Cryptocurrencies and the economy

[Meadmaker]

I never claimed that bitcoin makes things better. Bitcoin is a cryptographically scarce digital asset, which is making the people who had the foresight to invest in it great fortunes. It's a canary in the coal mine, at this point.

Ok. I think I see what you mean.


The biggest thing that bitcoin has been for me is a way of seeing, and talking about, how little difference there is between bitcoin and the US dollar. There are differences, but not enough differences.

However, there is one very, very, big difference. The US dollar is backed by the US army.

ETA: And I have lots of thoughts on related subjects, all related directly or indirectly to what I think is a general failure to grasp reality in American life, but I think that's too much of a derail for my tastes.

For now, related to the OP, what I think about Bitcoin is that it's a bizarre thing that we are giving people pseudo-money in exchange for burning fuel. It's kind of nuts.

 

[lomiller]

Ok. I think I see what you mean.


The biggest thing that bitcoin has been for me is a way of seeing, and talking about, how little difference there is between bitcoin and the US dollar. There are differences, but not enough differences.

However, there is one very, very, big difference. The US dollar is backed by the US army.

The dollar also benefits from having it's value stabilized by the federal reserve. You can make reasonable estimates of what things will cost tomorrow, next month and even next year.

The wild swings in bitcoin prices would make starting or running a business next to impossible. How could you plan for payroll, expansion, supply, etc when you don't know what things are going to cost next week let alone next year?

The deflation inherent in bitcoin is also a big problem. Why would anyone invest in a business if their "money" becomes more valuable just sitting there in a wallet while business face ever declining sales and ever declining valuations? Worse, the decline in investment creates recessionary conditions that drive demand down as well. A bitcoin economy would be every businessman's worst nightmare. The aristocrats and trust fund babies would probabaly make out ok though.

 

[Meadmaker]

The dollar also benefits from having it's value stabilized by the federal reserve. You can make reasonable estimates of what things will cost tomorrow, next month and even next year.

Ideally.

 

[Tippit]

The biggest thing that bitcoin has been for me is a way of seeing, and talking about, how little difference there is between bitcoin and the US dollar. There are differences, but not enough differences.

However, there is one very, very, big difference. The US dollar is backed by the US army.

The other very, very, big difference is that the supply of bitcoin is limited to 21 million. The supply of US Dollars is limited by what some technocrat can conjure up on a computer, in order to either a) effectively nationalize an asset, without any congressional oversight, or b) loan (or gift, there isn't much difference at zero to negative interest rate policy) dollars to some wall street ******* or crony who then expropriates assets, often from someone who worked and saved a lifetime to pay for those assets. Money for nothing. Chicks for free.

The Fed is a glorified counterfeiter, and the US army, by way of the global petrodollar standard and the SWIFT network, provides the "incentive" for people to get fleeced by the counterfeiter.

ETA: And I have lots of thoughts on related subjects, all related directly or indirectly to what I think is a general failure to grasp reality in American life, but I think that's too much of a derail for my tastes.

For now, related to the OP, what I think about Bitcoin is that it's a bizarre thing that we are giving people pseudo-money in exchange for burning fuel. It's kind of nuts.

I'm not sure whether you're accusing me of failing to grasp reality or not. But there is reality, and the consequences of reality. We can afford to ignore the former, but not the latter. As for what is crazy, I would paraphrase Forrest Gump: Crazy is what crazy does. My friend who is worth around $2B and bought bitcoin hand over fist when it was $10-12ish is probably the smartest person I ever met. He scored a perfect 1600 on the SAT, and dropped out of Ga Tech to found a p2p company (with my help).

Maybe it's the people who save US Dollars who are nuts?

 

[Tippit]

The dollar also benefits from having it's value stabilized by the federal reserve. You can make reasonable estimates of what things will cost tomorrow, next month and even next year.

The wild swings in bitcoin prices would make starting or running a business next to impossible. How could you plan for payroll, expansion, supply, etc when you don't know what things are going to cost next week let alone next year?

The deflation inherent in bitcoin is also a big problem. Why would anyone invest in a business if their "money" becomes more valuable just sitting there in a wallet while business face ever declining sales and ever declining valuations? Worse, the decline in investment creates recessionary conditions that drive demand down as well. A bitcoin economy would be every businessman's worst nightmare. The aristocrats and trust fund babies would probabaly make out ok though.

Lol

 

[Meadmaker]

I'm not sure whether you're accusing me of failing to grasp reality or not.

No, I'm accusing the average American of failing to grasp reality.

You may or may not grasp reality, but I think the things you are saying about currency have a great deal of reality in them. I kind of like the "glorified counterfeiter" description. I just don't know what to do about it.

