4 ms·

Currencies have existed in a huge variety of forms over time. Basically anything can work as a medium of exchange as long as everyone has a high degree of confi

Currencies have existed in a huge variety of forms over time. Basically anything can work as a medium of exchange as long as everyone has a high degree of confidence that if they are paid in the currency, that they too can pay someone else in that currency. But that's not to say all currency regimes are created equally -- we've learned a number of lessons, painfully, about how to manage currencies. For a small-scale, but very instructive example that shows there are cases where simply increasing the money supply can sometimes create more value in the economy (or how deflation can destroy value), see the story of the Capitol Hill Babysitter Co-Op [0]. At a more serious scale, many prominent economists believe that an artificial restriction of the monetary supply led to, or exacerbated the Great Depression [1]. So, like Krugman [2], I think that BTC proponents really have to explain how the artificial restriction of the size of the BTC money supply is not a serious design flaw in the currency. Are BTC just crypotographic gold? If so, then is a successful BTC economy just a different gold standard (and all its associated problems)? [0] http://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op http://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op [1] http://en.wikipedia.org/wiki/Gold_standard#Prolongation_of_the_Great_Depression http://en.wikipedia.org/wiki/Gold_standard#Prolongation_of_t... [2] http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters/ http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfett...

polarix 14y ago
It's close to a new gold standard. The one problem associated with gold that it does solve is being as good a medium of exchange as visa/paypal (or better).
- chii 14y ago
  The one thing BTC cannot yet replicate is the trust that gold standard has. Anyone in the world would immediately accept gold standard, but this BTC, despite being a digital gold, will be difficult to overcome the initial fear/mist-trust. It doesn't matter what mathematical proof you provide - the laymen doesn't really understand it. May be one day, it becomes accepted, and BTC will then really be a new gold standard. But i don't see that day coming, because there are people who don't like the gold standard (as it prevents them from leeching money from society - i.e., various parties/entities who hold controlling interests in major central banks etc).
jamoes 14y ago
> If so, then is a successful BTC economy just a different gold standard (and all its associated problems)? The main problem with gold standards, is that governments don't like them, because it makes it really hard to fund wars and other expenditures. Eventually, this leads to gold confiscations [1], and the effective end of a gold standard. Bitcoin solves this by being resilient to confiscation, and also by having a value transfer mechanism built-in, so that you don't need to replace gold with paper receipts for the sake of convenience. In essence, bitcoin has all the upsides of a gold standard, with none of the downsides. [1] https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
SilasX 14y ago
The actual problem that arose in the CH Babysitter Co-Op, supposedly solved by inflation, was that they didn't let scrip trade at actual relative value; you had to pay/accept one scrip unit per time unit whether the babysitting was for Wednesday or Saturday night. This was compounded by a case of retardism on the part of its managers, who refused to accept that different nights have different value, and that prices have to change to achieve equilibrium. So the supposed solution of inflation was actually replacing one artificial problem (a price floor) with another (temporary misvaluation of the new currency due to "money illusion"). Go find out how Krugman answers the question of "Why didn't they just let the exchange rate of scrip per hour float freely in response to differential weeknight demand and risk aversion?" (Hint: he doesn't, anywhere.)

polarix 14y ago

It's close to a new gold standard. The one problem associated with gold that it does solve is being as good a medium of exchange as visa/paypal (or better).

chii 14y ago
The one thing BTC cannot yet replicate is the trust that gold standard has. Anyone in the world would immediately accept gold standard, but this BTC, despite being a digital gold, will be difficult to overcome the initial fear/mist-trust. It doesn't matter what mathematical proof you provide - the laymen doesn't really understand it. May be one day, it becomes accepted, and BTC will then really be a new gold standard. But i don't see that day coming, because there are people who don't like the gold standard (as it prevents them from leeching money from society - i.e., various parties/entities who hold controlling interests in major central banks etc).

jamoes 14y ago

> If so, then is a successful BTC economy just a different gold standard (and all its associated problems)? The main problem with gold standards, is that governments don't like them, because it makes it really hard to fund wars and other expenditures. Eventually, this leads to gold confiscations [1], and the effective end of a gold standard. Bitcoin solves this by being resilient to confiscation, and also by having a value transfer mechanism built-in, so that you don't need to replace gold with paper receipts for the sake of convenience. In essence, bitcoin has all the upsides of a gold standard, with none of the downsides. [1] https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102

SilasX 14y ago

The actual problem that arose in the CH Babysitter Co-Op, supposedly solved by inflation, was that they didn't let scrip trade at actual relative value; you had to pay/accept one scrip unit per time unit whether the babysitting was for Wednesday or Saturday night. This was compounded by a case of retardism on the part of its managers, who refused to accept that different nights have different value, and that prices have to change to achieve equilibrium. So the supposed solution of inflation was actually replacing one artificial problem (a price floor) with another (temporary misvaluation of the new currency due to "money illusion"). Go find out how Krugman answers the question of "Why didn't they just let the exchange rate of scrip per hour float freely in response to differential weeknight demand and risk aversion?" (Hint: he doesn't, anywhere.)