Please explain how fractional reserve banking or interest rate manipulation would be possible with tulip bulbs. Or Internet stocks. Or houses.
You are extremely confused. You just spent all this time claiming bitcoins are a commodity and yet you’re trying to claim their price couldn’t get artificially inflated because they themselves can’t be inflated? You really should have thought about that before typing it.
But anyway, nice dodge. Am I to assume your continuing avoidance of my question means you have no decent answer?
You are claiming that bitcoins are like tulip bulbs, which is utterly preposterous. Tulip bulbs are not divisible, they degrade over time, they can’t be sent across a wire transaction, and they can be arbitrarily replicated to absurd numbers if the demand for them exists.
Now, please explain how fractional reserve banking or interest rate manipulation would be possible with bitcoins.
It is what brings about the inflationary boom-bust cycle described in ABCT. However, inflation is not the only cause of business cycles, generally.
And, yes, Bitcoin can be inflated by whatever decision-making process is in place to change the 21 million number. Yes, it can be changed. Bitcoin is crap.
It is what brings about the inflationary boom-bust cycle described in ABCT. However, inflation is not the only cause of business cycles, generally.
Do tell. Please explain the “other” mechanism that causes business cycles according to ABCT.
And, yes, Bitcoin can be inflated by whatever decision-making process is in place to change the 21 million number. Yes, it can be changed. Bitcoin is crap.
Sure, anyone can take the open source code and modify it to make it inflationary.
Of course, they would have to convince every single user of Bitcoin to download their version AND go through a coin conversion process in the open market since the coins would be incompatible across versions.
Barring that taking place (which is about as likely as monkies flying out of my butt) they cannot be inflated. The nature of the currency code is such that any change to the currency itself branches the new currency unit off into its own networked world. It would not be able to interact with the existing version.
I’d also like to add that if you favor a gold standard, you can’t send gold across a wire. If you wish to do transactions across the web on a gold standard, one MUST use digital units to represent real gold. Since the banks would be in control of those digital units, there are NO protections on cooking the books or using fractional reserve banking accounting.
This is in contrast to bitcoins, which can not be inflated digitally.
If you want to make the case that gold is less prone to inflation than bitcoins, you can only do so in a world where everyone directly exchanges real gold coins. As soon as you start using units to represent gold, they can be arbitrarily inflated and fractionally reserved.
I had forgotten to respond to this and Clayton got it. But to simplify and reiterate his point, he’s just saying bitcoins are overvalued. I suppose it depends on how exactly you want to define “bubble”, but what Clayton has been talking about in this thread is that the people involved in bitcoin are wrong. That’s it. His argument is that they mistakenly place more value on the bitcoins than they are actually worth in terms of all other goods in the market.
Considering none of us know how much people value cryptographic data other than through market pricing, I find it incredibly presumptuious to say it’s overvalued. This is what speculators are doing. They are betting that the goods avaliable for bitcoin will in the future match what they are speculating the price at now. If the amount of goods never reach that point, then he’s correct. But if they do reach that point, then the speculators were correct. So why is everybody speculating that the goods will reach that point? Why are they all wrong? Shouldn’t there be those speculating downward to make the correction if you and clayton are correct? Why is nobody putting their money where their bubble filled mouth is?
It’s the same as if I created a new company manufacturing widgets. Widgets aren’t really very useful now, but a lot of people are convinced that they will be in the future…people believe that widgets will be widely sought after as an alternative to some good most people already use (making them more valuable)…and of course the more people that use widgets the more useful they become (which in turn makes them even more valuable). Based on this belief about future value, people are willing to pay much more for shares in my company than they otherwise would.
This is exactly why Gold has reached the valuation it has now. The price of gold is not accounted for by it’s industrial usefulness. It is precisely because it’s useful for exchange that it has reached the heights it has. Granted gold did not reach it nearly as quickly, but we’ve never really had the chance for a cross platform commodity to come into existance in the information age. Is it not equally likely that the speculators are correct? This isn’t fiat. This is entirely driven by the market. In fact, it’s working in spite of government decree (people are exchaning something worthless but decreed by the government to be worth something, for something “worthless” but not decreed by the government), something I find a compelling reason to agree with the market.
