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I am afraid this is incorrect. The problem is, you seem to have a very basic, early 19th century, Jean-Baptiste Say style concept of money. This early school wa

I am afraid this is incorrect. The problem is, you seem to have a very basic, early 19th century, Jean-Baptiste Say style concept of money. This early school was, too, of the opinion that money's only role in the economy is as a medium of exchange, barely abstracting how the underlying economy is just the exchange of commodities. Thus Say's law as corollary. But this analysis misses the time dimension of money: lending, borrowing and interest [1]. Keynes knew that, and before him Marx, and I bet someone before him too. And in this aspect, I find Bitcoin to be an irreversibly brain-damaged, if interesting, experiment. I look at it and see a massively deflationary currency, dependant on a empirical rule of thumb (Moore's Law), that is even today failing to accommodate the mildest exponential growth. When your currency gains value by the hour, actually borrowing and trading and doing capitalist things are losers' propositions. Don't get me wrong, I see value in an automated currency that can provide at least an amount of anonymity [2]. In my opinion, Bitcoin is just not it. When your economic theory is still getting an erection over the gold standard, like some 19th century robber baron, you know you just don't have the economic chops to do it. No sane modern-capitalist economy can be given birth by faulty economics. [1] Unless of course you belong to the school of the Austrians, like whomever wrote the "deflationary currency" joke of an entry in Bitcoin's Wikipedia. For you all evil's root is either the government or fractional reserve banking, so I'm obviously wrong. [2] Maybe with a fixed 4% inflation rate, like Milton Friedman suggested. It could also be a fiat currency, and simultaneously decentralized and anonymous, if we could take the principles of the free-banking era, see why they failed (because they failed by themselves, no amount of austrian self-bullshitting will change that) and fix them. Who knows, I'm not an economist.

white_devil 14y ago
You sure are biased against Bitcoin and the like. > this analysis misses the time dimension of money: lending, borrowing and interest [1]. Keynes knew that, and before him Marx, and I bet someone before him too. And in this aspect, I find Bitcoin to be an irreversibly brain-damaged, if interesting, experiment So we went straight from an analysis (what was it btw?) "missing the time dimension of money" - according to you - to Bitcoin being a brain-damaged experiment. What exactly was the logic there? > a massively deflationary currency .. that is even today failing to accommodate the mildest exponential growth How does a currency "accommodate exponential growth", and why should it? Are you saying Bitcoin can't be used for lending etc because it's "deflationary"? Don't you think it would be possible for lenders to estimate the risk involved in using (deflationary?) Bitcoins, and then pricing their loans accordingly? > When your currency gains value by the hour, actually borrowing and trading and doing capitalist things are losers' propositions. I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing? Everyone would be happy to trade in such a currency. If it were losing value by the hour, well then, yes, people would be reluctant to trade in it. > When your economic theory is still getting an erection over the gold standard, like some 19th century robber baron, you know you just don't have the economic chops to do it. Care to tell us what's wrong with the gold standard, and why is anyone who supports it a robber baron? > For you all evil's root is either the government or fractional reserve banking, so I'm obviously wrong. Care to explain why the government and fractional reserve banking are good for us all, then?
- stonemetal 14y ago
  I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing? Everyone would be happy to trade in such a currency. Everyone would be happy to sell in such a currency, but why on Earth would anyone want to buy with such a currency? The only currency that is good for both sides of the equation is the one that is stable in value.
  - XorNot 14y ago
    Also (to tie to a comment above this one) a currency which is gaining value quickly is highly regressive to the poor. The poor have to spend their limited means in such a currency - they have to spend substantial fractions of their working capital on consumables. Conversely, the rich don't. In fact, above a key level depending on how quickly it gains value, the rich functionally never lose any money - they can hold such levels of it that the amount they spend on food is rapidly eclipsed by the increase in value in their wealth. Of course, this sounds good and is somewhat true with normal currency via investment but there's the rub: with a deflationary currency you don't have to invest. You don't have to put your money in the bank, or loan it out or indeed engage in any type of productive activity to get wealthier. The poor are doomed to work all their lives because they can't get above the magic level of wealth where they don't have to, meanwhile those with the piles of wealth dispense tiny fractions to them to buy necessities. It entrenches a stratified society in a way an inflationary system does not (which is not to say that inflationary money puts us all in the free and clear, but it's better).
    - derleth 14y ago
      > The poor are doomed to work all their lives because they can't get above the magic level of wealth where they don't have to, meanwhile those with the piles of wealth dispense tiny fractions to them to buy necessities. A historical example of how bad a too-valuable currency can be was the situation surrounding the Free Silver Movement, a Populist-Progressive plan to make the gold-based late-19th-Century American currency inflationary by increasing the amount of cheaper silver in circulation. This was popular because it would help deeply indebted farmers pay back their loans. William Jennings Bryan made a wonderful speech, the Cross Of Gold speech, on the issue: "You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold." http://en.wikipedia.org/wiki/Cross_of_Gold_speech http://en.wikipedia.org/wiki/Cross_of_Gold_speech http://en.wikipedia.org/wiki/Free_silver http://en.wikipedia.org/wiki/Free_silver In the extreme limiting case, the money economy based on the deflationary currency freezes to death: The rich are left holding money nobody else wants when the majority of society goes to some other currency that actually meets their needs. In the non-Bitcoin world, the majority usually moves to another currency (a 'hard currency' like USD or Euros) when the local currency is hyper-inflationary toilet paper, but hyper-deflationary Super-Gold (Super-Duper-Super-Gold!) is, as has been explained, just as bad, and so would provoke the same reaction.

