So it looks like cryptocurrency has collapsed.
How unsurprising.
From the first mention of bitcoin I honestly could not get it. It had all these terms seelng it, like 'untraceable! ' and 'private'! and 'secret! '.
What I never understood and what all the 'explanations ' of cryptocurrency never really explained was a simple issue:
Where was the wealth coming from?
A poor man gathers cans and bottles along a highway. He takes them to a recycler. He is paid. He works at gathering a resource someone is willing and able to pay for. A man gathers chemicals, makes crystal meth, sells it. He produces a commodity people are willing and able to pay for. A prosititue... You know.
Now a man mines bitcoin. He, uh, he runs algorithms that wear out his computer and eat electricity ,and he makes numbers, then ??? Profit! Where did tbe wealth come from? What resource or good was sold? What service was preformed?
I heard vague explanations that never seemed to touch that issue. I stopped asking finally. I decided it was a particularly convoluted and crafty ponzi/pramid scheme. Part of it's success was too many people had begun to see the intrawebz as some sort of modern magic that could defy physics, that some sort of tron like cyberspace virtual reality existed, somehow, some where that just made money appear out of computer activity.
Well, the bubble just burst. A few people made big money, a few made a little, most lost money.
Just like a pyramid scheme...
First of all, you're late to the party. The price of bitcoin crashed about a month ago, and it's trending up for the past week. Secondly, it's still above $20,000. Two years ago, it was half that. Five years ago, it was 1/10th that. It's still way above previous peaks. That's a sign of volatility, not a collapse.
Quote from: Battlemaster on July 08, 2022, 12:43:17 PM
Where was the wealth coming from?
Your question doesn't make any sense.
Money isn't wealth. It's a medium of exchange.
So, apparently the government issued a vague response to crypto lately and might be developing a digital dollar type deal or more digital assets or more crypto regulation or something. NGL, even with it being summarized I'm not sure what they plan on doing exactly. But it's probably relevant to this discussion somehow and sharper minds can look into and try to interpret it. https://www.politico.com/newsletters/digital-future-daily/2022/07/08/treasury-unveils-its-global-crypto-response-sort-of-00044762
Quote from: Pat on July 08, 2022, 05:16:34 PM
First of all, you're late to the party. The price of bitcoin crashed about a month ago, and it's trending up for the past week. Secondly, it's still above $20,000. Two years ago, it was half that. Five years ago, it was 1/10th that. It's still way above previous peaks. That's a sign of volatility, not a collapse.
Quote from: Battlemaster on July 08, 2022, 12:43:17 PM
Where was the wealth coming from?
Your question doesn't make any sense.
Money isn't wealth. It's a medium of exchange.
I guess this is good information I didn't really know, like that bitcoin is often that volatile and has been bouncing back slowly. I had heard that many bitcoin "investors" would HODL to prevent a bigger drop unless it fell below 9,000 or so, though IDK if that increases real market value. That said, though, a decentralized currency that's private and cetera seems like it would be a good way to avoid government oppression, censorship and regulation, so I kinda get some of the interest in crypto and it's inherent perks maybe. (Though I guess the flip side might be proportionally greater currency tendency towards crime, uninsured loss via hacking, and etcetera.) So I guess I can see why folks might be willing to believe in it and the code's methods (which I do not understand) and thereby give it value, as a way to support a decentralized, more secretive alternative to centralized models, and protect against centralized mismanagement of currency and the like.
I'm not gonna lie though, I'm kinda like Battlemaster in that I don't really get much about crypto and why crypto tokens, if more are mined via algorithms daily, albeit mostly at a decreasing rate(?), kept trending upwards in value so much not just against the dollar but in real terms if not due primarily to speculation. I kinda feel like a lot of people treated crypto like stocks, which seemed a bit weird to me, and I did admittedly feel that since support and purchasing for crypto boosts crypto's value, there was maybe some degree of a conflict of interest in people analyzing crypto whilst they were holding it. So I kinda mistrusted some of what was said for it at times.
Also, while fiat currency seems weird and going off the gold standard was probably a bad idea from what I've heard, since we abandoned the tie in to real value of gold, don't physical central currencies have a more stable base? I dunno, maybe currencies only exist on faith to begin with, but I'm admittedly more skeptical of currencies that aren't currently accepted widely, don't have physical materials that can set floor price (?), as well as potentially not having the faith people put in their governments and the economic influence of the same to prop them up. To say little of potentially being on the future receiving end of government regulation/limitations that I feel could make it lose some of its edges like untraceability and current legality in many places.
To what extent do we think crypto is likely to emerge as a new currency form with wider adoption, should it, and what did the recent drops in the currencies mean in practical terms? Do we expect government reactions, or impacts following this semi-recent 2 trillion dollar dip? I feel like there are definitely things to talk about following the drop, though I may not necessarily be the best person to understand them.