This is what Clayton is saying is the case with Bitcoin. You don’t need new money being printed for people to mistakenly be willing to overpay for something and thus raise its price to an artificial level…especially not something starts off as basically a penny stock. It doesn’t take much for something that’s 6 cents per unit to see a price jump. And sure, if you look at it as a percentage, an increase to $20 over two years is ridiculous (which kind of supports Clayton’s point)…but you don’t need an increase in the money supply to show a 33,000% movement in something when that thirty-three thousand percent equates to $19.94.
But that ignores the possibility that it was incredibly undervalued at 6 cents per unit. When you consider that hardly anybody knew about it for those first few months, and now it’s gotten alot of media attention, that would seem just as likely. And there are people putting their own money up saying exactly that. There is nothing a priori that will tell us this is inherently unvaluable.
I think the rise of selling game currencies for purely in game rewards shows just how subjective valuation of a currency can be. The fact that bitcoin is essentially a cross platform game currency (which was it’s first use) that can’t be counterfited and can be taken out of and put into any game, can/has lead to real world uses. So tell me, Is there a WoW gold bubble?
What to me seems potentially very powerful is an encrypted/decentralized reputation system, and possibly arbitration system as well.
The reason private reputation systems don’t appear today is because it’s actually illegal. The first reason is because there are privacy laws meaning the government will crack down on you if you try to establish them. The second reason is that trying to act on reputation is in many cases also illegal; these are equality laws. If you try to deny people from your store, the government will also crack down on you, because your store is consired public property in the way it’s treated (smoking laws are a good example demonstrating this).
You cannot be serious. How is “fractional reserve banking or interest rate manipulation” possible with anything that has been in a bubble? How is fractional reserve banking possible with a house? How is interest rate manipulation possible with an Internet stock? Those things were in bubbles were they not? They were overvalued, were they not?
It sounds like you’re saying it’s only possible for a Federal Reserve note to be in a bubble. Is that your argument? That nothing else (bitcoins, houses, stocks, tulip bulbs) cannot ever be in a bubble because you cannot fractionally reserve bank with them, or manipulate the interest rate with them?
Uh…okay, I must have missed it. Please point me to where you answered this: “If bitcoins were declared illegal, (which would not be hard, as supported in the link) do you think any major business is going to accept them or deal with them in any way? Of course not. And who the heck is going to continue to use a currency that you can’t transact in with any reputable business?”
I’ve already corrected Nielsio on this once. BTC is a commodity. Bitcoin is a proof-of-work system. It’s useful because it proves that you’ve spent resources generating BTC. This means someone can charge for otherwise relatively free actions such as signing up to a website, posting on a forum or sending an email. This forces spammers to incur higher costs, making spam less profitable and reducing the overall amount.
A commodity is a specific kind of good. It is a good which is “fungible”, that is, any one unit of it is exchangeable for any other unit of it. While Bitcoin has the property of fungibility (a Bitcoin is a Bitcoin), the real issue is whether a Bitcoin is a good - specifically, whether it is a good in its non-monetary use - and the fact is that it is not. A “spent” Bitcoin is completely useless, no one will ever use it for anything ever again and outside of its use within the Bitcoin chain, it never had any.
It is true that people are trading real money for Bitcoins. But the argument that Bitcoins are valuable because they are valuable is transparently circular and utterly fails to address the logical problem that Mises tackled with his regression theorem… how did money come to be valued as money in the first place? You cannot give an account of how Robinson Crusoe could one day end up using Bitcoins - absent government force and consistent with the principle of human action. There is simply no path from here to there because Bitcoins are worthless.
I’ve just explained how Bitcoin is a proof-of-work system and can be used to prevent spam by requiring BTC before performing actions such as joining a website, posting a comment on a forum or sending an email. I don’t see any acknowledgement of that fact in your reply. BTC has a use outside of being a currency. It’s a replacement for CAPTCHA’s. If Robinson Crusoe wants to join a website that requires BTC instead of solving CAPTCHA’s then he’ll want to use it. Of course, if you’re going to argue that a single person, with no other humans in existence, still wouldn’t have use for BTC then your argument is reduced to absuridity. A solitary human being wouldn’t have use for televisions, radios or telephones either, which are certainly commodities but require the existence of other human beings to be useful.
