The New Economy


Theodore

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It has been a while since I made a post but I would like to pick up on the bitcoin theme which I already posted on.

http://www.weusecoins.com/

Bitcoins (BTC) are making a rapid growth as well as changing the way people do business. Already there are sites out there which allow people to gamble online, buy and sell food, clothing, precious metals, and a number of other things. It is my belief that as the US dollar continues to fall more and more people will turn to the BTC as an alternative currency to collapsing global currencies. Whats more is the total anonymity which the BTC provides for its users. This is going to make it much harder for governments to track people for taxes, and simply outlawing it wont do much good as people are able to transfer their BTC into VISA and other card based services rather easily.

Add to that the fact that there exists a BTC stock exchange and other investment institutions and the BTC looks more and more attractive to people. I think though that the last straw will be the coming hyper-inflation which i see occuring within the next five to ten years.

As for myself I am heavily invested in BTC as well as silver and gold. What I see as the major advantage to the BTC however is the lack of control. The way it is designed makes it impossible for it to be anything but a free market currency.

welcome to the end of governments.

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http://www.pyramining.com/account/browse?id=py7g92nz for those that are interested this is one of the best parts of the BTC economy. The BTC has a limit on how many BTC will ever exist. Like gold or silver the BTC must be mined. The total number of BTC and the number of users determines their value, but what is really important is that BTC are so divisible.

There is a criticism that because they are not backed by anything they have no real value. This however does not understand the real definition of money. Gold and silver are trusted long existing money, but gold and sliver have no inherit value. Their value is only from the fact that people trust it.

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I don't understand. Why is this better than using gold or silver? What makes gold and silver so trustworthy is that they exist physically and scarcely. They are backed by reality; so yeah, there is a difference.

Bitcoins would just replace paper money, they wouldn't add any extra security except for the claim that it's secure and there are limitations... The government also claims the Federal Reserve does a good job.

The mining process is ridiculous. It's just wasted electricity and hardware to generate digital coins... If there was a purpose to the mining it would make more sense, like maintaining the network and security.

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The value of gold and silver as money can be objectified as such. What cannot be objectified is how much they are valued that way. Value means of value to whom. This objectification comes from the existence of people and people's need for money, not from how much they need it. Therefore the perceived amount of value goes up and down. A member of a lost Amazonian tribe may value gold and silver not in the least, as they only hunt and gather and direct trade. That too is an objectification of a value--a common value not being a value to some. It's true. Objectification is all about truth. Underneath the Austrian theory of economic subjective value, holding the whole thing up--the foundation, is this truth--this objectification. Truth cannot be subjectified.

--Brant

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  • 2 weeks later...

Bitcoins have value for several reasons not the least of which is that gold cannot be sent instantly through your computer. Another aspect of its value is the ability to do business anonymously. further silver and gold have NO value just as bitcoins or salt or FRN's etc have NO value. A currencies only value is that you have it and someone else desires it. Currencies are a commdity which are bartered. In fact you might say that the only real definition of a currency is: The most bartered item within a community. There is also more than just a claim. The source code for bitcoins is open source which means that you can go and check it out yourself, if you dont know about it you can learn about it and then check it out. Further there will only ever be a set number of bitcoins in the world. Once that limit is reached that is all there will ever be.

My favorit thing about bitcoins however is that my bank is my computer. I am taking my money out of the hands of the banks and the federal government and denying them its use.

Finally. Lets not pretend that the FRN is not on the verge of collapse. Yes I have gold, I have silver, but I believe in diversifying. Bitcoins are much easier to use than silver or gold.

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Bitcoins are one of several historical developments in the computer era. Digital cash first appeared in the late 1980s, I think, as the home computer became common.

The historical development of gold and silver as money is not what Karl Marx and Carl Menger claimed. The historical development of trade from barter is also erroneous. When Columbus landed at Hispanola, the natives wanted the brass fittings from their jacket. Gold, they had, brass (copper, actually), they knew by its taste and valued highly because it was better for tools but it was scarce to them.

Agreed that you cannot send gold through the computer (yet). So digital currency serves a purpose.

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It has been a while since I made a post but I would like to pick up on the bitcoin theme which I already posted on.

http://www.weusecoins.com/

Bitcoins (BTC) are making a rapid growth as well as changing the way people do business. Already there are sites out there which allow people to gamble online, buy and sell food, clothing, precious metals, and a number of other things. It is my belief that as the US dollar continues to fall more and more people will turn to the BTC as an alternative currency to collapsing global currencies. Whats more is the total anonymity which the BTC provides for its users. This is going to make it much harder for governments to track people for taxes, and simply outlawing it wont do much good as people are able to transfer their BTC into VISA and other card based services rather easily.

