8 ms·

The Antisocial Network

58 points by nate_martin 14y ago

jayfuerstenberg 14y ago
I don't know if I agree with everything Krugman says here but the more I think about bitcoins and real money the more I realize how much better life would be if the world of abundance would finally get here. The idea of treating electricity and clean water (among a whole host of other resources) as abundant as the air we breathe is one worth pursuing.
- richardjordan 14y ago
  Would finally get here? What gives you the confidence this will happen in a world of finite resources and where Physics & Chemistry contain rules that don't break (like the challenges of obtaining sufficient energy supplies at an sufficiently high Energy-Return-On-Energy-Invested basis), and where we have a huge population that's still growing, and an environment which appears to be straining under these pressures? Sure, resources being as abundant as the air we breathe is an idea worth pursuing. Unfortunately it smacks into reality where resources are limited, are being converted into unusable forms at increasing rates and many if not most of the critical ones are peaking or have peaked in terms of production rates. Still... I long for Iain M. Banks Culture too... sadly I just don't think it's going to happen.
  - jayfuerstenberg 14y ago
    Well somethings will always be scarce, like real estate. But other things can be made abundant. The internet and sites like Khan Academy are the first great steps in making education abundant for instance. Electricity is another resource that within the next decade anybody can have in abundance. Well, anybody with a roof onto which a solar panel can be placed that is. Little by little it is happening.
    - richardjordan 14y ago
      So one of the problems that advocates for solar panel driven futures have is that they don't add in the significant cost in terms of energy and resources of producing them, nor the fact that a lot of solar solutions start with petrochemical inputs. Once we lose the 100:1 EROEI that we get from drilled oil a lot of other assumed energy solutions become very challenging. A lot of these things are energy intenstve to produce in the first place and have finite lifetimes.
  - cmccabe 14y ago
    The US population is about 300 million and is not growing that fast. In fact, it might even be declining if immigration were not a factor. China's and Europe's populations will start decling in our lifetimes. Only India and Africa are set to keep increasing their populations. "Resources" is a conveniently vague word which could mean almost anything that people happen to think they need at any given point. Are horses and buggies a resource? Because if so, we're running pretty low. If not, though, we're probably good. If software is the "resource," I could probably make 300 million copies in my apartment. Most of the "resource" problems in the world are actually governance problems. For example, if the government is too corrupt and/or unstable to set up desalination plants, then there is a critical water shortage. On a pure physics basis, we have enough energy for hundreds of thousands of years. There's a reason why the northeast US is sometimes called the "Saudi Arabia of coal." The whole Limits to Growth thing from the 1970s should be thoroughly discredited by now. They picked a particularly bad time to come up with it, too, right before the Green Revolution and a prolonged slump in commodity and energy prices...
    - richardjordan 14y ago
      Semantics don't help us. Easily mined metals are a resource. Petrochemicals are a resource. As stated elsewhere the green revolution was just pouring oil on fields (as pesticides) and natural gas (as fertilizer). When we run out of those we run out of our ability to sustain even current food yields. Then there's topsoil. That's a resource, and in much of the midwest we're down to barely the amount needed for plants to root. Potable water is a resource. The state of many of our aquifers is precarious. Your statement that begins "on a pure physics basis..." bears little resemblance to any known facts about our current energy position. I'm a physicist by training, fwiw.
      - cmccabe 14y ago
        Look, there is a shit-ton of coal in the ground. There is a process for converting coal into oil. The Germans used it during WWII. Not exactly cutting edge technology. If you are going to predict doom and gloom, you could at least give me a plausible scenario, like a supervirus or nuclear war. Running out of energy is just not going to happen any time soon. If you wanted to stretch your horizons beyond the 1940s (hard, I know)... you could predict that soon enough we'll be able to synthesize oil using yeast and some energy input. There are ways to replenish topsoil. Or even not to use it at all. Look up hydroponics-- another not-particularly-new technology. People are pretty good at dealing with gradual change, especially when there are huge economic incentives to do so.
jonny_eh 14y ago
He totally skipped over the best argument for Bitcoin, the reliance on middle-men when exchanging money online. You either have Paypal or some other kind of credit card processor that takes %3 or more of every transaction. If only the value of BTC would settle down a bit, it would make a great way to facilitate micro-transactions.
- lbarrow 14y ago