A lot of the weirdness with crypto is that we haven't seen the emergence of a new form of currency since... well, before history started. Nobody's sure how to value it, or how widely it will be used, so it's been going through a speculative boom phase. All other examples of currency evolved from previous versions -- the dollar for instance was originally worth 247.5 grains of gold. It was 100% backed by gold and redeemable by anyone, then they untethered it from gold and made the private holding of gold illegal, then they returned to the gold standard but only between central banks, then they allowed private individuals to hold gold again, then they made the dollar fiat, then they began to lower the reserve standards, and on and on. Before that, currencies probably started as commodities like wheat that were widely available and accepted, but settled on gold (more than any other currency) because it was more durable and transportable. But crypto is just crypto.
Don't overemphasize mining. There are 21 million bitcoins, and there never will be any more. It's not an infinitely inflatable currency, like the US dollar, which has lost 98% of its value since the start of the last century. That's one of the key selling points, the government can't tax the poor by just creating more bitcoin out of thin air. That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold, which could end up with significant inflation if there was a major new strike, someone started to mine asteroids, or even a fleet of lost Spanish galleons was found.
Also, bitcoin and crypto in general isn't "untraceable" in any real sense. The blockchain is literally a public ledger of every transaction ever made. It's only untraceable, if you don't know who controls which wallet. And the government has plenty of ways of finding that out.
Quote from: Pat on July 08, 2022, 07:15:39 PM
A lot of the weirdness with crypto is that we haven't seen the emergence of a new form of currency since... well, before history started. Nobody's sure how to value it, or how widely it will be used, so it's been going through a speculative boom phase. All other examples of currency evolved from previous versions -- the dollar for instance was originally worth 247.5 grains of gold. It was 100% backed by gold and redeemable by anyone, then they untethered it from gold and made the private holding of gold illegal, then they returned to the gold standard but only between central banks, then they allowed private individuals to hold gold again, then they made the dollar fiat, then they began to lower the reserve standards, and on and on. Before that, currencies probably started as commodities like wheat that were widely available and accepted, but settled on gold (more than any other currency) because it was more durable and transportable. But crypto is just crypto.
Don't overemphasize mining. There are 21 million bitcoins, and there never will be any more. It's not an infinitely inflatable currency, like the US dollar, which has lost 98% of its value since the start of the last century. That's one of the key selling points, the government can't tax the poor by just creating more bitcoin out of thin air. That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold, which could end up with significant inflation if there was a major new strike, someone started to mine asteroids, or even a fleet of lost Spanish galleons was found.
Also, bitcoin and crypto in general isn't "untraceable" in any real sense. The blockchain is literally a public ledger of every transaction ever made. It's only untraceable, if you don't know who controls which wallet. And the government has plenty of ways of finding that out.
So a lot of the speculation and weirdness would likely to some extent die off once it actually becomes a more directly exchangeable currency that is more widely accepted, provided this happens. Though new crypto currencies would still be speculative in nature. Likewise presumably as with any currency faith would still be important, just less likely to go off track because...
Inflation is theoretically capped, so to speak, as well as ever decreasing, at least for bitcoin and not counting how new cryptocurrencies means inflation to some degree, due to how bitcoin mining works(?). Or at least assuming resources and tech don't suddenly backtrack, there should maybe even be deflation as more resources are uncovered and tech makes them more usable? Which I guess inflation hurts the poor if they're trying to save, don't have a ton of debt, and can't outpace inflation on their investments as well as potentially being hurt by its effects on things like variable rate mortgages and the like, or on their wages not rising fast enough to keep up? (Not sure I get inflation as a tax on the poor, intrinsically, but I think I may kind of get some of it?)
Provided nobody somehow breaks the system, which would be hard to do due to the decentralized model of the blockchain and the fact that everybody holds a record of transactions(?). Though I have heard inflation hit crypto as though it were a tech stock kinda, which was weird to hear, but that could just be because even bitcoin's not a fully realized currency yet. Though like you said, that may also mean that it may be in a bubble and going to be worth less than one would expect from current prices in future practice.
The government could theoretically figure out accounts, based on what you're saying, then. And people could know every dollar you ever spent. (NGL, that kinda scares me a bit.) But not freeze funds. Which I suppose could be either good or bad depending on how you look at it.
I think I'm getting a little closer to understanding the topic now. Though I'm also seeing new questions crop up I think as I get closer to comprehension. Thanks for the info.
Quote from: KindaMeh on July 08, 2022, 07:50:04 PM
So a lot of the speculation and weirdness would likely to some extent die off once it actually becomes a more directly exchangeable currency that is more widely accepted, provided this happens. Though new crypto currencies would still be speculative in nature. Likewise presumably as with any currency faith would still be important, just less likely to go off track because...
Inflation is theoretically capped, so to speak, as well as ever decreasing, at least for bitcoin and not counting how new cryptocurrencies means inflation to some degree, due to how bitcoin mining works(?). Or at least assuming resources and tech don't suddenly backtrack, there should maybe even be deflation as more resources are uncovered and tech makes them more usable? Which I guess inflation hurts the poor if they're trying to save, don't have a ton of debt, and can't outpace inflation on their investments as well as potentially being hurt by its effects on things like variable rate mortgages and the like, or on their wages not rising fast enough to keep up? (Not sure I get inflation as a tax on the poor, intrinsically, but I think I may kind of get some of it?)