Add to that the fact that there exists a BTC stock exchange and other investment institutions and the BTC looks more and more attractive to people. I think though that the last straw will be the coming hyper-inflation which i see occuring within the next five to ten years.

As for myself I am heavily invested in BTC as well as silver and gold. What I see as the major advantage to the BTC however is the lack of control. The way it is designed makes it impossible for it to be anything but a free market currency.

welcome to the end of governments.

What are bitcoins backed by. Are they backed by anything more solid than government issued fiat money?

Ba'al Chatzaf

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  • 1 year later...

Ba'al Chatzaf,

Gold is intrinsically a ledger. The person who holds some quantity of physical gold in their hand (or safe) owns the gold. Gold is not "backed" by anything.

The original bitcoin ledger is also a ledger. The person who has the password for his deterministic wallet owns bitcoins that have been signed over to him. Bitcoins are not "backed" by anything.

So bitcoins do not have any use other than as currency. Thier value only comes from that currencies enable trade, and trade increases personal goal attainment, and bitcoins potential to be more efficient in trade than existing currencies.

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The person who holds some quantity of physical gold in their hand (or safe) owns the gold. Gold is not "backed" by anything.

I'm sorry...

I hate to be a pest since you folks are so much smarter about all this here gold stuff...

Just one simple question arises in my mind...

and that is,

how do all you folks intend on defending what you own/aquire/etc.

A...
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Selene, How do all you folks chose to post on this thread rather than a different one?

First, I do not speak for all the "folks" who decide to post, on this, or, any other thread.

Second, there is just something special about a man in a tux...so that may be why I made the post...

A...

Post Script:

To post, or not to post...

that is the question...

whether tis nobler in the mind...

to suffer the ineptly clever...

or...

to die, to sleep, to laugh hysterically...

and just enjoy life...

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Hi Dean,

I think what Adam meant was; how do you keep the gold you've accumulated? People can just take it away from you, probably killing you when they take it, or the government can simply outlaw its ownership and confiscate it. My understanding of gold buying these days is all of the transactions are tracked. The government will have records of who owns how much gold. If we have runaway inflation the govt can just declare an outrageous capital gains tax and suck the value out of owning it. Back to square one. Same with bitcoins, they can just outlaw it, declare it a tax dodge and deal with it in their federal tax courts where you have no constitutional rights at all. No right to privacy, no fifth amendment rights, no due process, nothing. As far as encryption, they just get a judge to order the decryption of whatever records you have, if you refuse, contempt of court, guilty, indefinite jail term. Maybe the answer is just to learn to operate on the black market, when things go south you're already off the radar.

Cheers,

Mike E.

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At this point let me assert the source of value of a currency. The source of value of currency is: 1. Specialization increases an individual's productive efficiency, but prevents the individual from independently providing for all of his own needs/desires. Trade allows for individuals to benefit from the productivity benefits of specialization and yet still attain resources and services that one does not directly make or do. The gains of specialization and trade is the source of currency's value to individual market participants. Various forms of currency have different properties that increase trade efficiency in different ways for trade participants. The more efficient a currency is in trade, the more valuable it is.

Given that Bitcoin technology is sound (no critical problems are found with this new currency technology)... I believe that Bitcoin is more efficient technology than other currencies for most trades. The main problem it has right now is market acceptance and price discovery... which is a slow process.

=======

On the subject of security... yes so security is extremely important for a currency to be efficiently used as a facilitator for trade. If your currency can easily be stolen from you, then net net looking at your overall net trade efficiency, getting stolen from reduces your benefits from trade.

Gold can be physically stolen and there are various ways to protect it such as locking it in a safe or hiding it. Individuals doing so in an individual distributed fashion makes it much harder for the Feds (or whatever powerful gang) to take it. But if you store it in a bank, then a powerful gang or government can easily take it from you, or the bank could steal it from you too... which is a big problem with using gold as a day to day currency.

Bitcoin now has this new neat "Deterministic Wallet" feature being developed where basically you can memorize passwords... and the passwords themselves are the wallet. So then you don't even need files on a computer to maintain access to spending bitcoins that have been signed over to you. Hence due to this property its significantly easier for people to protect their bitcoins from unwanted taking than gold... and also significantly less profitable for a gang to attack holders of bitcoins: now instead of killing and stealing they can only kill.

And then again from a security perspective... gold that you are using as currency (actively exchanging in the market) pretty much has to be deposited at an international bank in order to complete international transactions. This is huge counter party risk and risk of theft by government... in fact the risk is so high that inevitably in my mind central governments have become intertwined with older currency technology (gold, gold backed banks, fiat).