  Why do you need an alternate currency to do that? Companies like Dwolla are hard at work trying to make credit card processing payment fees a thing of the past. Last time I checked, it cost only 25c to move money between bank accounts on Dwolla.
  - damian2000 14y ago
    Are they international? If so you can bet someone (such as a bank) is taking a cut somewhere on the offered exchange rate. EDIT: I just looked and Dwolla is US only.
    - consz 14y ago
      I mean, there's a % taken from every bitcoin transaction as well, it's just a question of which fee is lower, BTC or dwolla.
      - damian2000 14y ago
        I think the bitcoin fee is optional? or at least doesn't apply in many cases?
        accountoftheday 14y ago
        peers may offer to process bitcoin transactions for free, and the original paper posits there are always going to be participants who will.
  - jonny_eh 14y ago
droopyEyelids 14y ago
I've always heard Krugman referred to in reverential terms, so this really leaves me scratching my head. Setting aside the near ad-hom based on the fact that people use currency for drugs, he seems to take the idea that bitcoin is anonymous for granted. That means he doesn't understand what he's talking about, and there can't be two ways about it. Bitcoin can be considered pseudonymous, and in a system where exchanges need to abide by money transmitter laws combined with the fact that every transaction is a matter of public record, the situation is murky at best. And when you actually think about it, if people must identify to exchange bitcoin for other currencies, that might mean a sea change in the transparency of financial transactions. Krugman, if you read this, think of your goddamn reputation and do some research! There are about a million exciting inferences to be made based on the hard rules of the bitcoin protocol. Start here. http://bitcoin.org/bitcoin.pdf http://bitcoin.org/bitcoin.pdf
- damian2000 14y ago
  I get what you're saying and agree, but it remains that a lot of people using Bitcoin actually do want to be anonymous. http://bitcoin.stackexchange.com/questions/439/how-can-one-remain-relatively-anonymous-while-using-bitcoin http://bitcoin.stackexchange.com/questions/439/how-can-one-r...
- hudibras 14y ago
  Lots of comments here about how his minor "back alley" analogy, but so far nothing about his main point comparing bitcoiners to goldbugs.
  - XorNot 14y ago
    Which is also completely accurate. That is the exact and often lauded benefit of BitCoin. It's as anonymous as that act, but digital and cross-border. That the technical details differ is functionally irrelevant since this is what BitCoin people are claiming you can do!
- richcollins 14y ago
  I was listening to a talk show on public radio a few months ago. The man being interviewed said it would be a great idea to build a defense against alien attack as a way to stimulate the economy. I laughed aloud and wondered what sort of crackpot they'd invited onto the show. When they returned from commercial the host announced "we're back with Nobel Prize winner Paul Krugman" ... http://www.huffingtonpost.com/2012/06/21/paul-krugman-alien-invasion_n_1612973.html http://www.huffingtonpost.com/2012/06/21/paul-krugman-alien-...
damian2000 14y ago
Surely Bitcoin and its users are social - as can be attested by its viral growth in the last couple of years.
richardjordan 14y ago
I see BitCoin as an opening gambit not an end position. It's likely that BitCoin will bubble, froth, and ultimately collapse, but that it will be replaced by something of similar form with certain structural improvements. I read (wish I could link to give credit to the commenter) a nice analogy today - of BitCoin being the Napster of the space, innovator but not the ultimate winner. Krugman's point as to its necessity is valid, however I still see it as likely that we'll end up with a currency of consensus, which has exchange value because a critical mass of people believe in its value and are prepared to act on that for a sustained period of time.
- damian2000 14y ago
  It could be that a large retailer with an existing user base could launch their own currency, much as Amazon has done in a limited fashion with Amazon Coins. http://www.slate.com/articles/technology/technology/2013/02/amazon_coins_jeff_bezos_brilliant_plan_to_give_free_money_to_kindle_fire.html http://www.slate.com/articles/technology/technology/2013/02/...
  - XorNot 14y ago
    This would just be funbucks though, no different to Disney. What it would not be would be a separate currency, since that's illegal and for good reason: it would be a return to the days of being paid in company scrip, which can only be spent at the company store. EDIT: Not to mention that apparently we can't trust the government, but we can definitely trust a giant profit-motivated non-democratic entity to manage our currency?
kaoD 14y ago
I stopped reading after the "untraceable" claim and the "dark alley" simile. What a showstopper. No wonder he doesn't get Bitcoin at all.
- jayfuerstenberg 14y ago
  Type "Paul Krugman is" into Google and you'll see the how people feel about him.
  - shmageggy 14y ago
    For me, it autocompletes with "wrong", "right", "always right", and a bunch of ad hominems (not necessarily in that order), so I'm going to say... conflicted.
- nate_martin 14y ago
  While Bitcoin is certainly traceable, it is being used for shady dealings (silk road). His point about it being a way to pay for illegal goods online was correct. This adds little to his overall argument however.