 

[psionl0]

Sorry, I didn't realize the time factor was so important. A year, a decade, the analogy was about value. What value is added?

But, at least the tulip investors got tulips. And if you still have your Beanie Babies then you still have a toy.

When the market for bitcoin collapses what will the investors have?

Of course the time factor matters. If the discussions were just recent then it would be easy to dig up the discussions to show where you are wrong. But it would be a lot of work after all of these years.

The essential difference is that the tulip mania only had one price bubble and lasted less than 1 year. There has never been another tulip mania since. OTOH bitcoin has had several major price bubbles and many minor price bubbles and there is no sign (other than your crystal ball) that these cycles are coming to an end.

"<some other bad investment> ergo bitcoin" is not critical thinking. It is just "cum hoc ergo propter hoc" rationalization.

 

[lomiller]

Ideally.

This isn't just an ideal world phenomenon. Since the advent of inflation targeting by the Fed in the 1980's US inflation rates have been remarkably stable, more stable by far than any period in US history. Other countries have seen the same thing with their currencies.

 

[lomiller]

The essential difference is that the tulip mania only had one price bubble and lasted less than 1 year.

You have yet to explain why that matters

There has never been another tulip mania since.

The analogy is about bubbles. A repeat of a tulip bulb specific bubble is irrelevant, analogies don't work that way.

 

[Belz...]

analogies don't work that way.

Yeah but... you know....

 

[Meadmaker]

This isn't just an ideal world phenomenon. Since the advent of inflation targeting by the Fed in the 1980's US inflation rates have been remarkably stable, more stable by far than any period in US history. Other countries have seen the same thing with their currencies.

Quite.

As long as they don't decide that some other thing is more important, we'll be fine.

 

[JoeMorgue]

Here's the thing.

- Cryptocurrency sold itself on being an alternative to traditional fiat and representative money (or a new unique version of one of those depending how and where you want to split a very semantic hair)

- But literally the only people who keep cryptocurrency going and the people responsible for all its highs and lows are people looking to get rich quick. And you can't have a currency that everyone is too scared to spend because tomorrow it might quadruple in price because Elon Musk sent out a tweet.

- Cryptocurrency's only actual functional use is as a PayPal analog for when you want to order child porn or hitmen off the Dark web. Cryptocurrency can't "do" anything on a day to day level for 99.99999999999999% of the population that other money/payment types can't equally well but far easier. So the only people who "use" it in any sense people use money are people willing to trade a potentially massive payday to offset risk of being caught and there's not a lot of legit and non-skeevy reasons people are doing that.

- Competing cryptocurrencies are popping up almost daily which will split the base of the "get rich quick" people which, again, are the only ones keeping these things alive.

- The inherent decentralized and non-regulated nature of Cryptocurrencies makes these problems impossible to effectively address.

- So when used as a currency on any practical level it has all the usefulness of Marlboro bucks, it's value is like trying to value of the dollar to value of chips at the high roller table at Caeser's Palace, those two core facts are in directly conflict, and there's no possible way to fix either of those issues because no one is steering the ship.

 

[zooterkin]

Several posts have been consigned to AAH.

Please knock off the bickering, and keep to the topic. Thank you.

Replying to this modbox in thread will be off topic  Posted By: zooterkin

 

[psionl0]

You have yet to explain why that matters

All you have to do is read the following two sentences and you will see that it makes all the difference in the world.

No matter how desperately you want to paint bitcoin in a negative light, you can't compare apples to oranges.

 

[lomiller]

All you have to do is read the following two sentences and you will see that it makes all the difference in the world.

I read them and they do no such thing. Now, are you going to explain why you think the duration of the bubble "invalidates" the analogy or not?

No matter how desperately you want to paint bitcoin in a negative light, you can't compare apples to oranges.

I don't *want* to see it in either a positive or negative light, I'm just following the evidence to the logical conclusion that it's a net negative for the economy and functionally transfer wealth from people who earned it to people who did not. I'm sorry this offends you, but the facts are the facts and I'm not going to deny the facts just because some snowflakes are offended by hearing them.

 

[ChrisBFRPKY]

Here's the thing.

- Cryptocurrency sold itself on being an alternative to traditional fiat and representative money (or a new unique version of one of those depending how and where you want to split a very semantic hair)

Yes, it has advantages over traditional fiat. Mainly sending and receiving. If one wishes to send a large amount of wealth to someone else across the Country or even the other side of the World, Cryptocurrency is a very fast and efficient way of doing so. It would be exceedingly difficult to send someone overseas a million $ US. It takes a few minutes to do so with Crypto.

- But literally the only people who keep cryptocurrency going and the people responsible for all its highs and lows are people looking to get rich quick. And you can't have a currency that everyone is too scared to spend because tomorrow it might quadruple in price because Elon Musk sent out a tweet.