With Bitcoin, you don't need a bank to help you exchange ownership of the currency. You just hop on the internet and sign your coins over to whoever you want. No counter party risk!

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Mike,

There are places in the world where government is not as well respected by the citizens, where the citizens trade in whatever they want, despite the government's proclimations. There Bitcoin will flourish, and they would be the new centers of production and innovation rather than the old western governments who's power was based on monopoly of money.

Deans password policy for financial information:

=== Generation ===

Passwords generated using upper and lower case letters, numbers, and symbols selected using a crytographic quality non-predictable character generator. Here's the tool I use to generate such passwords (I'm the author): SecretGenerator. Currently I recommend 16 characters.

So then you get a password like "y.qX>:Rhg>?Km*w~". Write the password down until you are confident you won't forget it.

=== Memorizing ===

1. Break the password into smaller pieces:

"y.qX >:Rh g>?K m*w~"

2. Make a word for each piece that somehow helps you remember some of the characters in the piece.

"Yuck rah gunk meow"

3. Repeatedly type the pieces of the password over and over again. I recommend using Notepad2. Say the word in #2 while you type the password pieces.

Type: "y.qX >:Rh g>?K m*w~"

Say: "Yuck rah gunk meow"

4. Now open a new notepad2 window, hide the password, and challenge yourself to see how much of the password you remember.

Answer: "yk R g?k m*w-"

Ok, so you see I didn't remember all of the characters, and some of them were wrong alltogether, some of the character capitalization was wrong. This is ok, look on the bright side, you remembered some of it... you are making progress. Also, even if you don't remember it perfectly, if you remember some of it then you can try to guess the rest... especially as you remember more and more of it.

5. Get a good nights rest.

6. Repeat steps 3 through 5. Within a few days you will find that in step 4 you can remember the password flawlessly. Make sure to do this once in a while to check your memory. Once you are confident you won't forget the password, you can destroy the written copy of the password. Or put it in a remote secure location.

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Mike,

There are places in the world where government is not as well respected by the citizens, where the citizens trade in whatever they want, despite the government's proclimations. There Bitcoin will flourish, and they would be the new centers of production and innovation rather than the old western governments who's power was based on monopoly of money.

Make a dated prediction when this will happen. I will give you fifty year slop on your prediction.

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BaalChatzaf,

Its not going to be an instantaneous transition, its slow... familiar with Austrian Economics? One can make predictions about directions things will go (qualitative) but no dates or numbers (quanitative). Also... I'm really bad at predicting these things. I thought back in 2005 that there would soon be a housing crash AND a collapse of the dollar, but it took all the way until 2008 for the housing crash to happen, and the bond market bubble still has yet to burst now in 2014.

Another posibility is that despite the laws, people will still use bitcoin in the black/gray market, and it will be so popular that no matter what the law is, people will still use it and the laws will not be enforceable. And people who use previous fiat money technology will demand better service that competes with Bitcoin. So then even with the laws on the books to try to prevent use of Bitcoin, Bitcoin's competition will cause improvements in the fiat money system which will result in greater productivity in the US etc.

For example look at "file sharing" technology like BitTorrent. I'd suspect that BitTorrent pushed the movie industry into allowing Netflix to exist. Using BitTorrent for "illigal file sharing" via sites like ThePirateBay is still very popular despite laws. (I'm not saying that copying copyrighted works is objectively the moral thing to do or that using Bitcoin is objectively immoral, that is where this simile breaks down.)

But I think Bitcoin is simply too good at improving trade efficiency that even the corrupt manipulators in the government won't be able to trick the general population into thinking that Bitcoin is bad. If the government tries this trick, I think it will backfire on them.

Cheers,

Dean

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http://www.pyramining.com/account/browse?id=py7g92nz for those that are interested this is one of the best parts of the BTC economy. The BTC has a limit on how many BTC will ever exist. Like gold or silver the BTC must be mined. The total number of BTC and the number of users determines their value, but what is really important is that BTC are so divisible.

There is a criticism that because they are not backed by anything they have no real value. This however does not understand the real definition of money. Gold and silver are trusted long existing money, but gold and sliver have no inherit value.

They actually do. The value of gold and silver is the literal cost of physical mining and refining as well as their useful value in electronics and other industries.

Their value is only from the fact that people trust it.

That's the rest of the equation. A totally virtual currency like bitcoin is fine as long as the internet is working and sattelites are flying, and wifi is radiating, and cell phones are calling, and GPS is directing.