shmageggy 14y ago
> When you transfer bitcoins to someone else, it’s as if you handed over a paper bag filled with $100 bills in a dark alley. This analogy is so wildy off the mark. In fact, an opposite scenario is more apt; a transfer of bitcoins is like handing someone a bag filled with cash, and then announcing it to everyone else in the world so that we can all agree on who has possesion of what. Only now you have a robot or other faceless surrogate perform the transaction for you, and (ideally) nobody knows which surrogates, or addresses, map to which people. The fact that Krugman's analogy botches the primary mechanism that makes crypto-currency work is disappointing. Edit: wording.
- d0m 14y ago
  I really haven't had much time to learn on bitcoins, so sorry my dumb question.. but when people are buying illegal drugs by using bitcoins, are they really "Announcing it to everyone else?". I believe, maybe in theory, that there's a clear trace of the transactions, but it gets way more easier to hide both side, no? For instance, we know that XYZ shared 1k$ with ABC.. good luck finding to find out who's that XYZ.
  - shmageggy 14y ago
    Yes, that's exactly it. The shared, public, distributed block chain records every transaction that has ever taken place [1], so everyone knows and agrees on the amounts that are associated with each address. As long as nobody knows what addresses you use, it's anonymous with respect to a real-world identity. [1] https://en.bitcoin.it/wiki/Block_chain https://en.bitcoin.it/wiki/Block_chain
  - d0m 14y ago
    By the way, I'd love to learn more and start using bitcoins.. transferring money with paypal or by, shrug writing paper cheques, feels so much deprecated. As an anecdote.. I'm using two different banks (One for work, one personal) but I can't share money between both accounts! Even if they both have online accounts.. I need to write the transaction on papers and go to the local bank to trade it. Thankfully I practically never do it.. or if I do it it's because it's big enough amounts that I'm happy to do it, but still..
jibiabrahm 14y ago
"Gold’s value comes in part because it has nonmonetary uses, such as filling teeth and making jewelry" - my favorite line. I really do hope that the sarcasm was real
temphn 14y ago
First, take a gander at M0, to get a sense of how much money has been printed: http://research.stlouisfed.org/fred2/series/BASE http://research.stlouisfed.org/fred2/series/BASE That shows you what actually happened to the money supply. In other words, the central factual claim made by Krugman is false: The practical misconception here — and it’s a big one — is the notion that we live in an era of wildly irresponsible money printing, with runaway inflation just around the corner. It’s true that the Federal Reserve and other central banks have greatly expanded their balance sheets — but they’ve done that explicitly as a temporary measure in response to economic crisis. I know, government officials are not to be trusted and all that, but the truth is that Ben Bernanke’s promises that his actions wouldn’t be inflationary have been vindicated year after year, while goldbugs’ dire warnings of inflation keep not coming true. As that graph shows, we are indeed in an era of out of control money printing[0]. Moreover, food[1] and energy[2] prices are through the roof, and housing is being artificially propped up by QE4 -- in which dollar holders are diluted to the tune of $85B per month[3] so that the government can take mortgage-backed securities off the hands of their favorite banks. The CPI intentionally excludes[4] the consequent energy and food price increases (ostensibly due to their "volatility") thereby systematically understating the consequences of printing 85 billion dollars per month, every month, to infinity. [0] http://research.stlouisfed.org/fred2/series/BASE http://research.stlouisfed.org/fred2/series/BASE [1] http://research.stlouisfed.org/fred2/graph/?g=8l2 http://research.stlouisfed.org/fred2/graph/?g=8l2 [2] http://goo.gl/R4r0f http://goo.gl/R4r0f [3] http://www.forbes.com/sites/afontevecchia/2012/12/12/qe4-is-here-bernanke-delivers-85b-a-month-until-unemployment-falls-below-6-5 http://www.forbes.com/sites/afontevecchia/2012/12/12/qe4-is-... [4] http://www.bls.gov/cpi/cpifaq.htm#Question_13 http://www.bls.gov/cpi/cpifaq.htm#Question_13
- mav3r1ck 14y ago
  Um, your link to gas prices show them going down. I don't consider that as "energy prices going through the roof", quite the opposite actually. By the way, a barrel of oil right now is in the same exact price range it was 5 years ago (go to Marketwatch and click 5-year price). Furthermore, one would be hard pressed to claim a rise in food-prices resulted solely from inflation-- given the record droughts in America [1] and record fires in Russia [2] that devastated entire crops last year. Please, for the sake of good argument, try to be factually correct when trying to claim others aren't. [1] http://theweek.com/article/index/230673/americas-worst-drought-in-decades-by-the-numbers http://theweek.com/article/index/230673/americas-worst-droug... AND http://en.wikipedia.org/wiki/2012_drought http://en.wikipedia.org/wiki/2012_drought [2] http://en.wikipedia.org/wiki/2010_Russian_wildfires http://en.wikipedia.org/wiki/2010_Russian_wildfires
mav3r1ck 14y ago
