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Surely there is more to the Bitcoin movement that a desire for a currency that's worse than those sponsored by nation states. Just pointing out that Bitcoin suc

Surely there is more to the Bitcoin movement that a desire for a currency that's worse than those sponsored by nation states. Just pointing out that Bitcoin sucks does nothing to address the underlying reason why people want to use Bitcoin. Where I live, alternative currencies seem to have sprung up as a response to feelings of disgust with the current economic system, or mistrust of government or bankers. States and groups are looking at how the federal reserve is currently purchasing more than half of all newly issued U.S. Treasury Bonds, and drawing the inevitable conclusion that the the failure of the system is accelerating. The natural end to an inflationary currency is BOOM! There is a desire out there for a deflationary currency. Bitcoin is deflationary, right? Now I think Bitcoin Sucks is sound economic advice because for every altruistic financial scheme, there have been a hundred scams, but I don't know if Bitcoin has the potential to be useful if we experience hyperinflation.

akjj 14y ago
> drawing the inevitable conclusion that the the failure of the system is accelerating. The natural end to an inflationary currency is BOOM! And yet inflation is as low or lower than it has been in the past 30 years. Not to mention compared to the high inflation of the '70s.
- euroclydon 14y ago
  This is not my strong suite, but if you look at the assets which large holders of t-bills are divesting into, you'll find strong inflation.
  - eli_gottlieb 14y ago
    That's not inflation, that's a capital glut!
  - akjj 14y ago
    The yields on treasury bills are extraordinarily low by historical standards (i.e. the prices are high) because they are in high demand, not low demand.
    - euroclydon 14y ago
      So why is debt being monetized? Because it's politically better to owe it to yourself than to owe it to someone else?
      - tbrownaw 14y ago
        House prices went down, and a recession happened. So making the prices of some other investment (which probably has to be government debt in order for them to not get sued for favoritism) go up by a similar amount, should make the recession stop happening.
- jpadkins 14y ago
  CPI is only one measure of inflation. For example, substituting housing price index for owner equivalent rent raises the CPI a lot recently. Look at asset prices, they are going up very fast (historically). Or healthcare or higher education, they have been growing faster than CPI for decades with fiat money. You have to look at who has the newly created currency, and where they spend to see the inflation (gov't, high wealth, and upper middle).
- ChuckMcM 14y ago
  "And yet inflation is as low or lower than it has been in the past 30 years. Not to mention compared to the high inflation of the '70s." The problem with this statement is that 'inflation', as a measurement, has changed greatly over 30 years. To use a technical analogy comparing inflation in the 70s is like comparing "lines of code to implement a function" in a RISC assembly language and python. The only thing that is comparable is that they are both programming languages. There is a particularly telling comment that came out of the fiscal cliff negotiations, where the Senate asked for a change in the way 'inflation' was computed to avoid a big hit with respect to government programs tied to the CPI. (search for "chained CPI fiscal cliff" for various examples). This very explicit mention of managing the CPI to avoid increases aside, my father who is on a military pension (also indexed to the official government "inflation" rate) has a pretty good history of expenses, and their rise, during his retirement which does not correlate at all with the government rate. There are some pretty tin foil like sites like www.shadowstats.com but you can also use various search metrics to create a 'bundle' of expenses (housing, food, clothing, gas, taxes, and utilities) and create your own view of what the cost of living has done over the last 20 years. Add in the effects of 'unit deflation' where a 16 oz box of breakfast cereal is now 11.2oz and you realize that the cost of living is going up more than your government is sharing with you, even informally. Their motive is pretty simple, they want to avoid killing the budget with huge increases in indexed aid and indexed treasuries (called inflation protected securities). But it is interesting that you mentioned the 70's because that is where this started. No one except economists and policy wonks "cared" about inflation until it became an election issue. Then voters started "caring" a lot so the congress has helped "clarify" what it means more and more. Its one of the things I would do if elected to congress (not that I'm running) is I would create a steel wall between economic statistics and legislators. Government manipulation of them does more harm than good unfortunately, but nearly every government manipulates them to some extent.
