25 ms·

"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 th

• deleted 15y ago
  [deleted]
• alenlpeacock 15y ago
  When Bitcoin reaches supply maturity, there will be no more bitcoins to mine, making those that are currently held even more valuable, making those who hold them even more inclined to keep hoarding them, no?
  • sliverstorm 15y ago
    Not to mention, as bitcoins are inevitably lost here and there (a deleted wallet.dat here, a hoarder there, a transaction wired to a mistyped address that doesn't exist) the supply of bitcoins will actually shrink.
    • zach 15y ago
      Wow, that's an excellent point. That doesn't happen easily with gold. People retrieve gold from ships sunk hundreds of years ago. Actually, is there an efficient way that physical gold or other precious metals can be intentionally destroyed or put beyond use? Has anyone tried to use this technique to corner a market? What would happen if Hugo Chávez actually got his hands on 211 tons of actual gold and announced he has verifiably shot half of it into the sun? Presumably, you could make money on such an event through the options market. So it's a great point that it's comparatively easy to do such a thing with Bitcoin. It's even entirely possible to do it by mistake (i.e. a programming error). Physicality is a fantastic hedge against loss.
      • sliverstorm 15y ago
        Gold can be "destroyed or put beyond use" by stockpiling (similar to DeBeers & stockpiling diamonds) or by disseminating it such that recovering it is not cost-efficient. For example, the oceans have a small percentage of dissolved gold, but extracting it is too expensive to make a profit.
      • wmf 15y ago
        Actually, is there an efficient way that physical gold or other precious metals can be intentionally destroyed or put beyond use? Has anyone tried to use this technique to corner a market? In Goldfinger, the eponymous villain tried to irradiate all the gold in Ft. Knox with a dirty bomb, making it worthless.
        • zach 15y ago
          Oh wow, how could I miss that? Well, now it comes out that I've never seen Goldfinger. And I've listened to all the Bond discussions with John Gruber on The Talk Show. Shame on me!
        • nerfhammer 15y ago
          Wouldn't that actually not make it worthless? Wouldn't you just have to encase it in lead?
    • sneak 15y ago
      Your argument is valid, however I want to point out that the third scenario you describe (mistyped addresses) is extremely unlikely due to a built-in checksum in bitcoin addresses to prevent exactly that.
  • orbenn 15y ago
    That would be true if owning bitcoins had intrinsic value, but they only have value in terms of the things they can purchase, so no. Bitcoin maturity will actually cause bitcoins to decrease in value as inflation in the rest of the economy outpaces the rate of new bitcoin creation.
• maratd 15y ago
  > Perhaps when Bitcoin reaches supply maturity the value will stabilize I absolutely hate Krugman, but this is Econ 101 and even he gets it right. Bitcoin was a flawed experiment from the start because it has an absolute supply limit. Reaching that limit won't help. It'll make things worse. The money supply needs to expand for healthy economic activity and growth. If it doesn't, weird shit starts to happen. Here's an example. In a normal economy, the population is constantly expanding. That means you need more $$$ in the system for each new person. If more money doesn't enter the system, the value of money goes up because of increasing demand and you start experiencing deflation. Deflation is really really bad. Imagine you're a store owner. All of a sudden, people stop buying your stuff. Not because they don't want to, they love your stuff ... they just don't have enough money. So you lower your prices. Things go back to normal. Your own expenses go down as well, after all, everybody experienced deflation. No big deal, right? This is what happens when a computer scientist creates a currency. Just adjust to the new price level, right? WRONG. It IS a big deal. Think of the psychological effect of having to CONSTANTLY lower your prices on your goods. At some point, you'll hang yourself. You want to charge more, not less. It is absolutely depressing and has a real effect. Deflation is absolutely horrible.
  • euroclydon 15y ago
    How is it any better when prices keep going up? Imagine you're, gasp, a saver, and one day you decide to buy that hamburger, but now you need five or ten times the money to make the purchase as you did, when you stashed it away twenty years ago.
    • rabidsnail 15y ago
      Inflation encourages the savers to put their money to work (by investing in the stock market, for example) so that the amount of money that they have increases in proportion to the growth of the overall economy. This is a benefit.
      • 3pt14159 15y ago
        You can't have it both ways. Either consumption is encouraged via inflation or investment is encouraged. For example, say that prices were slightly deflationary, as they are with computer equipment, across the board.* I could easily make the case that saving goes up! Why? Well if I took my goldbucks and lent them to you at 1% interest we would both be happy. My total return would be something like 3% per year (2% deflation + 1% interest) non-risk adjusted. You would be happy because there are plenty of people that are willing to lend money to you. Because you have access to lending capital, you hire more decreasing unemployment. You can try to make the case that you wouldn't hire because there would be no demand for your goods, but in practice there are A. Other countries, and B. A precedent that people do continue to buy, even during deflationary pressures. The reason people buy computers and cars despite the fact that they are becoming better and cheaper as time goes on is that they expect that cars and computers are going to continue to get better and cheaper as time goes on. They know that they will face the same "save or spend" decision 2 year later, and they really do need a computer and a car. The problem with inflation is that "encouraging spending" practically only happens to the poor or middle lower class. I can afford to research gold, silver, lithium, cesium, grain futures, bitcoins, etc. and protect my assets from long term depreciation, but they can't. So you end up with a class of people that have a negative net worth, that is totally unprepared for long term retirement. * I know that money velocity starts to make a difference, but it is in effect the same as printing more money.