I think Krugman hit the nail on the head with some comparisons here, such as of being a bit-bug is no different than being a gold-bug and how money cannot stand outside the system. That's exactly what the value of money is-- it's other people's belief in whether other people believe in it, which actually is pretty much how social networks work. The thing I never liked about bitcoin was the whole let's prevent inflation by not allowing the 'printing' of money bit that are baked into how the bitcoin supply expands. I don't see any reason to expound on that other than to make a political, rather strongly libertarian-leaning, statement.
jdrobins2000 14y ago
Krugman: "I guess you could make that case if the money we actually have were misbehaving. But it isn’t." Translation: "Our fiat currency hasn't failed this time... yet. Ipso facto, it will never fail. Anyway, it's not worthwhile to try to forsee future problems until they actually happen." I'm not a fan of CNBC, but every once in a while they say something decent. http://www.cnbc.com/id/48349503 http://www.cnbc.com/id/48349503 “'Every single fiat currency in history has collapsed, this time will be no different.'” I'm not predicting the demise of any major currency. However, I can't say I don't have my concerns about current practices, and history does not bode well.
tantalor 14y ago
Not sure I buy the most persuasive argument, bitcoins are the ultimate fiat currency, with a value conjured out of thin air, paper currencies have value because they’re backed by the power of the state Dollars and yuan are fiat currency. What difference does it make that bitcoin holders aren't back by a state? Is anything going to change if countries convert their reserves to bitcoin? How many bitcoins does the US own? This seems like an argument that will evaporate given enough time.
- reaclmbs 14y ago
  the sovereign nations have gold...
  - tantalor 14y ago
    http://en.wikipedia.org/wiki/Nixon_Shock http://en.wikipedia.org/wiki/Nixon_Shock
    - reaclmbs 14y ago
      yes, but when cyprus defaults, what will the european countries want? gold.
      - tantalor 14y ago
        They have a lot of rubles, right?
      - dragonwriter 14y ago
        > yes, but when cyprus defaults, what will the european countries want? If history is any guide, they'll want the ability to dictate Cyprus's internal policies. That's usually the international response to default, rather than demands for gold. Concrete power, rather than weak symbolic representation of power.
- venomsnake 14y ago
  There was a joke once in soviet time that the dollar is backed by gold, while the ruble is backed by tanks. Currently USD is also backed by the tanks. The US government has the power to extract from every person certain amount of USD per year that it determines. And the US government is the only source. How the person can obtain them is up to them. This makes a big difference.
bsimpson 14y ago
The first dot-com crash and the housing crash were both painfully obvious, but things went on swimmingly in spite of the obvious foolishness of it all long enough for people to forget their skepticism and buy in. Then, there weren't anymore people to buy in and both markets crashed. It's going to happen with the dollar too. Everything is going to keep going fairly OK, even though we all know it shouldn't, until the day it doesn't. Just because it hasn't crashed yet doesn't mean it isn't capable of or likely to do so.
tantalor 14y ago
Am I the only one amused by the Winklevoss twins declaration of "faith in a mathematical framework that is free of politics and human error"? 1. You don't need faith in math. That's the point. 2. Just because it's based on math doesn't mean it can't all come crashing down. 3. If you think you can invest money in math, please contact me privately about some exciting differential equations you may be interested in.
jdrobins2000 14y ago
Krugman: "bitcoins are in a sense the ultimate fiat currency, with a value conjured out of thin air" I recently did a little reading into the mechanisms behind bitcoin, and am intrigued. I was skeptical but certainly understand the merit now, though I don't understand enough details (especially the transaction-fee-only endgame) to rule out vulnerabilities. However, it does seem clear that the miners actually perform a valuable service of ensuring the integrity of the bitcoin system. So, for Krugman to say that the bitcoins are created out of thin air is disingenuous, if not surprising.
venomsnake 14y ago
I usually like Krugman, but this column is botched. Krugman does not get bitcoin protocol but is a bit better with Bitcoin. Just reading about "complicated math problems" make my brain hurt. There is nothing complicating in a hash function except designing it properly. While there are valid attacks on bitcoin he is not making them.
- nate_martin 14y ago
  Agreed, I think he fails to see past the idea that bitcoin has its own "gold standard" built in. The idea of a non-inflationary currency to PK is just silly. Perhaps he will change his mind once further adoption has taken place or when a new use surfaces.
vinhboy 14y ago
Krugman really dropped the ball on this one. He really needs to sit down with a technologist and have them explain to him how bitcoin works before he writes anymore critiques of Bitcoin. However, looking pass his technological misunderstanding, he does raise some good points about why bitcoin can not be the idealistic currency people want it to be.