But while everyone is busy Roulette betting on red and black, one day the ball will land on green double zero, and the croupier will rake all of the virtual chips off of the table. One EMF event of a well positioned coronal mass ejection from the Sun, or one small nuclear air burst over the country and it's game over for bitcoin. Everyone will be slackjawed staring at blank screens on their smartphones now rendered dumb.

Greg

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Greg,

Thank you for your input.

Theodore: "Gold and silver are trusted long existing money, but gold and sliver have no inherit value."

Haha I was like what the heck, I didn't type that did I? I must have been really sleep deprived... look it says inherit instead of inherent... that couldn't have been me! And then I looked up and sure enough it wasn't me. :smile: Theodore! When people say "Gold is intrinsically valuable" my only criticism is a common problem that people forget the context: When you say something is valuable... that is a moral judgement, a conclusion that comes from a goal seeker, you are saying that X helps a goal seeker attain his goals. So I'd say instead "Gold is intrinsically valuable [to humans]".

"They actually do. The value of gold and silver is the literal cost of physical mining and refining as well as their useful value in electronics and other industries."

Part invalid: "the literal cost of physical mining and refining". See Austrian Economics. Any previous costs or work that have been put into a resource have no determination on their market price. This particular correlation is not the causation. The correlation exists only because of profitability... generally things are only made and exist in the market if their production costs are lower or near equal to the market price, because putting resources towards making something unprofitable results in running out of resources and the end of that production process. For example if I spent 5 hours scribbling on a piece of paper then the paper would not be 5x more valuable than if I only spent 1 hour scribbling. Mises would say that I just "exploded" your assertion. :tongue:

But yea... gold and silver are scarce resources, and their difficulty in mining is part of what makes them scarce. And scarcity does have implications on market value a la marginal utility: the less of a resource you have, the greater marginal utility there is for each unit of the resource. Furthermore, their use as industrial materials and jewlrey give them value in a non-currency aspect... and I completely agree that Bitcoin lacks this aspect.

People make the same mistake thinking that mining for Bitcoins is what makes Bitcoins valuable. But in real its not that the difficulty of mining for them is what makes them valuable. Instead it is that the market value of bitcoin is what makes mining for bitcoins worthwile despite the great difficulty of mining.

===

As for the EMF/CME risk... yea, I agree that is a risk for Bitcoin. But in such a case, its not just the bitcoin resource that will significantly change in value. After such an event, there would be a vast change in valuations of various resources. Water, stored food, guns & ammo, local communication equipment, and given that the global economy is not quickly restored, gold and silver would once again become the primary form of currency in day to day trading. Even without considering such an event, I still recommend using gold & silver for long term savings and as a long term form of currency. What I propose is that we use both gold and bitcoin... gold for long term and local trades where practical, and bitcoin for shorter term/long distance/international trades.

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Greg,

Thank you for your input.

Theodore: "Gold and silver are trusted long existing money, but gold and sliver have no inherit value."

Haha I was like what the heck, I didn't type that did I? I must have been really sleep deprived... look it says inherit instead of inherent... that couldn't have been me! And then I looked up and sure enough it wasn't me. :smile: Theodore! When people say "Gold is intrinsically valuable" my only criticism is a common problem that people forget the context: When you say something is valuable... that is a moral judgement, a conclusion that comes from a goal seeker, you are saying that X helps a goal seeker attain his goals. So I'd say instead "Gold is intrinsically valuable [to humans]".

"They actually do. The value of gold and silver is the literal cost of physical mining and refining as well as their useful value in electronics and other industries."

Part invalid: "the literal cost of physical mining and refining". See Austrian Economics. Any previous costs or work that have been put into a resource have no determination on their market price.

Lots of luck trying to sell that to the mining companies.

This particular correlation is not the causation. The correlation exists only because of profitability...

No company would mine if there wasn't a profit.

For example if I spent 5 hours scribbling on a piece of paper then the paper would not be 5x more valuable than if I only spent 1 hour scribbling.

...but you'd qualify as a government employee. :wink:

But yea... gold and silver are scarce resources, and their difficulty in mining is part of what makes them scarce. And scarcity does have implications on market value a la marginal utility: the less of a resource you have, the greater marginal utility there is for each unit of the resource. Furthermore, their use as industrial materials and jewlrey give them value in a non-currency aspect... and I completely agree that Bitcoin lacks this aspect.

Well, there you go. That was my point.

As for the EMF/CME risk... yea, I agree that is a risk for Bitcoin.

In that regard, life itself is an inherent risk. So I'm not against your freely choosing to gamble on virtuality, because it has absolutely no effect on my gambling on outright owning debt free real things with real intrinsic value like land, homes, vehicles, tools, food, clothing and the like. Because I'm a literal being. If I want a warm house, I need to cut wood.