Robinson Crusoe couldn’t use bitcoins as a medium of exchange because bitcoins require the internet, the programming necessary to run them, and all of the infrastructure that entails (and if Robinson had the spare time to create all of that, creating a medium of exchange would be the least of his worries)
Likewise, Robinson Crusoe would never find himself using gold, silver, expensive pieces of paper or ammunition either, as all of those require refining and hard work to create, but all also have few tangible benefits to a man on his own on a desert island. Why is gold valuable? It has some industrial applications, true, but those are generally few and far between, not to mention that most of gold’s practical uses can be generally be supplied even better by other metals.
Why is bitcoin worthwhile? Because it is a medium of exchange that fulfills the major requirements (easily divisible, doesn’t degrade, etc) and it is infinitely preferable to the worthless pieces of monopoly money that constitute that role today. It isn’t worthless, it is a large amount of electrons in a very specific formation that constitute quite a bit of processing power. Short of a general collapse of society scenario, it can’t cease to be of value at all, and if that happened then gold would be practically worthless, too. It works as jewelry, but jewelry would not be in high demand assuming everything went tits up. It is, as said above, used in certain electronics and industrial applications, but if the infrastructure that keeps bitcoin around fell then so would the infrastructure that requires gold. Also, you can’t eat gold.
Oh, and bitcoin does have an purpose besides a currency as it functions as a service, specifically money transfer (something demanded by banks, paypal, etc).
Okay, I’m game if you can show a decent credit rating and really will sign such a contract. I have well over 100 BTC, and I’m willing to risk it to break you. If a BTC is worth $1000 in one year, what are you going to offer in settlement? What kind of collateral do you have?
Clayton, please do feel free to short bitcoin. Your trades will be welcome.
"Shorts,
You know who you are. It is time to put your money where your mouth is, and do some option trading.
https://bitoption.org is up and running. It will keep gaining features this week, but there are currently over $1k USD in options offers on the site, and more coming in quickly. I’ll look forward to seeing those bear trades roll in. You now have a way to actively trade against BTC; enjoy! I have had fun building it." -bitoption
I’m certainly intrigued with the idea of bitcoins and I have to admit that a lot of the people responding to you and doing so very douchily (what’s up with that? Have mises people become so accustomed to being treated rudely by the rest of the world that they feel compelled to treat each other rudely?), but my personal concern, which you can take perhaps as some echo of how the market might react to bitcoins, is: what’s going to happen when there are 869 different brands of “bitcoin”? Sure, the current “bitcoin” has a finite amount, but what’s to stop people from creating “Andy’sBitCoins” and “John’sBitCoins” using the exact same setup and algorithm etc? And given that there’s nothing to prevent that, it becomes an economic question to ask how the market will react. The optimistic answer is that the current bitcoin will have some sort of lock-in advantage and people will still value them while not valuing the competitors. The pessimistic answer is that if there are is a neverending sequence of competitors, holders of current bitcoins may indeed see thiers as being at risk and the price for them may plummet.
Thirty Three Thousand Percent in two years!?!?!?!?!??!?!?!?!
hahahaha
i have tons of priceless real estate in Rwanda if anyone cares to start the bidding? I’m just not there because my girlffriend doesn’y like the humidity. It’s really peaceful and serene. I promise.
Peter Schiff had the BitCoin guy on today. I’m gonna listen in a bit here and post back, my guess is. IT’s A BAD INVESTMENT. (in his opinion. ‘past performance is no indication of future success’.)
AAAAAAAHGGGGGHHHHH (thanks for posting that video)
WHUUUDUHTHUNK ITDDD GET HACVKD claiminxxx to be muney !!!
Get real folks, the internet is not to be monetized. that is the point. it is the breakdown of IP law and enforcement EMBRACE IT. Money is for physical production, not instant replication, let’s keep ot to physical production