That's not true anymore. Banks are using stable coins to settle transfers now. Stable coins are those Cryptocurrencies that maintain a stable value of $1.00 US.

- Cryptocurrency's only actual functional use is as a PayPal analog for when you want to order child porn or hitmen off the Dark web. Cryptocurrency can't "do" anything on a day to day level for 99.99999999999999% of the population that other money/payment types can't equally well but far easier. So the only people who "use" it in any sense people use money are people willing to trade a potentially massive payday to offset risk of being caught and there's not a lot of legit and non-skeevy reasons people are doing that.

If you go down that road then you must admit or at least accept that the US dollar funds far more illegal activities than Crypto ever could.

- Competing cryptocurrencies are popping up almost daily which will split the base of the "get rich quick" people which, again, are the only ones keeping these things alive.

New technologies are great. That's how we get better products. I think it's a good thing that Crypto is improving. When's the last time fiat improved to make a transaction easier or faster etc?

- The inherent decentralized and non-regulated nature of Cryptocurrencies makes these problems impossible to effectively address.

Decentralization is a key factor. Governments have no control over your money with Crypto, yet with fiat, they can simply remove it from your bank account if they choose to do so.

- So when used as a currency on any practical level it has all the usefulness of Marlboro bucks, it's value is like trying to value of the dollar to value of chips at the high roller table at Caeser's Palace, those two core facts are in directly conflict, and there's no possible way to fix either of those issues because no one is steering the ship.

Stable coins, as mentioned above, are a bit different than other Crypto. They're much closer to being an actual currency since the value is set to remain at $1.00 US. Other coins do invite trade and speculation though, that is true.

 

[Tippit]

Decentralization is a key factor. Governments have no control over your money with Crypto, yet with fiat, they can simply remove it from your bank account if they choose to do so.

This is somewhat true, but with a transparent blockchain, all tax authorities have to do is ID you with one transaction, and then your crypto-spending life is an open book. There are bitcoin forensic companies whose sole purpose is to identify people on the blockchain, and what they've spent their bitcoin on. They might not be able to "simply remove it from the bank", but they can make your real life miserable.

 

[Dr. Keith]

If you go down that road then you must admit or at least accept that the US dollar funds far more illegal activities than Crypto ever could.

I think you missed his point. The way I read it is that you crypto is more of a speculative tool than a currency. And it is only a currency for black market items.

If your assets were half US dollars and half crypto which would you spend if you needed to buy something?

If that answer is clearly the US dollars then you are admitting that crypto is not a currency, but an investment.

If that answer is clearly crypto then you are likely doing something illegal with that purchase or it is a purchase where privacy is more important than price.

I think that was his point.

 

[ChrisBFRPKY]

This is somewhat true, but with a transparent blockchain, all tax authorities have to do is ID you with one transaction, and then your crypto-spending life is an open book. There are bitcoin forensic companies whose sole purpose is to identify people on the blockchain, and what they've spent their bitcoin on. They might not be able to "simply remove it from the bank", but they can make your real life miserable.

Of course illegal activities can be traced with Bitcoin. The blockchain provides evidence that is presentable in court. All the more reason to use cash dollars if one was to attempt illegal activities, less chance of getting caught.

I think you missed his point. The way I read it is that you crypto is more of a speculative tool than a currency. And it is only a currency for black market items.

If your assets were half US dollars and half crypto which would you spend if you needed to buy something?

If that answer is clearly the US dollars then you are admitting that crypto is not a currency, but an investment.

If that answer is clearly crypto then you are likely doing something illegal with that purchase or it is a purchase where privacy is more important than price.

I think that was his point.

That is correct with some Cryptocurrency like Bitcoin, you'd likely spend your dollars and hold the BTC. But there are other cryptocurrencies called "Stable Coins" which maintain a value of $1 US dollar. So if you did a transaction online you'd be more likely to use those rather than cash.

 

[psionl0]

Now, are you going to explain why you think the duration of the bubble "invalidates" the analogy or not?

I will if I ever make such a claim. Now are you going to explain why you think that bitcoin has only had a single bubble and is about to fade into oblivion?

I'm just following the evidence to the logical conclusion .....

No you are not. You are just trying to establish spurious connections between bitcoin and irrelevant analogies. Maybe like some other posters you don't care if an analogy is bad as long as it reinforces your irrational beliefs but I prefer to think that there are still some critical thinkers left in this forum.

.... that it's a net negative for the economy and functionally transfer wealth from people who earned it to people who did not.

And suddenly you branch of into another irrelevant spurious claim. As if losing speculators are people who "earned" their wealth and winning speculators are not. How you can classify speculators into two distinct classes like this is unbelievable.