4 ms·

I think the point is that all spending is good spending. Imagine if we spent all of our resources building defenses against aliens. Wed all starve

cromwellian 14y ago
I don't think Paul Krugman would agree that if there are two types of spending, A and B, both are equally good. He would say that having people sit on cash in a deflationary situation is quite bad. If you had only two choices, no spending, and spending, then yes, spending is better. But your choices are often between not spending, building a bridge or a school, feeding or educating a kid, or building a bomber. And Krugman's point is that spending on the latter when borrowing is at historical lows is better than austerity. I find it ironic that a lot of the principle people upset by Krugman's analysis of Bitcoin are Austrian Business Cycle enthusiasts, who often promote the idea that volatile cycles are a creation of the government pumping money and credit, but who don't seem to recognize that a currencyt like Bitcoin has its own volatility that itself could drive crashes from instability. Here we have the world's greatest scientific laboratory test of libertarian monetary policy, a free market, "cryptoanarchist" currency, and if by running this experiment, we see that the traditional economists, who have been pointing out the flaws of the goldbugs and Austrians for years, have been right all along, will views moderate and accept the data?
- richcollins 14y ago
  You don't only have 2 choices. People save because its a better decision than spending at that given point in time. I have a consulting company. I save all of my profits so I can start a company that could conceivably create far more value than consulting at some point in the future. Should I be forced to spend all of my money as quickly as it comes in? Would it be better if I spend that money paying people to be live human sculptures in my front yard than to save it and spend it hiring programmers to create the next great thing when the time is right? Also comparing Bitcoin to a mature market is ridiculous. There is so much volatility due to the huge amount of uncertainty surrounding it and the huge potential upside. In 5 or 10 years it's perceived value is unlikely to have much volatility. Once we know what it works well for and what it doesn't work well for, its value will be understood and its purchasing power will be predictable. Prices in BTC will likely fluctuate very little but steadily drop due to deflationary pressures.
  - cromwellian 14y ago
    As usual, it is erroneous to compare the micro vs the macro, a government is not the same as a business or a family. That said, as a business, you have to evaluate spending money to grow your business. If you have proven unmet demand, you should spend money to meet that increased demand. If you don't have enough demand, but that is purely because customers don't know about your business, then you spend money on reach. And if your business really doesn't have much untapped potential, then maybe you should invest somewhere else. In your case, if you're really "saving all of your profits", you might be achieving your future company non-optimally. It might be better to invest some in your consulting company to grow its profits faster, compounding things even better. IMHO, if you really have a great idea for a future company, "bootstrapping via consulting company" I think is a poor way to go about it. Rip off the bandaid, go raise some funding, or quit now and start immediately. You might find that "at some point in the future" your amazing company already got done by someone else. The macro economy is a a completely different issue. Deflation or the paradox of thrift can leave everyone worse off in the way way that a trade can be win-win, a non-trade can be lose-lose. The basic criticism of goldbug mentality is that if the money itself becomes a better investment than using the money for transactions, then the social function of the money as a means for trade is devalued. Fewer trades = loss for everyone. And frankly, you should be spend some of your money supporting the overall system in which your business has thrived, including basic infrastructure, education, and insurance. It is in your own rational self interest to do it, but unfortunately for society as a whole, too few people are able to realize it. Is your future business really made better off, if we converted everyone into Austrians, and we just left millions of elderly without support, millions of unemployed with no insurance, and millions of kids with no public education? There's no evidence for the libertarian utopian position, and not much evidence we should fear mixed-model economies. Sweden is doing very well with "socialist" tax rates, a debt-to-GDP ratio <30%, average GDP growth >2.5%, not the disaster that the welfare state is supposed to be. I don't think we need to adopt Sweden's policies to solve our problems, I think we can maintain our dynamic economy without this constant fetishizing over extreme economist policies on both sides. We need tweaks, not revolution.

cromwellian 14y ago

I don't think Paul Krugman would agree that if there are two types of spending, A and B, both are equally good. He would say that having people sit on cash in a deflationary situation is quite bad. If you had only two choices, no spending, and spending, then yes, spending is better. But your choices are often between not spending, building a bridge or a school, feeding or educating a kid, or building a bomber. And Krugman's point is that spending on the latter when borrowing is at historical lows is better than austerity. I find it ironic that a lot of the principle people upset by Krugman's analysis of Bitcoin are Austrian Business Cycle enthusiasts, who often promote the idea that volatile cycles are a creation of the government pumping money and credit, but who don't seem to recognize that a currencyt like Bitcoin has its own volatility that itself could drive crashes from instability. Here we have the world's greatest scientific laboratory test of libertarian monetary policy, a free market, "cryptoanarchist" currency, and if by running this experiment, we see that the traditional economists, who have been pointing out the flaws of the goldbugs and Austrians for years, have been right all along, will views moderate and accept the data?

richcollins 14y ago
You don't only have 2 choices. People save because its a better decision than spending at that given point in time. I have a consulting company. I save all of my profits so I can start a company that could conceivably create far more value than consulting at some point in the future. Should I be forced to spend all of my money as quickly as it comes in? Would it be better if I spend that money paying people to be live human sculptures in my front yard than to save it and spend it hiring programmers to create the next great thing when the time is right? Also comparing Bitcoin to a mature market is ridiculous. There is so much volatility due to the huge amount of uncertainty surrounding it and the huge potential upside. In 5 or 10 years it's perceived value is unlikely to have much volatility. Once we know what it works well for and what it doesn't work well for, its value will be understood and its purchasing power will be predictable. Prices in BTC will likely fluctuate very little but steadily drop due to deflationary pressures.
- cromwellian 14y ago
  As usual, it is erroneous to compare the micro vs the macro, a government is not the same as a business or a family. That said, as a business, you have to evaluate spending money to grow your business. If you have proven unmet demand, you should spend money to meet that increased demand. If you don't have enough demand, but that is purely because customers don't know about your business, then you spend money on reach. And if your business really doesn't have much untapped potential, then maybe you should invest somewhere else. In your case, if you're really "saving all of your profits", you might be achieving your future company non-optimally. It might be better to invest some in your consulting company to grow its profits faster, compounding things even better. IMHO, if you really have a great idea for a future company, "bootstrapping via consulting company" I think is a poor way to go about it. Rip off the bandaid, go raise some funding, or quit now and start immediately. You might find that "at some point in the future" your amazing company already got done by someone else. The macro economy is a a completely different issue. Deflation or the paradox of thrift can leave everyone worse off in the way way that a trade can be win-win, a non-trade can be lose-lose. The basic criticism of goldbug mentality is that if the money itself becomes a better investment than using the money for transactions, then the social function of the money as a means for trade is devalued. Fewer trades = loss for everyone. And frankly, you should be spend some of your money supporting the overall system in which your business has thrived, including basic infrastructure, education, and insurance. It is in your own rational self interest to do it, but unfortunately for society as a whole, too few people are able to realize it. Is your future business really made better off, if we converted everyone into Austrians, and we just left millions of elderly without support, millions of unemployed with no insurance, and millions of kids with no public education? There's no evidence for the libertarian utopian position, and not much evidence we should fear mixed-model economies. Sweden is doing very well with "socialist" tax rates, a debt-to-GDP ratio <30%, average GDP growth >2.5%, not the disaster that the welfare state is supposed to be. I don't think we need to adopt Sweden's policies to solve our problems, I think we can maintain our dynamic economy without this constant fetishizing over extreme economist policies on both sides. We need tweaks, not revolution.