58 points by nate_martin 14y ago

I don't know if I agree with everything Krugman says here but the more I think about bitcoins and real money the more I realize how much better life would be if the world of abundance would finally get here. The idea of treating electricity and clean water (among a whole host of other resources) as abundant as the air we breathe is one worth pursuing.

richardjordan 14y ago
Would finally get here? What gives you the confidence this will happen in a world of finite resources and where Physics & Chemistry contain rules that don't break (like the challenges of obtaining sufficient energy supplies at an sufficiently high Energy-Return-On-Energy-Invested basis), and where we have a huge population that's still growing, and an environment which appears to be straining under these pressures? Sure, resources being as abundant as the air we breathe is an idea worth pursuing. Unfortunately it smacks into reality where resources are limited, are being converted into unusable forms at increasing rates and many if not most of the critical ones are peaking or have peaked in terms of production rates. Still... I long for Iain M. Banks Culture too... sadly I just don't think it's going to happen.
- jayfuerstenberg 14y ago
  Well somethings will always be scarce, like real estate. But other things can be made abundant. The internet and sites like Khan Academy are the first great steps in making education abundant for instance. Electricity is another resource that within the next decade anybody can have in abundance. Well, anybody with a roof onto which a solar panel can be placed that is. Little by little it is happening.
  - richardjordan 14y ago
    So one of the problems that advocates for solar panel driven futures have is that they don't add in the significant cost in terms of energy and resources of producing them, nor the fact that a lot of solar solutions start with petrochemical inputs. Once we lose the 100:1 EROEI that we get from drilled oil a lot of other assumed energy solutions become very challenging. A lot of these things are energy intenstve to produce in the first place and have finite lifetimes.
- cmccabe 14y ago
  The US population is about 300 million and is not growing that fast. In fact, it might even be declining if immigration were not a factor. China's and Europe's populations will start decling in our lifetimes. Only India and Africa are set to keep increasing their populations. "Resources" is a conveniently vague word which could mean almost anything that people happen to think they need at any given point. Are horses and buggies a resource? Because if so, we're running pretty low. If not, though, we're probably good. If software is the "resource," I could probably make 300 million copies in my apartment. Most of the "resource" problems in the world are actually governance problems. For example, if the government is too corrupt and/or unstable to set up desalination plants, then there is a critical water shortage. On a pure physics basis, we have enough energy for hundreds of thousands of years. There's a reason why the northeast US is sometimes called the "Saudi Arabia of coal." The whole Limits to Growth thing from the 1970s should be thoroughly discredited by now. They picked a particularly bad time to come up with it, too, right before the Green Revolution and a prolonged slump in commodity and energy prices...
  - richardjordan 14y ago
    Semantics don't help us. Easily mined metals are a resource. Petrochemicals are a resource. As stated elsewhere the green revolution was just pouring oil on fields (as pesticides) and natural gas (as fertilizer). When we run out of those we run out of our ability to sustain even current food yields. Then there's topsoil. That's a resource, and in much of the midwest we're down to barely the amount needed for plants to root. Potable water is a resource. The state of many of our aquifers is precarious. Your statement that begins "on a pure physics basis..." bears little resemblance to any known facts about our current energy position. I'm a physicist by training, fwiw.
    - cmccabe 14y ago
      Look, there is a shit-ton of coal in the ground. There is a process for converting coal into oil. The Germans used it during WWII. Not exactly cutting edge technology. If you are going to predict doom and gloom, you could at least give me a plausible scenario, like a supervirus or nuclear war. Running out of energy is just not going to happen any time soon. If you wanted to stretch your horizons beyond the 1940s (hard, I know)... you could predict that soon enough we'll be able to synthesize oil using yeast and some energy input. There are ways to replenish topsoil. Or even not to use it at all. Look up hydroponics-- another not-particularly-new technology. People are pretty good at dealing with gradual change, especially when there are huge economic incentives to do so.

jonny_eh 14y ago

He totally skipped over the best argument for Bitcoin, the reliance on middle-men when exchanging money online. You either have Paypal or some other kind of credit card processor that takes %3 or more of every transaction. If only the value of BTC would settle down a bit, it would make a great way to facilitate micro-transactions.