• theschwa 15y ago
  Collecting a currency wouldn't be a problem if there was some type of Bitcoin bank. These people who are hoarding the currency could put their Bitcoins in the bank for a promised interest rate, and in the mean time the bank could loan out the money to borrowers for new investments, thus growing the economy. I'm also not sure how much Krugman has looked at the price of Bitcoin. Every time I've looked at the price it continues to go down in terms of USD. A couple months ago it was around $16 now its at $7. I think Bitcoin's real problem is the fact that it's not actually a commodity, because it's price isn't backed by any real goods. In that sense it's more similar to the dollar.
  • alttab 15y ago
    I think you need to read more about bitcoin. First, having a centralized bitcoin bank defeats the purpose of a peer-to-peer system entirely. Your identity is no longer anonymous. Second, providing interest to those that hold their bit coins in this bank must provide some facility for the bank to be able to give out bit-coins they didn't previously have (fractional reserve banking). Due to the mining nature of bit-coins which is not regulated by the fed but limited to an absolute supply, interest can not always be guaranteed to the holders, and there would be a run on the accounts to pull out. What you've described is the system we have- BitCoin is an experiment on something different.
    • theschwa 15y ago
      I'm well aware of how bitcoin works, and for starters bitcoin isn't completely anonymous. It's semi-anonymous. Secondly, a bank doesn't have to practice fractional reserve banking, they can practice Full-reserve banking. In this case the deposit to the bank is really a loan to the bank, with the bank promising an interest rate on the loan. On your point of interest rate, interest rate can't be truly guaranteed in any system, and a run is prevented in a full-reserve banking system, because it's not a deposit it's a loan. Now, I'm not saying anyone should actually try to do these things. In fact I agree that Krugman is missing the whole point of bitcoins to the point where he doesn't even bring up it's semi-anonymous nature. I simply wanted to counter his argument that commodity currency wouldn't allow the economy to grow, but as I said earlier bitcoin isn't a regular commodity. It is a currency whithout intrinsic value.
• zerostar07 15y ago
  He also mentioned that in general any limited commodity such as bitcoin or gold is worse than the current system of currencies.
• mcantelon 15y ago
  Fiat currencies discourage saving by gradually stealing the value of the saved money via inflation. Theft isn't essential to trade: people will still innovate and exchange without being coerced into doing so by the systematic devaluation of their previous economic contributions.
  • mousa 15y ago
    I don't think there is any reason to encourage saving money. Living within your means, yes, investing, yes, but saving under your pillow, especially if you had a non-inflating currency, isn't good for the economy. Even if it should be encouraged, it doesn't matter the logic of it, people won't accept making less and less money over time. Non-fiat currency + population increase makes that inevitable.
    • mcantelon 15y ago
      >Living within your means, yes, investing, yes, but saving under your pillow, especially if you had a non-inflating currency, isn't good for the economy. It's good for the individual if investment opportunities aren't adequately regulated.
    • selven 15y ago
      > saving under your pillow, especially if you had a non-inflating currency, isn't good for the economy. It actually is. It you earn $100, by producing $100 worth of goods for the economy, and you don't spend it, you're producing more than you consume. This increases the supply of all goods on the market, decreasing the price, effectively making the entire world richer by that amount. Other people can use that extra money partly to increase their consumption and partly for investment purposes. When you take your $100 out of your pillow and spend it, you're then having the opposite effect. So in the end, you're allowing people to consume more at an earlier time (when you put the money in) and less at a later time (when you're taking it out). This is a very valuable service, as shown by the fact that people are willing to take out loans where they pay money (interest) for the ability to temporally distort their consumption patterns in this way. Some people can even use the temporary possession of additional goods as capital to generate permanent wealth. A constant pattern of people saving under their pillow will simply reduce prices by a certain percentage and hold it there. If deflation is small, then this secondary price reduction will be lower than the primary reduction and the economy will remain stable. The problem only arises when deflation becomes too high - then, the secondary reduction becomes greater than the primary reduction, and causes a still greater tertiary reduction, leading to a deflationary spiral (ie. bubble), which screws up the economy until it inevitably pops, but if deflation is within reasonable margins it should not be an issue. > Even if it should be encouraged, it doesn't matter the logic of it, people won't accept making less and less money over time. How do we know this? One could imagine a deflationary society where people ask how people could possibly stand their money buying less and less over time.
• smokeyj 15y ago
  If a bitcoin clone were to spin-off where inflation was controlled by a set algorithm, would we still consider it to have a limited supply?
  • tptacek 15y ago
    Inflation and deflation aren't "controlled" by Bitcoin's design. The money supply is. Because the money supply is capped, over the long term, deflation is predictable. The week-to-week reality of Bitcoin is one of wild swings in the "valuation" of the Bitcoin "asset". Describing these swings as "inflationary" and "deflationary" dignifies Bitcoin. Was the collapse of PETS.COM and resulting devaluation of its stock "inflationary"? Was its run-up "deflationary"?
  • wmf 15y ago
    That would solve one problem, although it seems impossible to pick the right level of inflation. Then we could get on to discussing Bitcoin's other problems, such as slow transaction clearing and poor usability.
    • stevenwagner 15y ago
      http://bitcoin.stackexchange.com/questions/328/how-do-i-safely-accept-bitcoins-without-waiting-for-confirmations http://bitcoin.stackexchange.com/questions/328/how-do-i-safe...
• iradik 15y ago
  Value will stabilize against what? Not USD ever.