  - trts 14y ago
    The CPI has a number of (serious) problems and I would never suggest that congress attempted to change the calculation for anything other than cynical reasons, but the proposed change would coincidentally be the better measure. The current method which is often used to adjust nominal expenditures into current dollars is calculated using a Laspeyres index which, year-over-year, does not account for the fact that when prices change people shift their patterns of consumption. A Paasche index is somewhat the reverse of this in that it assumes that what you purchased last year was the same as what you purchased this year. The Fisher index is the geometric mean of the two and if you've had a chance to study some of the methods and difficulties of constructing price indexes, it does offer a plausible compromise between the two, allowing for substition but giving some weight to both indices. However that it accomodates changes in consumption or "substitution" lets lobbies like the AARP exclaim that it hides the case that retirees have to switch from beef tenderloin to cat food when prices rise. But in actuality it's both a pretty minor change and the better measure of price changes (if the underlying data can be trusted).
Groxx 14y ago
Define "worse". It's an endless pain in the ass to get money from <person X> to <person y>, because I have to mail a check, use PayPal, give out rather sensitive banking information, pay insane wire transfer costs (and delays), or meet with them in person. Now try automating it. There are reasons aside from "fiat money sucks". The big ones I encounter seem to be "this is interesting", "this has interest, maybe I can make money in it", and "this can do X".
rayiner 14y ago
I actually like the concept of alternative currencies. But bitcoin really does suck. It's not just an alternative currency. It's an alternative currency with a built-in retarded fiscal policy.
- clicks 14y ago
  Would you like to enlighten us by explaining a little more all the ways exactly in which it is 'retarded'?
  - wisty 14y ago
    The problem with a fixed M0 is that broad money (credit and debt based on the money) can fluctuate, causing deflation. Deflation makes people delay on investments, which causes a recession, and more deflation. It's a vicious cycle. That's basically how the Great Depression happened. The GFC was a similar crisis, but the Fed was able to quantitatively ease the US out of it. OK, things were still pretty dire, but given how much debt there was (as a result of the debt bubble which had kept the economy going gangbusters for so long) it wasn't as bad as it could have been. Austrians (Ron Paul) say things like "that's bad - the Fed shouldn't be able to rescue the economy, because that will force the bankers to act like grown-ups". Unfortunately, it doesn't work that way. The bankers will still take massive risks, and crash the economy every now and then, and the Fed won't be able to help. Of course, there's reasons to be concerned about the US economy. IIRC, real median wages haven't grown much since the 80s. Basically all the growth has been the rich getting richer. But I don't think that's because of inflation, so much as general policies which favor GPD growth over raising median wages. The US is not a country which cares about the poor, and outsourcing has weakened poor Americans' bargaining power. With the rise of China, that might change (Chinese wages are rising quite quickly, which will make US workers more competitive, which will allow them to demand higher wages). Whatever the case, I don't think it's all the fault of inflationary monetary policy. And no, I don't blame robots. If robots were taking all the jobs, they wouldn't be going to China. Maybe they will take all the jobs one day, but currently more robots means cheaper products, which means more jobs. Also, before anyone says "the jobs will just go to Africa", they better consider the challenges in building infrastructure there, the fact that Africa is quite diverse (there won't be 200 million peasants all swarming to special economic zones within a decade), and the added demand from all the newly wealthy (or at least, not piss-poor) Chinese.