lbarrow 14y ago
Why do you need an alternate currency to do that? Companies like Dwolla are hard at work trying to make credit card processing payment fees a thing of the past. Last time I checked, it cost only 25c to move money between bank accounts on Dwolla.
- damian2000 14y ago
  Are they international? If so you can bet someone (such as a bank) is taking a cut somewhere on the offered exchange rate. EDIT: I just looked and Dwolla is US only.
  - consz 14y ago
    I mean, there's a % taken from every bitcoin transaction as well, it's just a question of which fee is lower, BTC or dwolla.
    - damian2000 14y ago
      I think the bitcoin fee is optional? or at least doesn't apply in many cases?
      - accountoftheday 14y ago
        peers may offer to process bitcoin transactions for free, and the original paper posits there are always going to be participants who will.
- jonny_eh 14y ago

droopyEyelids 14y ago

I've always heard Krugman referred to in reverential terms, so this really leaves me scratching my head. Setting aside the near ad-hom based on the fact that people use currency for drugs, he seems to take the idea that bitcoin is anonymous for granted. That means he doesn't understand what he's talking about, and there can't be two ways about it. Bitcoin can be considered pseudonymous, and in a system where exchanges need to abide by money transmitter laws combined with the fact that every transaction is a matter of public record, the situation is murky at best. And when you actually think about it, if people must identify to exchange bitcoin for other currencies, that might mean a sea change in the transparency of financial transactions. Krugman, if you read this, think of your goddamn reputation and do some research! There are about a million exciting inferences to be made based on the hard rules of the bitcoin protocol. Start here. http://bitcoin.org/bitcoin.pdf http://bitcoin.org/bitcoin.pdf

damian2000 14y ago
I get what you're saying and agree, but it remains that a lot of people using Bitcoin actually do want to be anonymous. http://bitcoin.stackexchange.com/questions/439/how-can-one-remain-relatively-anonymous-while-using-bitcoin http://bitcoin.stackexchange.com/questions/439/how-can-one-r...
hudibras 14y ago
Lots of comments here about how his minor "back alley" analogy, but so far nothing about his main point comparing bitcoiners to goldbugs.
- XorNot 14y ago
  Which is also completely accurate. That is the exact and often lauded benefit of BitCoin. It's as anonymous as that act, but digital and cross-border. That the technical details differ is functionally irrelevant since this is what BitCoin people are claiming you can do!
richcollins 14y ago
I was listening to a talk show on public radio a few months ago. The man being interviewed said it would be a great idea to build a defense against alien attack as a way to stimulate the economy. I laughed aloud and wondered what sort of crackpot they'd invited onto the show. When they returned from commercial the host announced "we're back with Nobel Prize winner Paul Krugman" ... http://www.huffingtonpost.com/2012/06/21/paul-krugman-alien-invasion_n_1612973.html http://www.huffingtonpost.com/2012/06/21/paul-krugman-alien-...

damian2000 14y ago

Surely Bitcoin and its users are social - as can be attested by its viral growth in the last couple of years.

richardjordan 14y ago

I see BitCoin as an opening gambit not an end position. It's likely that BitCoin will bubble, froth, and ultimately collapse, but that it will be replaced by something of similar form with certain structural improvements. I read (wish I could link to give credit to the commenter) a nice analogy today - of BitCoin being the Napster of the space, innovator but not the ultimate winner. Krugman's point as to its necessity is valid, however I still see it as likely that we'll end up with a currency of consensus, which has exchange value because a critical mass of people believe in its value and are prepared to act on that for a sustained period of time.

damian2000 14y ago
It could be that a large retailer with an existing user base could launch their own currency, much as Amazon has done in a limited fashion with Amazon Coins. http://www.slate.com/articles/technology/technology/2013/02/amazon_coins_jeff_bezos_brilliant_plan_to_give_free_money_to_kindle_fire.html http://www.slate.com/articles/technology/technology/2013/02/...
- XorNot 14y ago
  This would just be funbucks though, no different to Disney. What it would not be would be a separate currency, since that's illegal and for good reason: it would be a return to the days of being paid in company scrip, which can only be spent at the company store. EDIT: Not to mention that apparently we can't trust the government, but we can definitely trust a giant profit-motivated non-democratic entity to manage our currency?

kaoD 14y ago

I stopped reading after the "untraceable" claim and the "dark alley" simile. What a showstopper. No wonder he doesn't get Bitcoin at all.

jayfuerstenberg 14y ago
Type "Paul Krugman is" into Google and you'll see the how people feel about him.
- shmageggy 14y ago
  For me, it autocompletes with "wrong", "right", "always right", and a bunch of ad hominems (not necessarily in that order), so I'm going to say... conflicted.
nate_martin 14y ago
While Bitcoin is certainly traceable, it is being used for shady dealings (silk road). His point about it being a way to pay for illegal goods online was correct. This adds little to his overall argument however.