Provided nobody somehow breaks the system, which would be hard to do due to the decentralized model of the blockchain and the fact that everybody holds a record of transactions(?). Though I have heard inflation hit crypto as though it were a tech stock kinda, which was weird to hear, but that could just be because even bitcoin's not a fully realized currency yet. Though like you said, that may also mean that it may be in a bubble and going to be worth less than one would expect from current prices in future practice.
The government could theoretically figure out accounts, based on what you're saying, then. And people could know every dollar you ever spent. (NGL, that kinda scares me a bit.) But not freeze funds. Which I suppose could be either good or bad depending on how you look at it.
I think I'm getting a little closer to understanding the topic now. Though I'm also seeing new questions crop up I think as I get closer to comprehension. Thanks for the info.
Money is a widely accepted medium of exchange. Commodity monies, like bushels of wheat or rolls of fine cloth, have some degree of value external to their use as money. Even gold has value as jewelry and in certain industrial uses. But money also has a value in its use as the medium of exchange and the unit of account. That's why paper money has value, even when it's not backed by anything. And bitcoin, though the market's still in the process of finding the price of bitcoin, and deciding whether it will really become money. (It currently has some features of money, but it's not widely accepted enough yet.)
Bitcoin is ultimately a deflationary money, because it's finite. As the number of goods and services in the economy increase, so will the value of bitcoin, because the same number of bitcoin will be used to exchange a greater value of goods. This contrasts with fiat money, which because governments seem to be constitutionally incapable of keeping their hands out of the till even when it's harmful, is always increased at a rate exceeding the real growth of the economy, and thus is inflationary. Central bankers speak about deflation as if it were this existential threat, using justifications like Keynes' stickiness of wages, and saying it takes away some of their tools to manage the economy (it's hard to lower interest rates below zero). In contrast, Austrians have no problem with deflation, basically thinking of it as a reward for savers, and saying central banks shouldn't be meddling like that anyway.
Inflation is a tax on both income and savings. Traditional taxes target spending (like sales tax) or income (like interest or wages), but leave your bank accounts alone. But inflation chews away at the value of your savings, as well as the value of your wages. This primarily hurts the poor, because the poor tend to keep more of their money in things like bank accounts, whose interest rates don't keep up with inflation. In contrast, the wealthy tend to have their assets in investments, which tend to appreciate in real value (i.e. beat inflation).
Also, inflation doesn't happen instantly. It spreads out in waves. The people who get the newly created money first are able to spend it at the old value, before the market adjusts. And the people who get the money first are the financial industry (which explains their huge growth over the past generation), because it's their loans that create new money. They then loan this money out to businesses. Consumers only get the new money at the very end, when the businesses give it to them in the form of wages. Since the wealthy have more of their money in investments, while the poor rely more on wages, monetary inflation transfers real wealth from the poor to the rich.
Look at the charts showing when real wage growth stopped keeping up with growth in the overall economy (GDP), or when the rich's percentage of national wealth started to increase -- the curve changed almost exactly when Nixon took the US off the gold standard, and allowed central bankers to inflate the monetary supply willy-nilly.
Quote from: Pat on July 08, 2022, 05:16:34 PM
First of all, you're late to the party. The price of bitcoin crashed about a month ago, and it's trending up for the past week. Secondly, it's still above $20,000. Two years ago, it was half that. Five years ago, it was 1/10th that. It's still way above previous peaks. That's a sign of volatility, not a collapse.
Quote from: Battlemaster on July 08, 2022, 12:43:17 PM
Where was the wealth coming from?
Your question doesn't make any sense.
Money isn't wealth. It's a medium of exchange.
Yeah it has not "collapsed" it's just going up and down. It's down right now relative to a couple months ago, but up relative to a couple years ago. No idea where it will go but it's still a thing, for sure. I have a small amount of bitcoin, just because I think it's smart to diversify. If it disappeared tomorrow I would not be crying over it.
I often end up learning a fair bit on this site. Not just about RPGs but in general. Which may perhaps speak poorly of my knowledge going into these discussions, but still makes me feel good in the sense of making progress.
It's not a collapse, it's a shake-out. Only one or two coins have popped and new ones are being added all the time. The market is at about half what it was before the Ukrainian bollocks.
Quote from: KindaMeh on July 09, 2022, 02:48:55 PM
I often end up learning a fair bit on this site. Not just about RPGs but in general. Which may perhaps speak poorly of my knowledge going into these discussions, but still makes me feel good in the sense of making progress.
Any day you learn something new is a good day.
Also, I am leery of crypto and think NFTs are the biggest fucking scam since Dutch petunias.
Quote from: Ghostmaker on July 10, 2022, 11:41:33 AM
Quote from: KindaMeh on July 09, 2022, 02:48:55 PM
I often end up learning a fair bit on this site. Not just about RPGs but in general. Which may perhaps speak poorly of my knowledge going into these discussions, but still makes me feel good in the sense of making progress.
Any day you learn something new is a good day.
Also, I am leery of crypto and think NFTs are the biggest fucking scam since Dutch petunias.