akjj 14y ago

> drawing the inevitable conclusion that the the failure of the system is accelerating. The natural end to an inflationary currency is BOOM! And yet inflation is as low or lower than it has been in the past 30 years. Not to mention compared to the high inflation of the '70s.

euroclydon 14y ago
This is not my strong suite, but if you look at the assets which large holders of t-bills are divesting into, you'll find strong inflation.
- eli_gottlieb 14y ago
  That's not inflation, that's a capital glut!
- akjj 14y ago
  The yields on treasury bills are extraordinarily low by historical standards (i.e. the prices are high) because they are in high demand, not low demand.
  - euroclydon 14y ago
    So why is debt being monetized? Because it's politically better to owe it to yourself than to owe it to someone else?
    - tbrownaw 14y ago
      House prices went down, and a recession happened. So making the prices of some other investment (which probably has to be government debt in order for them to not get sued for favoritism) go up by a similar amount, should make the recession stop happening.
jpadkins 14y ago
CPI is only one measure of inflation. For example, substituting housing price index for owner equivalent rent raises the CPI a lot recently. Look at asset prices, they are going up very fast (historically). Or healthcare or higher education, they have been growing faster than CPI for decades with fiat money. You have to look at who has the newly created currency, and where they spend to see the inflation (gov't, high wealth, and upper middle).
ChuckMcM 14y ago
"And yet inflation is as low or lower than it has been in the past 30 years. Not to mention compared to the high inflation of the '70s." The problem with this statement is that 'inflation', as a measurement, has changed greatly over 30 years. To use a technical analogy comparing inflation in the 70s is like comparing "lines of code to implement a function" in a RISC assembly language and python. The only thing that is comparable is that they are both programming languages. There is a particularly telling comment that came out of the fiscal cliff negotiations, where the Senate asked for a change in the way 'inflation' was computed to avoid a big hit with respect to government programs tied to the CPI. (search for "chained CPI fiscal cliff" for various examples). This very explicit mention of managing the CPI to avoid increases aside, my father who is on a military pension (also indexed to the official government "inflation" rate) has a pretty good history of expenses, and their rise, during his retirement which does not correlate at all with the government rate. There are some pretty tin foil like sites like www.shadowstats.com but you can also use various search metrics to create a 'bundle' of expenses (housing, food, clothing, gas, taxes, and utilities) and create your own view of what the cost of living has done over the last 20 years. Add in the effects of 'unit deflation' where a 16 oz box of breakfast cereal is now 11.2oz and you realize that the cost of living is going up more than your government is sharing with you, even informally. Their motive is pretty simple, they want to avoid killing the budget with huge increases in indexed aid and indexed treasuries (called inflation protected securities). But it is interesting that you mentioned the 70's because that is where this started. No one except economists and policy wonks "cared" about inflation until it became an election issue. Then voters started "caring" a lot so the congress has helped "clarify" what it means more and more. Its one of the things I would do if elected to congress (not that I'm running) is I would create a steel wall between economic statistics and legislators. Government manipulation of them does more harm than good unfortunately, but nearly every government manipulates them to some extent.
- trts 14y ago
  The CPI has a number of (serious) problems and I would never suggest that congress attempted to change the calculation for anything other than cynical reasons, but the proposed change would coincidentally be the better measure. The current method which is often used to adjust nominal expenditures into current dollars is calculated using a Laspeyres index which, year-over-year, does not account for the fact that when prices change people shift their patterns of consumption. A Paasche index is somewhat the reverse of this in that it assumes that what you purchased last year was the same as what you purchased this year. The Fisher index is the geometric mean of the two and if you've had a chance to study some of the methods and difficulties of constructing price indexes, it does offer a plausible compromise between the two, allowing for substition but giving some weight to both indices. However that it accomodates changes in consumption or "substitution" lets lobbies like the AARP exclaim that it hides the case that retirees have to switch from beef tenderloin to cat food when prices rise. But in actuality it's both a pretty minor change and the better measure of price changes (if the underlying data can be trusted).

Groxx 14y ago

Define "worse". It's an endless pain in the ass to get money from <person X> to <person y>, because I have to mail a check, use PayPal, give out rather sensitive banking information, pay insane wire transfer costs (and delays), or meet with them in person. Now try automating it. There are reasons aside from "fiat money sucks". The big ones I encounter seem to be "this is interesting", "this has interest, maybe I can make money in it", and "this can do X".

rayiner 14y ago

I actually like the concept of alternative currencies. But bitcoin really does suck. It's not just an alternative currency. It's an alternative currency with a built-in retarded fiscal policy.

clicks 14y ago
Would you like to enlighten us by explaining a little more all the ways exactly in which it is 'retarded'?
- wisty 14y ago
  The problem with a fixed M0 is that broad money (credit and debt based on the money) can fluctuate, causing deflation. Deflation makes people delay on investments, which causes a recession, and more deflation. It's a vicious cycle. That's basically how the Great Depression happened. The GFC was a similar crisis, but the Fed was able to quantitatively ease the US out of it. OK, things were still pretty dire, but given how much debt there was (as a result of the debt bubble which had kept the economy going gangbusters for so long) it wasn't as bad as it could have been. Austrians (Ron Paul) say things like "that's bad - the Fed shouldn't be able to rescue the economy, because that will force the bankers to act like grown-ups". Unfortunately, it doesn't work that way. The bankers will still take massive risks, and crash the economy every now and then, and the Fed won't be able to help. Of course, there's reasons to be concerned about the US economy. IIRC, real median wages haven't grown much since the 80s. Basically all the growth has been the rich getting richer. But I don't think that's because of inflation, so much as general policies which favor GPD growth over raising median wages. The US is not a country which cares about the poor, and outsourcing has weakened poor Americans' bargaining power. With the rise of China, that might change (Chinese wages are rising quite quickly, which will make US workers more competitive, which will allow them to demand higher wages). Whatever the case, I don't think it's all the fault of inflationary monetary policy. And no, I don't blame robots. If robots were taking all the jobs, they wouldn't be going to China. Maybe they will take all the jobs one day, but currently more robots means cheaper products, which means more jobs. Also, before anyone says "the jobs will just go to Africa", they better consider the challenges in building infrastructure there, the fact that Africa is quite diverse (there won't be 200 million peasants all swarming to special economic zones within a decade), and the added demand from all the newly wealthy (or at least, not piss-poor) Chinese.