white_devil 14y ago

You sure are biased against Bitcoin and the like. > this analysis misses the time dimension of money: lending, borrowing and interest [1]. Keynes knew that, and before him Marx, and I bet someone before him too. And in this aspect, I find Bitcoin to be an irreversibly brain-damaged, if interesting, experiment So we went straight from an analysis (what was it btw?) "missing the time dimension of money" - according to you - to Bitcoin being a brain-damaged experiment. What exactly was the logic there? > a massively deflationary currency .. that is even today failing to accommodate the mildest exponential growth How does a currency "accommodate exponential growth", and why should it? Are you saying Bitcoin can't be used for lending etc because it's "deflationary"? Don't you think it would be possible for lenders to estimate the risk involved in using (deflationary?) Bitcoins, and then pricing their loans accordingly? > When your currency gains value by the hour, actually borrowing and trading and doing capitalist things are losers' propositions. I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing? Everyone would be happy to trade in such a currency. If it were losing value by the hour, well then, yes, people would be reluctant to trade in it. > When your economic theory is still getting an erection over the gold standard, like some 19th century robber baron, you know you just don't have the economic chops to do it. Care to tell us what's wrong with the gold standard, and why is anyone who supports it a robber baron? > For you all evil's root is either the government or fractional reserve banking, so I'm obviously wrong. Care to explain why the government and fractional reserve banking are good for us all, then?

stonemetal 14y ago
I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing? Everyone would be happy to trade in such a currency. Everyone would be happy to sell in such a currency, but why on Earth would anyone want to buy with such a currency? The only currency that is good for both sides of the equation is the one that is stable in value.
- XorNot 14y ago
  Also (to tie to a comment above this one) a currency which is gaining value quickly is highly regressive to the poor. The poor have to spend their limited means in such a currency - they have to spend substantial fractions of their working capital on consumables. Conversely, the rich don't. In fact, above a key level depending on how quickly it gains value, the rich functionally never lose any money - they can hold such levels of it that the amount they spend on food is rapidly eclipsed by the increase in value in their wealth. Of course, this sounds good and is somewhat true with normal currency via investment but there's the rub: with a deflationary currency you don't have to invest. You don't have to put your money in the bank, or loan it out or indeed engage in any type of productive activity to get wealthier. The poor are doomed to work all their lives because they can't get above the magic level of wealth where they don't have to, meanwhile those with the piles of wealth dispense tiny fractions to them to buy necessities. It entrenches a stratified society in a way an inflationary system does not (which is not to say that inflationary money puts us all in the free and clear, but it's better).
  - derleth 14y ago
    > The poor are doomed to work all their lives because they can't get above the magic level of wealth where they don't have to, meanwhile those with the piles of wealth dispense tiny fractions to them to buy necessities. A historical example of how bad a too-valuable currency can be was the situation surrounding the Free Silver Movement, a Populist-Progressive plan to make the gold-based late-19th-Century American currency inflationary by increasing the amount of cheaper silver in circulation. This was popular because it would help deeply indebted farmers pay back their loans. William Jennings Bryan made a wonderful speech, the Cross Of Gold speech, on the issue: "You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold." http://en.wikipedia.org/wiki/Cross_of_Gold_speech http://en.wikipedia.org/wiki/Cross_of_Gold_speech http://en.wikipedia.org/wiki/Free_silver http://en.wikipedia.org/wiki/Free_silver In the extreme limiting case, the money economy based on the deflationary currency freezes to death: The rich are left holding money nobody else wants when the majority of society goes to some other currency that actually meets their needs. In the non-Bitcoin world, the majority usually moves to another currency (a 'hard currency' like USD or Euros) when the local currency is hyper-inflationary toilet paper, but hyper-deflationary Super-Gold (Super-Duper-Super-Gold!) is, as has been explained, just as bad, and so would provoke the same reaction.