Another set of issues we agree on.
NFTs are nothing more than a distributed method of recording and transferring ownership. Which can be useful, but it's a boring infrastructure technology. The hype seems to be almost entirely focused on digital collectibles whose only value is being the first. Which is a very limited market, where a few insiders will become winners, and everyone else is a loser.
Quote from: Pat on July 08, 2022, 05:16:34 PM
That's a sign of volatility
Quote from: Pat on July 08, 2022, 07:15:39 PM
That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold
Hmmmmmm...
Quote from: Daztur on July 10, 2022, 09:36:03 PM
Quote from: Pat on July 08, 2022, 05:16:34 PM
That's a sign of volatility
Quote from: Pat on July 08, 2022, 07:15:39 PM
That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold
Hmmmmmm...
Do you have a problem grasping simple concepts?
Quote from: Pat on July 10, 2022, 09:52:14 PM
Quote from: Daztur on July 10, 2022, 09:36:03 PM
Quote from: Pat on July 08, 2022, 05:16:34 PM
That's a sign of volatility
Quote from: Pat on July 08, 2022, 07:15:39 PM
That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold
Hmmmmmm...
Do you have a problem grasping simple concepts?
Well I guess volatile = stable is simple, whatever else it is...
Quote from: Daztur on July 10, 2022, 10:07:59 PM
Quote from: Pat on July 10, 2022, 09:52:14 PM
Quote from: Daztur on July 10, 2022, 09:36:03 PM
Quote from: Pat on July 08, 2022, 05:16:34 PM
That's a sign of volatility
Quote from: Pat on July 08, 2022, 07:15:39 PM
That potentially makes it more stable a store of wealth than fiat currencies. More stable even than gold
Hmmmmmm...
Do you have a problem grasping simple concepts?
Well I guess volatile = stable is simple, whatever else it is...
If you have a simple mind. If you had an average one, you would have noticed the "potentially". What's true when something's in its growing phase will not necessarily remain true when it reaches maturity.
It seems to this simple mind that if something like Bitcoin was dis-inflationary then there would be an incentive not to use it as money and rather to hold it as a store of value which means that it would not be a good form of money.
Something like gold is better in this respect because it inflates slowly over time and more closely matches the economy.
Quote from: Ghostmaker on July 10, 2022, 11:41:33 AM
Quote from: KindaMeh on July 09, 2022, 02:48:55 PM
I often end up learning a fair bit on this site. Not just about RPGs but in general. Which may perhaps speak poorly of my knowledge going into these discussions, but still makes me feel good in the sense of making progress.
Any day you learn something new is a good day.
Also, I am leery of crypto and think NFTs are the biggest fucking scam since Dutch petunias.
Both are rational positions. Be leery. BitCoin is pretty solid, but many other forms of crypto are scams. NFTs...they had a purpose but that purpose has been subverted so much these days that I'd stay far away.
Quote from: Shasarak on July 10, 2022, 11:34:22 PM
It seems to this simple mind that if something like Bitcoin was dis-inflationary then there would be an incentive not to use it as money and rather to hold it as a store of value which means that it would not be a good form of money.
Something like gold is better in this respect because it inflates slowly over time and more closely matches the economy.
Definitely encourages saving, which in the old school model I heard in another thread drives investment and growth. And I think Pat may be onboard with that and possibly the Austrian perspective(?). Which dislikes inflation as a tax on the poor and a driver of malinvestments/the boom-bust cycle I think. As well as possibly being a symptom and enabler of government overspending and fiscal/market overreach. (Most of what I know is either hearsay or the result of me googling stuff about the Keynes v Hayek rap battles, so I'm not the best source.)
Though I guess a Keynesian counter-argument might be circular flow in spending, which deflation discourages because goods depreciate relative to the currency. Circular flow and spending helping those who produce goods to reinvest in production while also creating value by putting goods in the hands of those who most value them. While cycling cash through the economy and driving down unemployment. Also maybe less Keynesian, if inflation incentivized investment and that's part of why it's a tax on the poor... Investments will be disincentivized under deflation, because they are tied to real value that drops relative to the currency over time. Safer investments with lower yields that would otherwise have grown the economy may even become worthless from the perspective of an investor, I think? So GDP and its growth may fall as a result.
Though wages are hard for workers to get raised once hired, and so deflation would help prevent (and in fact reverse) loss of real wage value over a career at one company or employer, and thereby raise the working class standard of living(?), I guess. Though Keynesians would probably argue there is potentially a cost to be paid in unemployment, and supply/production since wages are the cost of labor and if marginal costs ever exceed marginal benefits...
But take all this with a heap of salt. I kinda just learned most of this was even possibly a thing.
Well again I note that no one is able to say how 'cryptomining' produces any item of value or does wny service that generates wealth asides from making profits for electric companies and cpu/gpu makers so I'm assuming it does not, but it's cultists adopt a 'mysterious ways' attitude similar to religious cultists.