But in such a case, its not just the bitcoin resource that will significantly change in value. After such an event, there would be a vast change in valuations of various resources. Water, stored food, guns & ammo, local communication equipment, and given that the global economy is not quickly restored, gold and silver would once again become the primary form of currency in day to day trading. Even without considering such an event, I still recommend using gold & silver for long term savings and as a long term form of currency. What I propose is that we use both gold and bitcoin... gold for long term and local trades where practical, and bitcoin for shorter term/long distance/international trades.

Go for it.

Bitcoin is like a Ponzi religion. You need to believe in it, and its value is dependent upon your convincing others to share your faith. So it's necessary to proselytize and to constantly evangelically convert others into your faith in the virtual. Pyramids need to constantly grow by converting new people to form their base or they will collapse, but then they'll eventually collapse anyways with the inevitable green double zero event. This does not mean that the Federal Reserve Note is exempt from that fate either. It's always good to know exactly the nature of where you're bets are placed. On virtuality, or on reality.

While in contrast, there is no need for me to try to convince anyone else of the real value of owning a home, or of growing your own food on your own land because its value to me is not dependent on what others believe. To borrow a term used by Nassim Taleb...

...it is Antifragile. :smile:

Greg

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BaalChatzaf: I think we all agree on that except for Theodore.

Greg,

Bitcoin is not like a Ponzi scheme. Or rather, on only way they are similar is in that more people buying into it causes its value to increase.

Bitcoin has real value to humans in its ability to increase trade efficiency, particularly in a global economy for quick trades. Verses gold doesn't work well in a global economy for quick trades due to transportation time and costs. Those costs make Bitcoin more efficient for that kind of trade. You might argue for gold backed banking... but then I'll point out costs of counter party risk and theft by gangs & government that have made gold backed banking impossible. You may point out that currently Bitcoin's price is volatile, which reduces its trade efficiency. I'd agree that its price volatility is a problem in the short term, but I expect due to its technological features, that over time after price discovery, it will become more stable and efficient in this sense.

Furthermore, when someone sends you a Bitcoin, nobody can spend it but you. There is no counter party risk. This is completely different than a ponzi scheme, where counter party risk is the exact thing that is exploited in order to steal wealth from people who buy into it.

So Greg, let me ask you a question... Do you think Bitcoin is good? Given that Bitcoin is a potential way for us to free ourselves from monopoly money enslavement (USD monopoly enforcement + money printing)... don't you think you'd benefit by trying to use them a little bit instead of USD? The fewer USD you have, the less the Federal Reserve & FDIC banks can steal from you. There are many ways you can spend Bitcoins now, including Amazon, Target, Home Depot, and others through Gyft.com and eGifter.com, and directly at overstock.com.

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Greg,

Bitcoin is not like a Ponzi scheme. Or rather, on only way they are similar is in that more people buying into it causes its value to increase.

That explains the messianic religious fervor of those who have already bet on bitcoins to try to convince others to also bet on it so that their prior bets will increase in virtual value. Then after the others have bet, they will in turn need to convince others to bet so that their bets will also go up in value.

That's the functional definition of a Ponzi scam.

So Greg, let me ask you a question... Do you think Bitcoin is good?

That's a question you need to answer for yourself. For me, bitcoin is useless because I don't need to create wealth by trying to convince others to join a pyramid. Instead, I create wealth by actually working. And I like doing it this way because it fits my ethics.

Given that Bitcoin is a potential way for us to free ourselves from monopoly money enslavement (USD monopoly enforcement + money printing)... don't you think you'd benefit by trying to use them a little bit instead of USD?

Thanks, I'll pass.

"I make money the old fashioned way... I EARN it." :smile:

--John Hausmann

The fewer USD you have, the less the Federal Reserve & FDIC banks can steal from you.

They already can't steal from me right now because I don't use dollars as a store of wealth. :laugh:

Greg

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Greg,

You are only looking at the price discovery phase where Bitcoin's value is going up. There is a component of truth to what you are saying, some people who hold bitcoin do recommend that others buy it merely for the purpose of being able to sell their holdings at a higher value. Never the less, I would not say that this is the primary reason why many Bitcoin users buy bitcoins. After the price discovery phase, Bitcoin's value will become more stable, a much slower slope, whether up or down.

But whatever. It seems that you do not acknowledge the value of having a decentralized digital currency. So it doesn't matter what I say to you for your own personal investment choice. In fact, for many who do not understand it, its probably not a wise decision to make a large purchase of bitcoins. You do not accept that it is good, but you do accept that it should be permitted to exist in a free market economy correct?

Cheers,

Dean

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