The New Economy

[Mikee]

One mismanaged exchange does not destroy bitcoin or the idea of digital currency. I'm not as optimistic in the near term as Dean but not nearly as pessimistic as Greg for the future of bitcoin or something like it. I think it is inevitable, in fact. I found this news exciting. A combination of bitcoin and the ability to communicate with any human on the planet unencumbered by government control... Particularly if the communication could be unbreakably encrypted. Governments would have a very hard time regulating a huge part of the new economy. I don't think digital currencies are a pyramid scheme, they require very careful engineering. The early failures and crashes are part of the process of evolution. In engineering you only learn from your mistakes.

[Brant Gaede]

One mismanaged exchange does not destroy bitcoin or the idea of digital currency. I'm not as optimistic in the near term as Dean but not nearly as pessimistic as Greg for the future of bitcoin or something like it. I think it is inevitable, in fact. I found this news exciting. A combination of bitcoin and the ability to communicate with any human on the planet unencumbered by government control... Particularly if the communication could be unbreakably encrypted. Governments would have a very hard time regulating a huge part of the new economy. I don't think digital currencies are a pyramid scheme, they require very careful engineering. The early failures and crashes are part of the process of evolution. In engineering you only learn from your mistakes.

The only way to compete with national fiat currencies is with commodities. What's going on with Bitcoin is accelerated loss of confidence caused by state machinations and nothing except scarcity. When confidence goes the currency will follow. In the meantime Bitcoin-type currencies can be destroyed virtually at will by governments and central banking. These even destroyed all the monetization, though not the value, of gold. (All currencies, btw, are already mostly digitalized but do have paper-in-your-hand back up if you want to stuff your mattress with it.)

--Brant

and fools rushed in . . .

[Mikee]

Near term, stay out. Long term, inevitable. Wait and see. By the way, Merlin Jetton wrote a paper years ago suggesting a replacement for fiat money and gold. It was a combination of fixed ratio of commodities, oil, metals including gold, and others. I'll try to find the paper. Very interesting. I think Merlin's about the smartest guy here by the way. If he has weighed in on digital currencies I haven't read it yet. I would go with his opinion if he cares to give it.

[BaalChatzaf]

Bitcoin is a computerized Tulip Bulb.

Wait for the crash.

[moralist]

One mismanaged exchange does not destroy bitcoin or the idea of digital currency. I'm not as optimistic in the near term as Dean but not nearly as pessimistic as Greg for the future of bitcoin or something like it. I think it is inevitable, in fact. I found this news exciting. A combination of bitcoin and the ability to communicate with any human on the planet unencumbered by government control... Particularly if the communication could be unbreakably encrypted. Governments would have a very hard time regulating a huge part of the new economy. I don't think digital currencies are a pyramid scheme, they require very careful engineering. The early failures and crashes are part of the process of evolution. In engineering you only learn from your mistakes.

Hey Mike,

I'm so enjoying the Nassim Taleb books. Black Swan is pure brain candy!

The missing $365,000,000 in bitcoins only demonstrates that nothing is swindle proof. This guy got taken for over $300,000 only because he tried to get something for nothing. Somewhere there is another guy who got what he lost. It's a closed system where no wealth is produced... only transferred.

As a transient virtual means of exchange, I think that bitcoin is a good idea. But as an investment, it's a suckertrap. Any currency must have a reasonably stable value to be useful for exchange. Every decline after a speculative fantasy is the inevitable return to objective reality. So the bitcoin system might improve after the gambling subsides.

There are two ways to make money. By useful productive work that creates wealth, or by zero sum gambling where wealth is taken away from one person and given to another.

Greg

[deanwins]

Mtgox appears to be defaulting. It was the biggest exchange a month ago, many other bitcoin exchanges exceeded it in volume. The price at exchanges that are still solvent is currently about $570 per bitcoin.

[Jules Troy]

Near term, stay out. Long term, inevitable. Wait and see. By the way, Merlin Jetton wrote a paper years ago suggesting a replacement for fiat money and gold. It was a combination of fixed ratio of commodities, oil, metals including gold, and others. I'll try to find the paper. Very interesting. I think Merlin's about the smartest guy here by the way. If he has weighed in on digital currencies I haven't read it yet. I would go with his opinion if he cares to give it.

[Jules Troy]

You are right, Merlin is a brilliant man.

[moralist]

I also like the idea of diversified commodities based currency because would be based upon real things which are mined, pumped, processed, refined, and produced.

Greg

[BaalChatzaf]

I also like the idea of diversified commodities based currency because would be based upon real things which are mined, pumped, processed, refined, and produced.

Greg

Real things that have to be labored over to obtain -from nature- as opposed to something that is really a computer game.

Gold is valuable not only become of its virtues of durability, divisibility and beauty, but because it has to be dug out of the earth at great effort. Gold is frozen labor.

Ba'al Chatzaf

[moralist]

I also like the idea of diversified commodities based currency because would be based upon real things which are mined, pumped, processed, refined, and produced.

Greg

Real things that have to be labored over to obtain -from nature- as opposed to something that is really a computer game.

Gold is valuable not only become of its virtues of durability, divisibility and beauty, but because it has to be dug out of the earth at great effort. Gold is frozen labor.