I'm concluding that cryptocurrency is an example of 'capitalism as religion '.I. E. People devoted to capitalism are basically lile religious fanatics and adhere to their beliefs despite evidence they are false and have been discredited. Some high tech savvy conman comes up with this scam, dresses it up in ''glorious unregulated capitalism' and 'shut out big gubmint! ' and the libertarians come a runnin'.
Another issue is these could be used to funnel money to terrorists, criminals and states like Iran, NK and russia. I'm sure the libertarians will say letting child sex rings make money is ''freedumb'' but fuck libertarians.
Daztur is simple, no one else. There's not much difference between pretending to be stupid, and not pretending.
Wages are hard to get lowered, not raised. The idea that wages are "sticky" is one of Keynes' arguments against deflation and in favor of continually expanding the money supply.
Gold is deflationary. The amount of gold in human hands is roughly the same as it was a hundred years ago. Mining is expensive, and the growth of the gold supply is marginal, nowhere near the Fed's target rate of 2% inflation, or the projected growth rates even for established economies. Bitcoin is similar, except digital. There's an argument that we need more money to account for more wealth, but it's inherently a silly one. Because if the money is sufficiently divisible, any amount of money works. It doesn't matter if there are 20 million bitcoins, 100 billion trillion, or only 1. Or whether it's used for transactions in the 18th century when there was less wealth, in the early 21st, or for some future K3 civilization. You just move the decimal point.
There have always been attempts by those in power to debase the money supply to their advantage. It's called "debasing" because kings used to take the coins and remint them, except with a higher quantity of base metal. They'd issue more coins using the same amount of gold, and thus creating more coins the kings could keep, at the cost of making everything cost more. But hard, physical money is hard to debase. You can only alloy gold with so much tin before people start to notice. The shift to paper money made it easier. One historical example is the Continental currency, which was printed in such vast quantities during the American Revolution that it was worthless before the war was over. It's even easier today, with modern largely electronic money being created with just a few keystrokes.
The US lived under a gold standard a "deflationary" regime, for most of its history. This meant money was reliable and solid, and made for a good investment. Modern inflationary money has made saving cash impractical, and pushed people into investments in more speculative assets.
I'm not an Austrian. I don't really buy praxeology, for instance. But I'm definitely less of a Keynsian, though I do think he made a few sharp observations. Most of what I'm talking about is classical or neoclassical economics -- which every modern school of economic theory largely agrees with, with the fringe exception of the Marxists (Marx was a classical economist, but predated the insights of the Marginal Revolution).
Quote from: Battlemaster on July 11, 2022, 01:02:40 AM
Well again I note that no one is able to say how 'cryptomining' produces any item of value or does wny service that generates wealth asides from making profits for electric companies and cpu/gpu makers so I'm assuming it does not, but it's cultists adopt a 'mysterious ways' attitude similar to religious cultists.
Another issue is these could be used to funnel money to terrorists, criminals and states like Iran, NK and russia. I'm sure the libertarians will say letting child sex rings make money is ''freedumb'' but fuck libertarians.
And once again I'll say it's a nonsense question that shows your complete ignorance of basic economics.
And wow you're a creepy little shit.
Quote from: Pat on July 11, 2022, 01:07:55 AM
Gold is deflationary. The amount of gold in human hands is roughly the same as it was a hundred years ago. Mining is expensive, and the growth of the gold supply is marginal, nowhere near the Fed's target rate of 2% inflation, or the projected growth rates even for established economies. Bitcoin is similar, except digital. There's an argument that we need more money to account for more wealth, but it's inherently a silly one. Because if the money is sufficiently divisible, any amount of money works. It doesn't matter if there are 20 million bitcoins, 100 billion trillion, or only 1. Or whether it's used for transactions in the 18th century when there was less wealth, in the early 21st, or for some future K3 civilization. You just move the decimal point.
Physical gold supply is increasing by about 1.5% per year which is pretty close to the Feds target rate of 2% inflation.
Quote from: Pat on July 11, 2022, 01:07:55 AM
Daztur is simple, no one else. There's not much difference between pretending to be stupid, and not pretending.
Wages are hard to get lowered, not raised. The idea that wages are "sticky" is one of Keynes' arguments against deflation and in favor of continually expanding the money supply.
Gold is deflationary. The amount of gold in human hands is roughly the same as it was a hundred years ago. Mining is expensive, and the growth of the gold supply is marginal, nowhere near the Fed's target rate of 2% inflation, or the projected growth rates even for established economies. Bitcoin is similar, except digital. There's an argument that we need more money to account for more wealth, but it's inherently a silly one. Because if the money is sufficiently divisible, any amount of money works. It doesn't matter if there are 20 million bitcoins, 100 billion trillion, or only 1. Or whether it's used for transactions in the 18th century when there was less wealth, in the early 21st, or for some future K3 civilization. You just move the decimal point.
There have always been attempts by those in power to debase the money supply to their advantage. It's called "debasing" because kings used to take the coins and remint them, except with a higher quantity of base metal. They'd issue more coins using the same amount of gold, and thus creating more coins the kings could keep, at the cost of making everything cost more. But hard, physical money is hard to debase. You can only alloy gold with so much tin before people start to notice. The shift to paper money made it easier. One historical example is the Continental currency, which was printed in such vast quantities during the American Revolution that it was worthless before the war was over. It's even easier today, with modern largely electronic money being created with just a few keystrokes.
