4 ms·

But isn't one rule of money that it should at least hold it's value? Isn't that the main reason gold was used before? What is the point of using something as mo

But isn't one rule of money that it should at least hold it's value? Isn't that the main reason gold was used before? What is the point of using something as money if it keeps decreasing in value?

tptacek 15y ago
http://3.bp.blogspot.com/-_KuUh8iKx_c/TX_URc8gLpI/AAAAAAAAA6M/ES2msXT72PI/s1600/U.S.%2BYearly%2BInflation%2Bsince%2B1900.jpg http://3.bp.blogspot.com/-_KuUh8iKx_c/TX_URc8gLpI/AAAAAAAAA6... Please cite a source on this "one rule of money" you're thinking of?
- padmanabhan01 15y ago
  http://wiki.answers.com/Q/What_are_the_four_properties_of_money_please_identify_and_explain http://wiki.answers.com/Q/What_are_the_four_properties_of_mo... says one of the properties of money is that it has to be a 'store of value'.
  - tptacek 15y ago
    Logic that suggests that roads aren't a medium for transportation because they have friction.
2arrs2ells 15y ago
If money is decreasing in value, it gives people a huge incentive to do something with it - buy something or invest. As long as the decrease to the value is small (1-3%) and predictable, this is a good thing.
- tptacek 15y ago
  Since deflation is an obvious tax on investment and purchasing, arguments that increases in the value of a currency are "obviously" a good thing serve as a sort of litmus test for why people are interested in things like Bitcoin. The subtextual motivation for Bitcoin advocacy has always been "it's a speculative asset and I hold a position in it". Everything else is just rhetorical cover. The unfortunate reality is that even by reasoning through Bitcoin's programmed-in deflation, we're dignifying Bitcoin. Bitcoin itself is a sham. The original paper may have been a good-faith contribution to the state of the art in cryptocurrencies, but the "economy" is a trap; a realistic-looking distributed transaction clearing system built on a deliberately volatile wholly synthetic "asset" that exists for the purpose of creating pump-and-dump scams.
  - JoachimSchipper 15y ago
    I wouldn't be so sure that the (original) Bitcoin people are running a pump-and-dump scam - there is very little evidence either way. And there are plenty of people who genuinely seem to believe that Twitter causes and/or wins revolutions: love of technology, libertarianism and something we'll call optimism do occur together, and cypherpunks are not the least vulnerable.
    - tptacek 15y ago
      To be clear: I'm not saying the original design was a scam. Only its realization as a real system people can interact with and spend money on. This whole system is morally no different than Zynga tomorrow setting up a system to trade options on Farmville tomatoes.
      - JoachimSchipper 15y ago
        To be clear: I think that some people really do believe that Bitcoin is going to overthrow the monetary system and free us all from the evil government. I also think that quite a few more people believe that Bitcoin can only go up (designed for deflation, right?) "Bitcoin is a scam" is simply not enough to explain stuff from the Bitcoin bulletin to open source GPU mining software - hard work by obviously capable people, and not even remotely the most effective way to become rich. Mind you, I think the "true believers" are incorrect, sometimes naive and occasionally downright stupid; but declaring them "evil" leaves quite a few unanswered questions. [EDIT: Even if the speculators are probably in the majority.] (Also, I wouldn't be surprised if EVE had a foostone contract future market...) EDIT: also, there was nothing wrong with the system design. A bit uninspired, maybe; current research involves zero-knowledge exchanges and the like.
        Steko 15y ago
        The people that recommended Madoff's fund to their family and friends were probably well intentioned too. And the fund probably wasn't a Ponzi scheme from the beginning either but in the end a scam is a scam.
- sesqu 15y ago
  I don't really buy this argument. People invest to increase their capital, not to stop it from decreasing. When inflationary pressure is actually tangible, money becomes a hot potato that no one wants, and poof, there goes the economy in a blaze of hyperinflation. Arguing that inflation is good is tantamount to arguing that illiquidity is good. If I were to argue for inflation, I would go with some other angle, like that capital should evaporate after a lifetime.
  - SkyMarshal 15y ago
    Inflation != hyperinflation. You're conflating the two in your argument.
    - sesqu 15y ago
      Yes. When the argument for inflation is that rational actors should not want to hold on to money, I will conflate it with the scenario where rational actors should not want to receive money.
  - caf 15y ago
    In between "hot potato that nobody wants to hold" and "gold brick that nobody wants to relinquish from their grasp" lies the happy medium that we need.
rmc 15y ago
Just because something was widely held to be true in the past doesn't mean it's widely held to be true now. Some examples: "Gold is a good thing to base our money on", "Black people are mentally inferior to white people", "Homosexuality is unhealthy", "The economy requires slavery".
guelo 15y ago
The goal of an economy should be to produce as much as possible given the available resources. The goal of money should be to facilitate this happening. Money in itself is not a resource of an economy, it is a tool used to lubricate transactions.