shmageggy 14y ago

> When you transfer bitcoins to someone else, it’s as if you handed over a paper bag filled with $100 bills in a dark alley. This analogy is so wildy off the mark. In fact, an opposite scenario is more apt; a transfer of bitcoins is like handing someone a bag filled with cash, and then announcing it to everyone else in the world so that we can all agree on who has possesion of what. Only now you have a robot or other faceless surrogate perform the transaction for you, and (ideally) nobody knows which surrogates, or addresses, map to which people. The fact that Krugman's analogy botches the primary mechanism that makes crypto-currency work is disappointing. Edit: wording.

d0m 14y ago
I really haven't had much time to learn on bitcoins, so sorry my dumb question.. but when people are buying illegal drugs by using bitcoins, are they really "Announcing it to everyone else?". I believe, maybe in theory, that there's a clear trace of the transactions, but it gets way more easier to hide both side, no? For instance, we know that XYZ shared 1k$ with ABC.. good luck finding to find out who's that XYZ.
- shmageggy 14y ago
  Yes, that's exactly it. The shared, public, distributed block chain records every transaction that has ever taken place [1], so everyone knows and agrees on the amounts that are associated with each address. As long as nobody knows what addresses you use, it's anonymous with respect to a real-world identity. [1] https://en.bitcoin.it/wiki/Block_chain https://en.bitcoin.it/wiki/Block_chain
- d0m 14y ago
  By the way, I'd love to learn more and start using bitcoins.. transferring money with paypal or by, shrug writing paper cheques, feels so much deprecated. As an anecdote.. I'm using two different banks (One for work, one personal) but I can't share money between both accounts! Even if they both have online accounts.. I need to write the transaction on papers and go to the local bank to trade it. Thankfully I practically never do it.. or if I do it it's because it's big enough amounts that I'm happy to do it, but still..

jibiabrahm 14y ago

"Gold’s value comes in part because it has nonmonetary uses, such as filling teeth and making jewelry" - my favorite line. I really do hope that the sarcasm was real

temphn 14y ago

First, take a gander at M0, to get a sense of how much money has been printed: http://research.stlouisfed.org/fred2/series/BASE http://research.stlouisfed.org/fred2/series/BASE That shows you what actually happened to the money supply. In other words, the central factual claim made by Krugman is false: The practical misconception here — and it’s a big one — is the notion that we live in an era of wildly irresponsible money printing, with runaway inflation just around the corner. It’s true that the Federal Reserve and other central banks have greatly expanded their balance sheets — but they’ve done that explicitly as a temporary measure in response to economic crisis. I know, government officials are not to be trusted and all that, but the truth is that Ben Bernanke’s promises that his actions wouldn’t be inflationary have been vindicated year after year, while goldbugs’ dire warnings of inflation keep not coming true. As that graph shows, we are indeed in an era of out of control money printing[0]. Moreover, food[1] and energy[2] prices are through the roof, and housing is being artificially propped up by QE4 -- in which dollar holders are diluted to the tune of $85B per month[3] so that the government can take mortgage-backed securities off the hands of their favorite banks. The CPI intentionally excludes[4] the consequent energy and food price increases (ostensibly due to their "volatility") thereby systematically understating the consequences of printing 85 billion dollars per month, every month, to infinity. [0] http://research.stlouisfed.org/fred2/series/BASE http://research.stlouisfed.org/fred2/series/BASE [1] http://research.stlouisfed.org/fred2/graph/?g=8l2 http://research.stlouisfed.org/fred2/graph/?g=8l2 [2] http://goo.gl/R4r0f http://goo.gl/R4r0f [3] http://www.forbes.com/sites/afontevecchia/2012/12/12/qe4-is-here-bernanke-delivers-85b-a-month-until-unemployment-falls-below-6-5 http://www.forbes.com/sites/afontevecchia/2012/12/12/qe4-is-... [4] http://www.bls.gov/cpi/cpifaq.htm#Question_13 http://www.bls.gov/cpi/cpifaq.htm#Question_13

mav3r1ck 14y ago
Um, your link to gas prices show them going down. I don't consider that as "energy prices going through the roof", quite the opposite actually. By the way, a barrel of oil right now is in the same exact price range it was 5 years ago (go to Marketwatch and click 5-year price). Furthermore, one would be hard pressed to claim a rise in food-prices resulted solely from inflation-- given the record droughts in America [1] and record fires in Russia [2] that devastated entire crops last year. Please, for the sake of good argument, try to be factually correct when trying to claim others aren't. [1] http://theweek.com/article/index/230673/americas-worst-drought-in-decades-by-the-numbers http://theweek.com/article/index/230673/americas-worst-droug... AND http://en.wikipedia.org/wiki/2012_drought http://en.wikipedia.org/wiki/2012_drought [2] http://en.wikipedia.org/wiki/2010_Russian_wildfires http://en.wikipedia.org/wiki/2010_Russian_wildfires

mav3r1ck 14y ago

I think Krugman hit the nail on the head with some comparisons here, such as of being a bit-bug is no different than being a gold-bug and how money cannot stand outside the system. That's exactly what the value of money is-- it's other people's belief in whether other people believe in it, which actually is pretty much how social networks work. The thing I never liked about bitcoin was the whole let's prevent inflation by not allowing the 'printing' of money bit that are baked into how the bitcoin supply expands. I don't see any reason to expound on that other than to make a political, rather strongly libertarian-leaning, statement.