The US lived under a gold standard a "deflationary" regime, for most of its history. This meant money was reliable and solid, and made for a good investment. Modern inflationary money has made saving cash impractical, and pushed people into investments in more speculative assets.
I'm not an Austrian. I don't really buy praxeology, for instance. But I'm definitely less of a Keynsian, though I do think he made a few sharp observations. Most of what I'm talking about is classical or neoclassical economics -- which every modern school of economic theory largely agrees with, with the fringe exception of the Marxists (Marx was a classical economist, but predated the insights of the Marginal Revolution).
I wish I were pretending, but I honestly believed everything I said, even if I also knew enough about my lack of understanding to give warnings in advance that I might be getting it wrong.
I get that workers may not want lower wages, so that makes sense. (I feel like Keynes was kinda sketchy in that he wanted to trick them into accepting lower wages, right?) That said... Why aren't wages sticky the other way too, though, especially if they don't seem to keep up with inflation? Plus shouldn't the risk of unemployment and weak individual bargaining power mean that workers are unable to bargain individually cuz it might lose them stuff and probably won't gain anything? (Union threat weirdness notwithstanding, which may perhaps be the flaw in my perspective.) There's risk in applying to a new job, especially if you're used to your job or have a sentimental attachment and it's possible where you could apply elsewhere that new folks are the first to be fired, so lower wages at a certain job should probably be more valuable to the risk-neutral and risk-averse, I would think. Weird to hear wages are easy to get raised, but also if econometricians or whoever have data backing it, I guess I can maybe believe it. Possibly cuz unions or the like, maybe?
I don't really understand the division argument, save in that as bitcoin is more divisible it should probably be better able to handle precision in pricing and nobody has to worry about going without bitcoin more generally. But I guess if gold is deflationary and the economy did well under the gold standard that would probably prove that deflation doesn't inherently doom an economy.
Debasing sounds like a scam to make currency seem to be worth more than it is and create national/government wealth out of nothing. So I guess maybe there's something to be said for gold based currencies in that sense. I'm guessing the equivalent would be printing money as the government and then telling nobody you did that, to make it seem worth more than it is. Though even if they do tell, sounds like a very real problem if they go out of control, like in the case of hyperinflation, and based on what you said earlier might be an inflationary tax on the poor?
Also, apologies for inadvertently misrepresenting you and your stances. And I now know what praxeology is. Kinda have to agree that humans aren't always rational actors with perfect calculation. Also like that it sounds like you try to take from each school what deserves to be considered.
I don't know much about economic schools beyond, again, limited rap battle soundbites and google searches, but I will look into the categories you have mentioned probably. (What I really need to do is probably to read those 3 textbooks you recommended. But I'm procrastinating at the moment.)
I do appreciate your patience in explaining some of this stuff to us, and me specifically, though from what you've been saying it sounds like it may be a bit simple from your perspective. I do think the average person these days, as well as the average American, while better educated than at some points in history, may be a bit behind even on the core economic theories. That and we/I do admittedly perhaps have a tendency of making up assertions or arguments that may not be 100% supported by the literature or understood. But on the flip side, with discussion and shall we say creative argumentation, at least one gradually learns what one believes and eventually something that is said by others or supported rationally/logically consistent may take root and grow to develop or restructure one's positions. So I do appreciate discussions like these.
(Also, this may be a bit of a weird question, and no need to answer if it's too close to real life personal info, but are you like an economist or financial specialist or something? Or just well informed in that sector?)
Quote from: Battlemaster on July 11, 2022, 01:02:40 AM
Well again I note that no one is able to say how 'cryptomining' produces any item of value or does wny service that generates wealth asides from making profits for electric companies and cpu/gpu makers so I'm assuming it does not, but it's cultists adopt a 'mysterious ways' attitude similar to religious cultists.
I'm concluding that cryptocurrency is an example of 'capitalism as religion '.I. E. People devoted to capitalism are basically lile religious fanatics and adhere to their beliefs despite evidence they are false and have been discredited. Some high tech savvy conman comes up with this scam, dresses it up in ''glorious unregulated capitalism' and 'shut out big gubmint! ' and the libertarians come a runnin'.
Another issue is these could be used to funnel money to terrorists, criminals and states like Iran, NK and russia. I'm sure the libertarians will say letting child sex rings make money is ''freedumb'' but fuck libertarians.
I think the value is in its speculative utility as a medium of exchange, if I'm understanding correctly. Basically, if one believes that it would make a good deflationary and decentralized currency and that's a good thing, then that's a point in Bitcoin's favor and it has value in that sense. And also just people betting it will rise in speculative value driving its price up by buying so they can sell high and capitalize on its volatility. So there might be some speculative bubble stuff too.
Faith is a part of any currency tho. Paper money has value at least in part cuz people think it has value. I also DK about whether capitalism specifically as an ideology is what crypto buyers are purchasing, I kinda feel like most buy either because they think the currency will work at some point or cuz they personally want to make money playing it like a stock.
