin does not have a central bank capable of printing an

As an zeroHedge reading, armchair economist i think there are a lot of flaws in that guys argument "Bitcoin does not have a central bank capable of printing and lending bitcoins" >>I rather think thats the point. Lending is inflationary. "Built in Deflation" >> God knows how the computer industry makes money when if i hold my $$$ just a little longer, i can buy an even better machine. "For Bitcoin to work as a currency, it would have to act as a predictable store of value" >>No, currency does not have to store value. The USD is a terrible store of value. Gold is a store of value. Govt paper is not. " That's called a bank run, and for obvious reasons we want to avoid them." >> um - I'm not an expert on bitcoin but there are no banks i thought. your money is in your e-wallet. you dont need a bank to keep your money away from theives. there are no banks with fractional reserve lending that are fragile to a run on deposits This guy is dunning kruger at its best.

faski99 15y ago
"God knows how the computer industry makes money when if i hold my $$$ just a little longer, i can buy an even better machine" Not really. Because if you expect the value of your cash to rise, you would probably hold onto your cash. The liquidity of the system would drop as people hoard their cash (what happened during the Great Depression), depressing an economy. "bank run" He's talking about the need to inject cash into the system during economic shocks (the reason for the Fed injecting money into the system). This, again, happened during the Great Depression, as perfectly sound and profitable banks toppled left and right because of the bank runs, taking down the rest of the economy.
- anonymoushn 15y ago
  > Because if you expect the value of your cash to rise, you would probably hold onto your cash. Right, that's why the computer industry doesn't make any money. > This, again, happened during the Great Depression Yes. A large part of what made the Great Depression last much longer than the Depression of 1920-1921 was that insolvent businesses were given money instead of being allowed to fail. One might compare this to recent events, and have a look at the present employment rate of the U.S. population: http://market-ticker.org/akcs-www?get_gallerynr=1631 http://market-ticker.org/akcs-www?get_gallerynr=1631
- geen7ea 15y ago
  I think you are missing his point about the computer industry. If you wait, you can buy a better computer for the same amount of money as you would originally have. Alternatively, you could buy the same computer for less money. This is the equivalent of your money going up in value (as in you have more buying power). His argument is that if we use the author's logic, people would want to wait to get a new computer instead of buying one now. This is obviously not the case and so his argument is flawed. I agree with the poster and disagree with the author; the poster found the perfect analogy.
  - dedward 15y ago
    It's not flawed,it's just to narrow in scope. Deflation, when things are worth less over time, means producers have to sell MORE to make payroll, pay their bills, pay their debts - which haven't changed in value. It's great for people flush with cash - and horrible for anyone in debt. The computer industry has planned obsolescence. None of them are buying 10 years worth of parts for today's computers at projected market rates, because that would be a pile of stuff they'd ahve to eventaully sell at a loss. It's not so simple as simple analogies.... BTC is designed to be, in the true sense of the word, a trustworthy way to move value from point A to point B -and there is avery strong network effect required to make it work (or any similar currency). At a point where I know I can go somewhere, locally, and exchange my bitcoin for local currency (and some posted market rates) - I will probably start accepting using it for a few things. The concept has merit.
- mseebach 15y ago
  > Because if you expect the value of your cash to rise, you would probably hold onto your cash. So why don't you? By that logic, you don't own a computer. There has not been a single minute for the past thirty years when it was not an invariant that if you wait a little longer, you can get a better computer, or more lately, mobile phone or *pad-device for the same (or, not rarely, less). Yet, these items sell like hotcakes. When deflation is temporary, yes, then it's true - but when the deflation is constant, it's not.
  - nl 15y ago
    The computer argument is completely misguided. People buy a computer when the utility they will derive from it outweighs the monetary cost. They know they may get a better deal in the future, but immediate needs may outweigh potential future savings.
    - mseebach 15y ago
      And why wouldn't that argument work for all other goods, too, rendering the deflation argument misguided?
      - nl 15y ago
        Because most goods don't have the extreme pressure of Moore's law.
        mseebach 15y ago
        Bitcoin is being criticized for having built in deflation (not incidental deflation), thus comparing it to a category of goods (computers) that is also exposed to almost algorithmic deflation is relevant. So, given the built in deflation of Bitcoins, if you have some Bitcoins and need or want product X, why is knowing that you can have two X in a year, or four X in two, if you just hold on to your coins, going to keep you from getting your X now? Isn't that too, as you state, a question of whether "the utility they will derive from it outweighs the monetary cost" ?
zwischenzug 15y ago
Totally agree. His arguments struck me as complete nonsense with a superficial veneer of plausibility to the economics outsider. The best flaw in the bitcoin model (I've not studied it too thoroughly) is acceptance testing. You give me a bitcoin: how do I know to accept it as payment? This may not be a problem if suitable proxies are made (like with credit cards).
brown9-2 15y ago
The USD is a terrible store of value. Gold is a store of value. Govt paper is not. What makes gold a "store of value"?

