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He's making a big deal out of the fact that some evil human may concoct an evil plan and swindle an honest man out of his hard earned bitcoins. He's missing th

by maeon3 14y ago

He's making a big deal out of the fact that some evil human may concoct an evil plan and swindle an honest man out of his hard earned bitcoins. He's missing the entire point, bitcoin was designed to stop the federal reserve and US Mint from systematically diluting the value of our money through systematic inflation, (taking taxpayer dollars and giving it to AIG buddies for bailouts and million dollar bonuses) while bribing the media to trick the masses that inflation is somehow "good" for us. Yes, evil men exist, and they will swindle others with tricky transactions. The purpose of bitcoin is to stop the people who create the money from stealing most of the value of all wealth on Earth every 20 years or so through Quantitative easing, inflation, and "printing dollars and giving the money to your friends" which is running rampant in this country. He's ignoring one of the primary strengths of bitcoin, that if you want to acquire bitcoins, you will have to either A: deprive another human of them through specific and traceable theft/deception, or B: to provide reasonable goods and services in exchange them. It stops the "Government printing Money and giving it to buddies" inflation problem dead in its tracks. But who cares? It means 5 hours of human labor deposited into bit coin equals 5 hours of human labor back out 20 years from now. We don't have anything like that now. It is as revolutionary as the invention of agriculture. Sadly his conclusion is right. When this thing starts taking off (especially in cyprus where the governmental theft is rampant), anyone who uses it significantly is going to find their head on the chopping block, having been convicted of aiding and abetting the domestic terrorists. We must think clearly, putting ourselves in their shoes, on how they will crush BitCoin like a bug, and be prepared for the counter attacks.

muraiki 14y ago
Well, you can also acquire bitcoins through mining them, which substantially benefits the early adopters. 5 hours of human labor deposited into btc _is not_ equal to 5 hours in the future, because of btc's built-in inflation through increasing the difficulty of mining them. This is why Karl thinks that btc has the markings of a Ponzi scheme. Also, he points out that btc has no method of deflation aside from actually destroying the coins. The section about seigniorage explains his views here and while it's not worded the most clearly I think that it's a reasonable critique. If this were really a method that he felt was viable enough to escape the taxation of inflation through money printing, manipulation of the CPI, etc., then I'm sure Karl would be on board. He has been writing about these exact topics for more than five years now.
- tptacek 14y ago
  This is why everyone thinks Bitcoin has the markings of a pyramid scheme. It's so obvious that it was literally the only thing Tyler Cowan could say about Bitcoin several years ago, in something like 3 sentences.
jtbigwoo 14y ago
>> He's missing the entire point, bitcoin was designed to stop the federal reserve and US Mint from systematically diluting the value of our money through systematic inflation, (taking taxpayer dollars and giving it to AIG buddies for bailouts and million dollar bonuses) while bribing the media to trick the masses that inflation is somehow "good" for us. But they've replaced it with a massively deflationary system. As the number of bitcoins approaches the maximum of 21 million, there will be massive incentives not to spend or exchange bitcoin which should grind any bitcoin economy to a halt. Deflation is a much, much harder trap to get out of than inflation.
- Gormo 14y ago
  It's doubtful that bitcoin will ever become the dominant currency in any economy, let a lone a monopoly legal tender, and the impact of a single deflationary currency within a market of multiple competing currencies is going to be significantly different than that of a deflationary monopoly currency. There are pretty significant problems with an inflationary currency as well: it can incentivize risk-taking activity out of proportion with the actual opportunity available in the real economy, and ultimately lead to crises like the housing bubble. Ideally, the money supply would expand exactly in proportion to the real economy, so there wouldn't be price fluctuations due to money at all, but this is hard to achieve, because there's no clear-cut way to quantify the size of the real economy (GDP doesn't really work) and because it'd be difficult to devise a mechanism that could keep the money supply indexed to the real economy without having it be dependent on some sort of central authority. So a currency that maintains a constant relation with the real economy probably isn't an option here and now. If we have to choose between maintaining a single monopoly inflationary currency, or adding a deflationary alternative currency like bitcoin into the mix, such that each currency can temper the excesses of the other, I think the latter is a better choice.
  - jtbigwoo 14y ago
    >> Ideally, the money supply would expand exactly in proportion to the real economy, so there wouldn't be price fluctuations due to money at all, but this is hard to achieve, because there's no clear-cut way to quantify the size of the real economy (GDP doesn't really work) and because it'd be difficult to devise a mechanism that could keep the money supply indexed to the real economy without having it be dependent on some sort of central authority. So a currency that maintains a constant relation with the real economy probably isn't an option here and now. I disagree. A money supply that was perfectly indexed to the real economy would magnify ups and downs. Nobody wants a slight downturn to result in a death spiral because the money supply keeps getting incrementally tighter. >> If we have to choose between maintaining a single monopoly inflationary currency, or adding a deflationary alternative currency like bitcoin into the mix, such that each currency can temper the excesses of the other, I think the latter is a better choice. I'm not saying bitcoin is the worst thing ever, but I think its design will keep it from making a big positive impact. It'll be a novelty akin to precious metals but with more volatility and fraud.