But isn't one rule of money that it should at least hold it's value? Isn't that the main reason gold was used before? What is the point of using something as money if it keeps decreasing in value?

tptacek 15y ago

http://3.bp.blogspot.com/-_KuUh8iKx_c/TX_URc8gLpI/AAAAAAAAA6M/ES2msXT72PI/s1600/U.S.%2BYearly%2BInflation%2Bsince%2B1900.jpg http://3.bp.blogspot.com/-_KuUh8iKx_c/TX_URc8gLpI/AAAAAAAAA6... Please cite a source on this "one rule of money" you're thinking of?

padmanabhan01 15y ago
http://wiki.answers.com/Q/What_are_the_four_properties_of_money_please_identify_and_explain http://wiki.answers.com/Q/What_are_the_four_properties_of_mo... says one of the properties of money is that it has to be a 'store of value'.
- tptacek 15y ago
  Logic that suggests that roads aren't a medium for transportation because they have friction.

2arrs2ells 15y ago

If money is decreasing in value, it gives people a huge incentive to do something with it - buy something or invest. As long as the decrease to the value is small (1-3%) and predictable, this is a good thing.

tptacek 15y ago
Since deflation is an obvious tax on investment and purchasing, arguments that increases in the value of a currency are "obviously" a good thing serve as a sort of litmus test for why people are interested in things like Bitcoin. The subtextual motivation for Bitcoin advocacy has always been "it's a speculative asset and I hold a position in it". Everything else is just rhetorical cover. The unfortunate reality is that even by reasoning through Bitcoin's programmed-in deflation, we're dignifying Bitcoin. Bitcoin itself is a sham. The original paper may have been a good-faith contribution to the state of the art in cryptocurrencies, but the "economy" is a trap; a realistic-looking distributed transaction clearing system built on a deliberately volatile wholly synthetic "asset" that exists for the purpose of creating pump-and-dump scams.
- JoachimSchipper 15y ago
  I wouldn't be so sure that the (original) Bitcoin people are running a pump-and-dump scam - there is very little evidence either way. And there are plenty of people who genuinely seem to believe that Twitter causes and/or wins revolutions: love of technology, libertarianism and something we'll call optimism do occur together, and cypherpunks are not the least vulnerable.
  - tptacek 15y ago
    To be clear: I'm not saying the original design was a scam. Only its realization as a real system people can interact with and spend money on. This whole system is morally no different than Zynga tomorrow setting up a system to trade options on Farmville tomatoes.
    - JoachimSchipper 15y ago
      To be clear: I think that some people really do believe that Bitcoin is going to overthrow the monetary system and free us all from the evil government. I also think that quite a few more people believe that Bitcoin can only go up (designed for deflation, right?) "Bitcoin is a scam" is simply not enough to explain stuff from the Bitcoin bulletin to open source GPU mining software - hard work by obviously capable people, and not even remotely the most effective way to become rich. Mind you, I think the "true believers" are incorrect, sometimes naive and occasionally downright stupid; but declaring them "evil" leaves quite a few unanswered questions. [EDIT: Even if the speculators are probably in the majority.] (Also, I wouldn't be surprised if EVE had a foostone contract future market...) EDIT: also, there was nothing wrong with the system design. A bit uninspired, maybe; current research involves zero-knowledge exchanges and the like.
      - Steko 15y ago
        The people that recommended Madoff's fund to their family and friends were probably well intentioned too. And the fund probably wasn't a Ponzi scheme from the beginning either but in the end a scam is a scam.
sesqu 15y ago
I don't really buy this argument. People invest to increase their capital, not to stop it from decreasing. When inflationary pressure is actually tangible, money becomes a hot potato that no one wants, and poof, there goes the economy in a blaze of hyperinflation. Arguing that inflation is good is tantamount to arguing that illiquidity is good. If I were to argue for inflation, I would go with some other angle, like that capital should evaporate after a lifetime.
- SkyMarshal 15y ago
  Inflation != hyperinflation. You're conflating the two in your argument.
  - sesqu 15y ago
    Yes. When the argument for inflation is that rational actors should not want to hold on to money, I will conflate it with the scenario where rational actors should not want to receive money.
- caf 15y ago
  In between "hot potato that nobody wants to hold" and "gold brick that nobody wants to relinquish from their grasp" lies the happy medium that we need.

rmc 15y ago

Just because something was widely held to be true in the past doesn't mean it's widely held to be true now. Some examples: "Gold is a good thing to base our money on", "Black people are mentally inferior to white people", "Homosexuality is unhealthy", "The economy requires slavery".

guelo 15y ago

The goal of an economy should be to produce as much as possible given the available resources. The goal of money should be to facilitate this happening. Money in itself is not a resource of an economy, it is a tool used to lubricate transactions.