faski99 15y ago

"God knows how the computer industry makes money when if i hold my $$$ just a little longer, i can buy an even better machine" Not really. Because if you expect the value of your cash to rise, you would probably hold onto your cash. The liquidity of the system would drop as people hoard their cash (what happened during the Great Depression), depressing an economy. "bank run" He's talking about the need to inject cash into the system during economic shocks (the reason for the Fed injecting money into the system). This, again, happened during the Great Depression, as perfectly sound and profitable banks toppled left and right because of the bank runs, taking down the rest of the economy.

anonymoushn 15y ago
> Because if you expect the value of your cash to rise, you would probably hold onto your cash. Right, that's why the computer industry doesn't make any money. > This, again, happened during the Great Depression Yes. A large part of what made the Great Depression last much longer than the Depression of 1920-1921 was that insolvent businesses were given money instead of being allowed to fail. One might compare this to recent events, and have a look at the present employment rate of the U.S. population: http://market-ticker.org/akcs-www?get_gallerynr=1631 http://market-ticker.org/akcs-www?get_gallerynr=1631
geen7ea 15y ago
I think you are missing his point about the computer industry. If you wait, you can buy a better computer for the same amount of money as you would originally have. Alternatively, you could buy the same computer for less money. This is the equivalent of your money going up in value (as in you have more buying power). His argument is that if we use the author's logic, people would want to wait to get a new computer instead of buying one now. This is obviously not the case and so his argument is flawed. I agree with the poster and disagree with the author; the poster found the perfect analogy.
- dedward 15y ago
  It's not flawed,it's just to narrow in scope. Deflation, when things are worth less over time, means producers have to sell MORE to make payroll, pay their bills, pay their debts - which haven't changed in value. It's great for people flush with cash - and horrible for anyone in debt. The computer industry has planned obsolescence. None of them are buying 10 years worth of parts for today's computers at projected market rates, because that would be a pile of stuff they'd ahve to eventaully sell at a loss. It's not so simple as simple analogies.... BTC is designed to be, in the true sense of the word, a trustworthy way to move value from point A to point B -and there is avery strong network effect required to make it work (or any similar currency). At a point where I know I can go somewhere, locally, and exchange my bitcoin for local currency (and some posted market rates) - I will probably start accepting using it for a few things. The concept has merit.
mseebach 15y ago
> Because if you expect the value of your cash to rise, you would probably hold onto your cash. So why don't you? By that logic, you don't own a computer. There has not been a single minute for the past thirty years when it was not an invariant that if you wait a little longer, you can get a better computer, or more lately, mobile phone or *pad-device for the same (or, not rarely, less). Yet, these items sell like hotcakes. When deflation is temporary, yes, then it's true - but when the deflation is constant, it's not.
- nl 15y ago
  The computer argument is completely misguided. People buy a computer when the utility they will derive from it outweighs the monetary cost. They know they may get a better deal in the future, but immediate needs may outweigh potential future savings.
  - mseebach 15y ago
    And why wouldn't that argument work for all other goods, too, rendering the deflation argument misguided?
    - nl 15y ago
      Because most goods don't have the extreme pressure of Moore's law.
      - mseebach 15y ago
        Bitcoin is being criticized for having built in deflation (not incidental deflation), thus comparing it to a category of goods (computers) that is also exposed to almost algorithmic deflation is relevant. So, given the built in deflation of Bitcoins, if you have some Bitcoins and need or want product X, why is knowing that you can have two X in a year, or four X in two, if you just hold on to your coins, going to keep you from getting your X now? Isn't that too, as you state, a question of whether "the utility they will derive from it outweighs the monetary cost" ?

zwischenzug 15y ago

Totally agree. His arguments struck me as complete nonsense with a superficial veneer of plausibility to the economics outsider. The best flaw in the bitcoin model (I've not studied it too thoroughly) is acceptance testing. You give me a bitcoin: how do I know to accept it as payment? This may not be a problem if suitable proxies are made (like with credit cards).

brown9-2 15y ago

The USD is a terrible store of value. Gold is a store of value. Govt paper is not. What makes gold a "store of value"?