by maeon3 14y ago

muraiki 14y ago

Well, you can also acquire bitcoins through mining them, which substantially benefits the early adopters. 5 hours of human labor deposited into btc _is not_ equal to 5 hours in the future, because of btc's built-in inflation through increasing the difficulty of mining them. This is why Karl thinks that btc has the markings of a Ponzi scheme. Also, he points out that btc has no method of deflation aside from actually destroying the coins. The section about seigniorage explains his views here and while it's not worded the most clearly I think that it's a reasonable critique. If this were really a method that he felt was viable enough to escape the taxation of inflation through money printing, manipulation of the CPI, etc., then I'm sure Karl would be on board. He has been writing about these exact topics for more than five years now.

tptacek 14y ago
This is why everyone thinks Bitcoin has the markings of a pyramid scheme. It's so obvious that it was literally the only thing Tyler Cowan could say about Bitcoin several years ago, in something like 3 sentences.

jtbigwoo 14y ago

>> He's missing the entire point, bitcoin was designed to stop the federal reserve and US Mint from systematically diluting the value of our money through systematic inflation, (taking taxpayer dollars and giving it to AIG buddies for bailouts and million dollar bonuses) while bribing the media to trick the masses that inflation is somehow "good" for us. But they've replaced it with a massively deflationary system. As the number of bitcoins approaches the maximum of 21 million, there will be massive incentives not to spend or exchange bitcoin which should grind any bitcoin economy to a halt. Deflation is a much, much harder trap to get out of than inflation.

Gormo 14y ago
It's doubtful that bitcoin will ever become the dominant currency in any economy, let a lone a monopoly legal tender, and the impact of a single deflationary currency within a market of multiple competing currencies is going to be significantly different than that of a deflationary monopoly currency. There are pretty significant problems with an inflationary currency as well: it can incentivize risk-taking activity out of proportion with the actual opportunity available in the real economy, and ultimately lead to crises like the housing bubble. Ideally, the money supply would expand exactly in proportion to the real economy, so there wouldn't be price fluctuations due to money at all, but this is hard to achieve, because there's no clear-cut way to quantify the size of the real economy (GDP doesn't really work) and because it'd be difficult to devise a mechanism that could keep the money supply indexed to the real economy without having it be dependent on some sort of central authority. So a currency that maintains a constant relation with the real economy probably isn't an option here and now. If we have to choose between maintaining a single monopoly inflationary currency, or adding a deflationary alternative currency like bitcoin into the mix, such that each currency can temper the excesses of the other, I think the latter is a better choice.
- jtbigwoo 14y ago
  >> Ideally, the money supply would expand exactly in proportion to the real economy, so there wouldn't be price fluctuations due to money at all, but this is hard to achieve, because there's no clear-cut way to quantify the size of the real economy (GDP doesn't really work) and because it'd be difficult to devise a mechanism that could keep the money supply indexed to the real economy without having it be dependent on some sort of central authority. So a currency that maintains a constant relation with the real economy probably isn't an option here and now. I disagree. A money supply that was perfectly indexed to the real economy would magnify ups and downs. Nobody wants a slight downturn to result in a death spiral because the money supply keeps getting incrementally tighter. >> If we have to choose between maintaining a single monopoly inflationary currency, or adding a deflationary alternative currency like bitcoin into the mix, such that each currency can temper the excesses of the other, I think the latter is a better choice. I'm not saying bitcoin is the worst thing ever, but I think its design will keep it from making a big positive impact. It'll be a novelty akin to precious metals but with more volatility and fraud.