Regarding untraceable money, I don't have a lot of info on that. In theory every bit of money is listed on the blockchain, so transfers are traceable if you know the wallet codes, (which I think it was said earlier is maybe doable for a government?) though perhaps also not preventable(?). Darknet black markets do sometimes use crypto for criminal exchanges though, I hear. Though most crime is probably done with cash more generally.
Unrelated, I don't hate libertarians, and think you may be misportraying them a bit.
Quote from: Shasarak on July 11, 2022, 01:31:54 AM
Quote from: Pat on July 11, 2022, 01:07:55 AM
Gold is deflationary. The amount of gold in human hands is roughly the same as it was a hundred years ago. Mining is expensive, and the growth of the gold supply is marginal, nowhere near the Fed's target rate of 2% inflation, or the projected growth rates even for established economies. Bitcoin is similar, except digital. There's an argument that we need more money to account for more wealth, but it's inherently a silly one. Because if the money is sufficiently divisible, any amount of money works. It doesn't matter if there are 20 million bitcoins, 100 billion trillion, or only 1. Or whether it's used for transactions in the 18th century when there was less wealth, in the early 21st, or for some future K3 civilization. You just move the decimal point.
Physical gold supply is increasing by about 1.5% per year which is pretty close to the Feds target rate of 2% inflation.
Looks like you're correct. There's an interesting chart on world gold production, here:
https://www.bullionstar.com/blogs/ronan-manly/annual-mine-supply-gold-matter/
You're making a Monetarist argument, BTW.
Keynes is right that workers have to accept lower wages when there's a major contraction. If the economy suddenly shrinks, it means things have been overpriced, and there simply isn't enough money to go around. Though hiding the lower wages via inflation instead of being upfront about it is definitely a paternalistic approach, and that's one of the major differences between the schools. Wages do adjust downward without inflation -- Detroit autoworkers accepted lower wages and benefits when their industry was in trouble, for instance -- it's just painful. But do you want some pain in the short run, or more pain the long run? A lot of Kenysianism -- and modern central bank monetary policy -- seems to be based on kicking the can down the road as long as possible, rather than accepting the necessary and painful corrections. But in the long run, the Austrians argue, that leads to bigger crashes.
The Keynsians are also correct that people can't just switch jobs every time the economy changes. Very few people "learn to code" in middle age. Most just continue to struggle for the few remaining jobs on their original profession, leading to the rust belt. Major economic shifts happen between generations, when kids learn a different set of skills than their parents. Andrew Yang is one of the few major politicians I've seen who tried to address that. I don't think his solutions were good, but at least he faced the problems, and his stuff about how qualifying for disability had effectively become a UBI for permanently displaced workers was interesting. (See The War on Normal People.)
The divisibility argument just means prices adjust to the quantity of money. If you double the quantity of money, then prices will eventually double (with some messiness). Conversely, it doesn't matter how many bitcoins there are. Prices will be set based on the quantity of money available. This can be an issue with commodity money, where transportability matters -- one of the reasons why gold won out over bushels of wheat is because you didn't have to lug hundreds or thousands of pounds of gold down to the store to buy a fancy suit. And this could theoretically be a problem with bitcoin, since the smallest unit is the satoshi. But since there over 2 quadrillion satoshis, it's good for a while, and there's probably a Y2Kesque workaround anyway.
Also, no school of thought treats humans as completely rational actors. Homo economicus is an abstraction. A very useful abstraction at times, but one with limits. And everyone knows it, and has always known it. While it's useful to occasionally point out that certain assumptions may not hold out in every case, anyone who uses it to dismiss an entire school of thought is strawmanning them. David Friedman (Milton's son) made a good case for why these kinds of abstractions are useful in one of the early chapters of Hidden Order.
My issues with praxeology are more that it's based on pure theorizing and a rejection of the empirical. Which is valid to some degree -- the replication crisis hit economics as hard as all the other social sciences, and econometrics seems to be mostly p-hacking. Worst of all, humans are smart, and anticipate and predict. They actively react not just to what happens, but to what they think might happen, and what you as the central planner are trying to make happen. And even if you're the most brilliant person on the planet, you're vastly dumber than the distributed network formed by all those humans acting and reacting.
One good example is studies vs. theory of the minimum wage: The theory is absolutely, 100% clear and nobody has ever really disputed it -- wages are price fixing, and price fixing causes shortages (unemployment). Yet empirical studies don't show a rise in unemployment after an increase in minimum wages. Why? Probably because people adjust. There's vast pressure on employers to not fire workers, not just out of personal concern, but also from the government and public opinion. So they find alternatives to reduce costs or increase productivity without firing anyone, like reducing the number of breaks, or the number of perks like flextime or free employee meals, or by investing in additional equipment or automation that makes each worker more productive. And while you can measure any one of those things in a study fairly easily, it's such a complex web that drawing conclusions about how they interact is effectively impossible.
But I still think we should ground theories with empirical evidence. We just need to be better at a defining what don't know.
No, I'm not an economist. And yes, economic education is terrible.