jdrobins2000 14y ago

Krugman: "I guess you could make that case if the money we actually have were misbehaving. But it isn’t." Translation: "Our fiat currency hasn't failed this time... yet. Ipso facto, it will never fail. Anyway, it's not worthwhile to try to forsee future problems until they actually happen." I'm not a fan of CNBC, but every once in a while they say something decent. http://www.cnbc.com/id/48349503 http://www.cnbc.com/id/48349503 “'Every single fiat currency in history has collapsed, this time will be no different.'” I'm not predicting the demise of any major currency. However, I can't say I don't have my concerns about current practices, and history does not bode well.

tantalor 14y ago

Not sure I buy the most persuasive argument, bitcoins are the ultimate fiat currency, with a value conjured out of thin air, paper currencies have value because they’re backed by the power of the state Dollars and yuan are fiat currency. What difference does it make that bitcoin holders aren't back by a state? Is anything going to change if countries convert their reserves to bitcoin? How many bitcoins does the US own? This seems like an argument that will evaporate given enough time.

reaclmbs 14y ago
the sovereign nations have gold...
- tantalor 14y ago
  http://en.wikipedia.org/wiki/Nixon_Shock http://en.wikipedia.org/wiki/Nixon_Shock
  - reaclmbs 14y ago
    yes, but when cyprus defaults, what will the european countries want? gold.
    - tantalor 14y ago
      They have a lot of rubles, right?
    - dragonwriter 14y ago
      > yes, but when cyprus defaults, what will the european countries want? If history is any guide, they'll want the ability to dictate Cyprus's internal policies. That's usually the international response to default, rather than demands for gold. Concrete power, rather than weak symbolic representation of power.
venomsnake 14y ago
There was a joke once in soviet time that the dollar is backed by gold, while the ruble is backed by tanks. Currently USD is also backed by the tanks. The US government has the power to extract from every person certain amount of USD per year that it determines. And the US government is the only source. How the person can obtain them is up to them. This makes a big difference.

bsimpson 14y ago

The first dot-com crash and the housing crash were both painfully obvious, but things went on swimmingly in spite of the obvious foolishness of it all long enough for people to forget their skepticism and buy in. Then, there weren't anymore people to buy in and both markets crashed. It's going to happen with the dollar too. Everything is going to keep going fairly OK, even though we all know it shouldn't, until the day it doesn't. Just because it hasn't crashed yet doesn't mean it isn't capable of or likely to do so.

tantalor 14y ago

Am I the only one amused by the Winklevoss twins declaration of "faith in a mathematical framework that is free of politics and human error"? 1. You don't need faith in math. That's the point. 2. Just because it's based on math doesn't mean it can't all come crashing down. 3. If you think you can invest money in math, please contact me privately about some exciting differential equations you may be interested in.

jdrobins2000 14y ago

Krugman: "bitcoins are in a sense the ultimate fiat currency, with a value conjured out of thin air" I recently did a little reading into the mechanisms behind bitcoin, and am intrigued. I was skeptical but certainly understand the merit now, though I don't understand enough details (especially the transaction-fee-only endgame) to rule out vulnerabilities. However, it does seem clear that the miners actually perform a valuable service of ensuring the integrity of the bitcoin system. So, for Krugman to say that the bitcoins are created out of thin air is disingenuous, if not surprising.

venomsnake 14y ago

I usually like Krugman, but this column is botched. Krugman does not get bitcoin protocol but is a bit better with Bitcoin. Just reading about "complicated math problems" make my brain hurt. There is nothing complicating in a hash function except designing it properly. While there are valid attacks on bitcoin he is not making them.

nate_martin 14y ago
Agreed, I think he fails to see past the idea that bitcoin has its own "gold standard" built in. The idea of a non-inflationary currency to PK is just silly. Perhaps he will change his mind once further adoption has taken place or when a new use surfaces.

vinhboy 14y ago

Krugman really dropped the ball on this one. He really needs to sit down with a technologist and have them explain to him how bitcoin works before he writes anymore critiques of Bitcoin. However, looking pass his technological misunderstanding, he does raise some good points about why bitcoin can not be the idealistic currency people want it to be.