Ba'al Chatzaf

"Gold is frozen labor."

That's a beautiful truth, Bob.

There's moral character in labor

and therein lies the beauty.

The gox bitcoin swindle reminded me of Francisco's money speech...

"The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money."

Greg

[Mikee]

Thoughtful article about bitcoin technology.

'You always tell the pioneers by the arrows in their backs'.

That's why we need the very rich, they can afford to try new things while the bugs are getting ironed out. No rich people (private money free market rich): no new things. At least not the stuff I want. The ability to amass and keep private fortunes (under the rule of law) drives innovation and progress in more than one way. Jeff Tucker makes a good point about technologically new things being baffling to most people, but they eventually get used to it.

[moralist]

Thoughtful article about bitcoin technology.

'You always tell the pioneers by the arrows in their backs'.

That's why we need the very rich, they can afford to try new things while the bugs are getting ironed out. No rich people (private money free market rich): no new things. At least not the stuff I want. The ability to amass and keep private fortunes (under the rule of law) drives innovation and progress in more than one way. Jeff Tucker makes a good point about technologically new things being baffling to most people, but they eventually get used to it.

"Bitcoin Comes to Wall Street"

The title sums it up perfectly, Mike.

Bitcoin belongs on Wall Street where everyone is furiously betting on red and black...

...until green double zero comes up on the roulette wheel.

Greg

[deanwins]

Mikee,

Thanks for the link to the Jeffrey A. Tucker article Bitcoin Comes to Wall Street. I enjoyed reading it. I'll have to look around more on that website and Jeffrey Tucker stuff.

Cheers,

Dean

[Brant Gaede]

You can buy Bitcoins--as a speculation, not an investment. Since no one can rationally project their future value, that's why it's a speculation no matter what else you might call it.

--Brant

[Backlighting]

Now here's some coins I'd love to have:

http://video.foxnews.com/v/3259114038001/couple-finds-10m-in-gold-coins-buried-in-backyard/?intcmp=obnetwork#sp=show-clips

[moralist]

You can buy Bitcoins--as a speculation, not an investment. Since no one can rationally project their future value, that's why it's a speculation no matter what else you might call it.

--Brant

I'm all for people having the total freedom to spend their Dollars speculating on bitcoins or any other virtual nonproductive something for nothing zero sum game.

Because if they win, it's only the money lost by other gamblers who share their same values and has no effect upon those who choose not to play the game.

Greg

[Brant Gaede]

Aw, Greg, see, you can be rational, especially about money (matters).

--Brant

spread your wings over other things

[BaalChatzaf]

You can buy Bitcoins--as a speculation, not an investment. Since no one can rationally project their future value, that's why it's a speculation no matter what else you might call it.

--Brant

What good is "money" whose trade value is not known with reasonable certainty?

Ba'al Chatzaf

[Brant Gaede]

You can buy Bitcoins--as a speculation, not an investment. Since no one can rationally project their future value, that's why it's a speculation no matter what else you might call it.

--Brant

What good is "money" whose trade value is not known with reasonable certainty?

Ba'al Chatzaf

You get a greater fool to buy it from you--in dollars, for instance.

--Brant

the fools disappeared when the thieves appeared, both were more "real" than the "money" which was funny

[BaalChatzaf]

You get a greater fool to buy it from you--in dollars, for instance.

--Brant

the fools disappeared

There are enough "greater fools" but I don't see how one can grow a capital intensive industrial economy on the basis of greater fools. It is safer to assume most people are rational enough of the time that we can base our economic strategies on rationality, not stupidity.

Ba'al Chatzaf

[Brant Gaede]

You get a greater fool to buy it from you--in dollars, for instance.

--Brant

the fools disappeared

There are enough "greater fools" but I don't see how one can grow a capital intensive industrial economy on the basis of greater fools. It is safer to assume most people are rational enough of the time that we can base our economic strategies on rationality, not stupidity.

Ba'al Chatzaf

Except this country is destroying (consuming) its capital with government sucking debt so the economy is going off the cliff in slo mo.

--Brant

for rationality here you need market-set rational interest rates too

little to do with Bitcoin, btw, except all economic values are subjective including any understood Bitcoin value

[moralist]

Aw, Greg, see, you can be rational, especially about money (matters).

--Brant

spread your wings over other things

Being rational about money is what buys the freedom to be "irrational" about other things.

One of the wisest statements Ayn Rand ever made in her life was this:

"...NO MAN MAY BE SMALLER THAN HIS MONEY."

The same moral character it takes to work to earn money is required to properly manage the money you earn. So whenever money is won from others loses without the moral character to rightfully earn it through useful production, that person is equally susceptible to losing the money they won to others through the same lack of moral character.

"Whoever who is BIGGER than their money,

will ALWAYS have MORE than they need."

--Greg

[moralist]

Except this country is destroying (consuming) its capital with government sucking debt so the economy is going off the cliff in slo mo.

The mountain of government debt perfectly tracks with the mountains of personal debt, for people create the government they deserve in their own image by how they live.

This is the just and deserved consequence of millions of suckers all believing the same lie that debt is capital... when it is only the lack of it.

Greg

[Brant Gaede]

Uh, I think Francisco said that, not Rand.

--Brant

let's keep these characters straight