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I think his previous statements are also significant. "[bitcoin] has fluctuated sharply, but overall it has soared. So buying into [bitcoin] has, at least so f

by jshen 14y ago

I think his previous statements are also significant. "[bitcoin] has fluctuated sharply, but overall it has soared. So buying into [bitcoin] has, at least so far, been a good investment. But does that make the experiment a success? Um, no. What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in [bitcoin]."

deleted 14y ago
[deleted]
lucasrp 14y ago
This is not what is happening right now. Fact. BUT, if the project becomes mainstream as the dollar is today, the people of the earth will have a monetary system that doesnt allow taxation through inflation, with no banking monopolies, and globally available. Isnt that a system that "facilitate transactions and make the economy as a whole rich"?? Consider this initial profit just by hoarding Bitcoin as a reward to put your own assets at risk in this uncertain beginning. Bitcoins can't exist (or anything else, matter of fact), if the people who supports it arent driven by selfish motivation. I think it's fair that the people who risk themselves in the beginning are awarded, if Bitcoin succeeds.
- dragonwriter 14y ago
  > BUT, if the project becomes mainstream as the dollar is today, the people of the earth will have a monetary system that doesnt allow taxation through inflation, with no banking monopolies, and globally available. First: inflation isn't equivalent to taxation (it transfers wealth from net creditors to net debtors, not from everyone else to the government.) [It also, at moderate levels, promotes investment and, thereby, economic growth.] Second: as consensus among those who control a sufficient portion of the network can evolve the bitcoin protocol, its not actually immune to having a privileged class impose monetary policy. Third: Except by replacing some functions of "bankers" with those of "miners", I'm not sure how Bitcoin gets away from any "banking monopolies" that actually exist. > Isnt that a system that "facilitate transactions and make the economy as a whole rich"?? No, it would (assuming that the features which make inflation impossible were maintained) be a system which undermines the features that were introduced to encourage productive development (and, therefore, "make the economy as a whole rich") with deflationary features which have the opposite effect.
  - Andrew_Quentin 14y ago
    "as consensus among those who control a sufficient portion of the network can evolve the bitcoin protocol" Does this refer to the 51% effect? Isn't the solution to that for other people to simply start mining?
Sambdala 14y ago
Regardless of what happens going forward, Bitcoin has been a huge success by basically any metric that would have been put together >2 years ago. I don't think a lot of people who haven't been following the topic since the project was first put together really get how much larger and mainstream Bitcoin has become in such a short time with (relatively) so few hiccups compared to what seemed realistically possible when the experiment began. Also, I think there are a lot of companies that are now considered integral to world economics who, if they had publicly and transparently traded from inception, would have fluctuated just as much in their beginning years.
- penny500 14y ago
  It's certainly not being used as a currency, its original intention. It's being used by speculators to get rich. Sure you might find a few examples of buyers and sellers using bitcoin currency, but you'll find a lot more speculators buying and selling bitcoins to profit from the spreads.
  - think33 14y ago
    It is being used as a currency, and any metric on this far exceeds where people thought it would be a few years ago. It's also having massive adoption from a wide number of people. The reason the price is moving is not "speculation" as people seem to assume, but adoption. MtGox said they were getting 20,000 new accounts a day recently. By definition, new accounts are not "speculators" putting in trades to manipulate the price, they are people putting in trades to acquire their first bitcoins. People rushing into a currency, right after the EU forced bank depositors to lose %40-%60 of their money in a state run bank (which was only insolvent because they were forced to buy greek debt by the very same EU) is not "speculation" -- it is seeking a safe haven. A lot of people hope bitcoin will be a safe haven away from these increasingly manipulated and untrustworthy national currencies. That's a huge level of success, given the limited expectations for bitcoin only a few years ago. Suddenly it's actually considered a viable store of value for some segment of the population. Sure, it's a small percentage, but still, it's massive.
    - 14y ago
think33 14y ago
Your quote is relevant, but it's a shame he doesn't address the implied claim that bitcoin doesn't "facilitate transactions". And while it is relatively small in that use now, he really needs to make a compelling argument to why it won't work that way in the future. Further, it's worth pointing out that Krugman endorses a monetary system that makes people poor, via inflating the money supply by printing funds to underwrite policies that benefit, primarily, politicians. A currency whose supply is fixed, or whose inflation rate is constant and predictable (like bitcoin) is better for facilitating transactions. When you have a variable (and often high these days- in the US money supply is up over %50 in recent years) rate of inflation, it wrecks havoc with prices and other signals causing malinvestment and worsening the economy. Something that Krugman, to my knowledge, has never answered for. --- Since I am not allowed to reply to the person below me: It's quite silly to to say that a limited supply of a currency is bad for it. There is little incentive to hang onto bitcoins. A simple example will prove this to you: The amount of computer you can get for a given amount of money improves dramatically every three years. You could just hold onto your money and buy a much better computer. Thus, relative to computers, the dollar is deflationary.... yet people still buy computers. This is the kind of argument Krugman gives because he wants to excuse the inflation that has destroyed the dollar, and the economy.... but it is nonsensical. People still buy computers.
- pbreit 14y ago
  Uh, Krugman's whole point is that the capped supply is inherently deflationary so the incentive is to hang on to bitcoins, ie, not the best attribute of a currency.
  - bbbhn 14y ago
    When did the notion that a currency which loses value over time is ideal become orthodoxy? There are plenty of legitimate arguments that can be constructed against the idea of an inherently inflationary currency too.
    - parasubvert 14y ago
      "Best to have a stable currency with low inflation" grew out of hundreds of years of observations in the history of human production, prices, and mediums of exchange, and what conditions have traditionally leads to periods of peace and prosperity in a region, and what conditions have led to war, revolt, famine, etc. In short, empirically, wages and prices are sticky. We assume it has something to do with humans being stubborn, but don't really know why. However, until our imminent replacement by the kind robots, currencies must move if people won't.