Conversations like this, right here, are a big part of why I come to this forum. Though also I should probably participate a bit more in the RPG sections too. :P
Also, I think I get most of what you're saying, which is cool. (Though it's admittedly not so great to hear that econometrics was infiltrated by p-hacking and is having a replication crisis.)
In other news, we've maybe got some big upcoming indicators from the Fed alongside data on the markets coming up this month. Could have some effects on crypto, potentially. (At least according to this article: https://cointelegraph.com/news/crypto-community-eyeing-three-macro-events-to-tip-crypto-scales-in-july/amp)
Quote from: Battlemaster on July 11, 2022, 01:02:40 AM
Well again I note that no one is able to say how 'cryptomining' produces any item of value or does wny service that generates wealth asides from making profits for electric companies and cpu/gpu makers so I'm assuming it does not, but it's cultists adopt a 'mysterious ways' attitude similar to religious cultists.
I'm concluding that cryptocurrency is an example of 'capitalism as religion '.I. E. People devoted to capitalism are basically lile religious fanatics and adhere to their beliefs despite evidence they are false and have been discredited. Some high tech savvy conman comes up with this scam, dresses it up in ''glorious unregulated capitalism' and 'shut out big gubmint! ' and the libertarians come a runnin'.
Another issue is these could be used to funnel money to terrorists, criminals and states like Iran, NK and russia. I'm sure the libertarians will say letting child sex rings make money is ''freedumb'' but fuck libertarians.
There's nothing mysterious about what proof-of-work mining provides. It couples the production of bitcoin to real resources to ensure network security. That sets up an incentive where anyone running the protocol will make more by mining honestly than trying to subvert the network. Bitcoin (and money in general) is an incredibly deep rabbit hole. It's implications for society are pretty immense. This book is a good way to dip your toes in the water: https://saifedean.com/thebitcoinstandard/
Regarding criminals using it, USD is used in more criminal activity than bitcoin is. Criminals also use cars and guns and cell phones. Does that make those things inherently nefarious?
Quote from: KindaMeh on July 11, 2022, 12:09:59 AM
Quote from: Shasarak on July 10, 2022, 11:34:22 PM
It seems to this simple mind that if something like Bitcoin was dis-inflationary then there would be an incentive not to use it as money and rather to hold it as a store of value which means that it would not be a good form of money.
Something like gold is better in this respect because it inflates slowly over time and more closely matches the economy.
Definitely encourages saving, which in the old school model I heard in another thread drives investment and growth. And I think Pat may be onboard with that and possibly the Austrian perspective(?). Which dislikes inflation as a tax on the poor and a driver of malinvestments/the boom-bust cycle I think. As well as possibly being a symptom and enabler of government overspending and fiscal/market overreach. (Most of what I know is either hearsay or the result of me googling stuff about the Keynes v Hayek rap battles, so I'm not the best source.)
Though I guess a Keynesian counter-argument might be circular flow in spending, which deflation discourages because goods depreciate relative to the currency. Circular flow and spending helping those who produce goods to reinvest in production while also creating value by putting goods in the hands of those who most value them. While cycling cash through the economy and driving down unemployment. Also maybe less Keynesian, if inflation incentivized investment and that's part of why it's a tax on the poor... Investments will be disincentivized under deflation, because they are tied to real value that drops relative to the currency over time. Safer investments with lower yields that would otherwise have grown the economy may even become worthless from the perspective of an investor, I think? So GDP and its growth may fall as a result.
Though wages are hard for workers to get raised once hired, and so deflation would help prevent (and in fact reverse) loss of real wage value over a career at one company or employer, and thereby raise the working class standard of living(?), I guess. Though Keynesians would probably argue there is potentially a cost to be paid in unemployment, and supply/production since wages are the cost of labor and if marginal costs ever exceed marginal benefits...
But take all this with a heap of salt. I kinda just learned most of this was even possibly a thing.
However bad inflation is, deflation is a nightmare. If the currency deflates then all debts become worth more in real terms, I don't think I have to tell you why that is a bad things. Farmers got fucked over horribly during periods of 19th century deflation which lead to a huge political backlash. In addition just "saving" in the abstract isn't good for investment and growth. If you just sock some money under your mattress or in a cryptowallet that's not any kind of investment in anything concrete (i.e. more industrial equipment or what have you) that helps the economy grow. Also with deflation people tend to put off purchases which can hurt companies a lot as they have to sell shit to survive (the other extreme isn't too good either as "aaaaaargh! I've gotta burn through my cash now or it'll be worth half as much next week!" has obvious downsides as well).
In general what'd be wiser is to have a system with nominal GDP targeting, where you'd do something like try to consistently hit 5% real growth + inflation a year and be really transparent about how you're going to go about that. Having monetary policy be predictable and stable is good for the economy, swings of inflation and deflation cause uncertainty which is bad.
Quote from: Battlemaster on July 08, 2022, 12:43:17 PM
So it looks like cryptocurrency has collapsed.
How unsurprising.
When the gas station attendant tried selling me bitcoin I knew it wasn't something worth looking into. Surprised these "digital currencies" still around.