by jshen 14y ago

deleted 14y ago

[deleted]

lucasrp 14y ago

This is not what is happening right now. Fact. BUT, if the project becomes mainstream as the dollar is today, the people of the earth will have a monetary system that doesnt allow taxation through inflation, with no banking monopolies, and globally available. Isnt that a system that "facilitate transactions and make the economy as a whole rich"?? Consider this initial profit just by hoarding Bitcoin as a reward to put your own assets at risk in this uncertain beginning. Bitcoins can't exist (or anything else, matter of fact), if the people who supports it arent driven by selfish motivation. I think it's fair that the people who risk themselves in the beginning are awarded, if Bitcoin succeeds.

dragonwriter 14y ago
> BUT, if the project becomes mainstream as the dollar is today, the people of the earth will have a monetary system that doesnt allow taxation through inflation, with no banking monopolies, and globally available. First: inflation isn't equivalent to taxation (it transfers wealth from net creditors to net debtors, not from everyone else to the government.) [It also, at moderate levels, promotes investment and, thereby, economic growth.] Second: as consensus among those who control a sufficient portion of the network can evolve the bitcoin protocol, its not actually immune to having a privileged class impose monetary policy. Third: Except by replacing some functions of "bankers" with those of "miners", I'm not sure how Bitcoin gets away from any "banking monopolies" that actually exist. > Isnt that a system that "facilitate transactions and make the economy as a whole rich"?? No, it would (assuming that the features which make inflation impossible were maintained) be a system which undermines the features that were introduced to encourage productive development (and, therefore, "make the economy as a whole rich") with deflationary features which have the opposite effect.
- Andrew_Quentin 14y ago
  "as consensus among those who control a sufficient portion of the network can evolve the bitcoin protocol" Does this refer to the 51% effect? Isn't the solution to that for other people to simply start mining?

Sambdala 14y ago

Regardless of what happens going forward, Bitcoin has been a huge success by basically any metric that would have been put together >2 years ago. I don't think a lot of people who haven't been following the topic since the project was first put together really get how much larger and mainstream Bitcoin has become in such a short time with (relatively) so few hiccups compared to what seemed realistically possible when the experiment began. Also, I think there are a lot of companies that are now considered integral to world economics who, if they had publicly and transparently traded from inception, would have fluctuated just as much in their beginning years.

penny500 14y ago
It's certainly not being used as a currency, its original intention. It's being used by speculators to get rich. Sure you might find a few examples of buyers and sellers using bitcoin currency, but you'll find a lot more speculators buying and selling bitcoins to profit from the spreads.
- think33 14y ago
  It is being used as a currency, and any metric on this far exceeds where people thought it would be a few years ago. It's also having massive adoption from a wide number of people. The reason the price is moving is not "speculation" as people seem to assume, but adoption. MtGox said they were getting 20,000 new accounts a day recently. By definition, new accounts are not "speculators" putting in trades to manipulate the price, they are people putting in trades to acquire their first bitcoins. People rushing into a currency, right after the EU forced bank depositors to lose %40-%60 of their money in a state run bank (which was only insolvent because they were forced to buy greek debt by the very same EU) is not "speculation" -- it is seeking a safe haven. A lot of people hope bitcoin will be a safe haven away from these increasingly manipulated and untrustworthy national currencies. That's a huge level of success, given the limited expectations for bitcoin only a few years ago. Suddenly it's actually considered a viable store of value for some segment of the population. Sure, it's a small percentage, but still, it's massive.
  - 14y ago

think33 14y ago

Your quote is relevant, but it's a shame he doesn't address the implied claim that bitcoin doesn't "facilitate transactions". And while it is relatively small in that use now, he really needs to make a compelling argument to why it won't work that way in the future. Further, it's worth pointing out that Krugman endorses a monetary system that makes people poor, via inflating the money supply by printing funds to underwrite policies that benefit, primarily, politicians. A currency whose supply is fixed, or whose inflation rate is constant and predictable (like bitcoin) is better for facilitating transactions. When you have a variable (and often high these days- in the US money supply is up over %50 in recent years) rate of inflation, it wrecks havoc with prices and other signals causing malinvestment and worsening the economy. Something that Krugman, to my knowledge, has never answered for. --- Since I am not allowed to reply to the person below me: It's quite silly to to say that a limited supply of a currency is bad for it. There is little incentive to hang onto bitcoins. A simple example will prove this to you: The amount of computer you can get for a given amount of money improves dramatically every three years. You could just hold onto your money and buy a much better computer. Thus, relative to computers, the dollar is deflationary.... yet people still buy computers. This is the kind of argument Krugman gives because he wants to excuse the inflation that has destroyed the dollar, and the economy.... but it is nonsensical. People still buy computers.

pbreit 14y ago
Uh, Krugman's whole point is that the capped supply is inherently deflationary so the incentive is to hang on to bitcoins, ie, not the best attribute of a currency.
- bbbhn 14y ago
  When did the notion that a currency which loses value over time is ideal become orthodoxy? There are plenty of legitimate arguments that can be constructed against the idea of an inherently inflationary currency too.
  - parasubvert 14y ago
    "Best to have a stable currency with low inflation" grew out of hundreds of years of observations in the history of human production, prices, and mediums of exchange, and what conditions have traditionally leads to periods of peace and prosperity in a region, and what conditions have led to war, revolt, famine, etc. In short, empirically, wages and prices are sticky. We assume it has something to do with humans being stubborn, but don't really know why. However, until our imminent replacement by the kind robots, currencies must move if people won't.