Bitcoin Forum

The recent hubbub about the Bitcoin rally actually makes me nervous. I don't want Bitcoin to be a beanie-baby style bubble. I want it to make inroads into business and liberate people from the burdens of paypal and the dangers of our instable government-run banking system.

Naturally I'm very happy that my holdings have increased in value, as I'm sure other Bitcoiners are, but I don't want the BTC community to lose focus of the long-term goals here based on the recent rally. It feels like a few months ago bitcoin was a "stable currency", and now it's an "investment". Not a good label IMO, and it worries me. I have friends now that are asking me how to get into bitcoin, not because they want to use the currency in any way, but simply because "it's going up!", and they want to flip it for a USD profit (that is, they think of it as a commodity I guess). These types of people are also going to be the ones that will also panic sell if "it goes down!". Bitcoin has become FOREX now, bah ...

Maybe I just worry for nothing :)

Crash one time! I've got more I want to spend on cheap coins.

Also, are you sure about this or just speculating? ;-)

You are not the only one worried. But there is little that can be done, apart from tyring to spread the word and encouraging business to accept bitcoin.

Exactly. My general point is that most of the recent activity has been due to an increase in speculation rather than huge inroads into business. I think that business inroads will increase the stability of Bitcoin.

Don't get me wrong, I love the fact that my coins have increased 6X in value in the past two months, but at the same time doing business with something with that insane level of volatility is difficult to say the least. Maybe Bitcoin businesses should peg to the dollar :)

Somehow i feel that high value rises will be common thing for bitcoin, as it is a strongly deflationary currency.
We will have to just get used to it.

Also, BTC is not exactly impredictable. If the value of BTC will for long time keep rising fast, then this will be considered normal, and it will possibly be predictable enough to do buisness.

I'm glad that I'm not the only one worried about this. Reading the forums, there are all kinds of speculative uses, gambling, admitted ponzi schemes and similar crap ... but well, that's ok, nobody wants to forbid it, anyone can make crap if they want to ... what worries me is that it is generally accepted by bitcoin community as legitimate use - that is very dangerous thing, I thought people here would be more informed than that. This is the exact same mindset that brought about the economy crisis. The purpose of money is not to make more money! It is supposed to be a medium of exchange for real goods and services ... I'm watching with horror when there is a casino game posted and nobody speaks a word that that kind of use is extremely bad for bitcoin let alone it being immoral ... you make money on others desire to make money! Essentially taking advantage of their greed, it does not produce anything useful except nurturing bad aspects of human nature.

As far as speculation is concerned, that is simply a theft. Again, it does not produce anything ... it just siphons money away from real economy. Buying bitcoins for the hope you get more back than you put in later on is not investment, it's robbing people who make real contribution of their work. Investment would be giving someone bitcoins to make a new useful service which is going to rise the demand for bitcoin therefore up its value - that is real investment and the person investing in it deserves to make profit. Speculators are just thieves, shame on them! ;)

Why nobody else says this? Maybe because our real world economy was turned to crap and people see that crap everywhere so they consider it "normal" ... it is not! Wall Street is a parasite destroying everything it touches, please do not allow the same thing happen to bitcoin. If there are no real goods and services flowing between people who intend to actually use them (not speculate with them), it's a bubble economy and it is going to crash and burn sooner or later.

I'm not going into bitcoin right now exactly for this reason, there are no real things I would actually desire to buy for it so far so it is clear that the current value of bitcoin is a bubble for sure. If there are not real things available for bitcoin soon it is going to collapse just like our real world economy. And these "investors" are going to cry how it could happened, fools.

While you were discussing speculation.. Did anyone notice the market crashed?

The market didn't crash...
Mtgox has just introduced trade fees of 0.65%, and that has apparently killed most of the speculation.

I have a problem with that explanation for the drop in price. How do we know it's not simply because mtgox announced anyone can withdraw their money now... And they did?

Ah, I didn't know about it, perhaps i am mistaken.

This is complete utter nonsense once you consider that speculators are risking their money and their credit rating. They essentially take risks so that farmers and other people don't have to speculate. They serve a very important economic function in ensuring supply meet demands. Who do you think give you the liquidity to convert your dollars into bitcoins and vice versa? Bitcoin speculators.

Who do you think have a vested interest in keeping the bitcoin economy growing? Bitcoin speculators.

Why do you think I post a bounty for a chrome bitcoin extension? Part of it is to make it easier for bitcoins to grow, thus increasing the price of bitcoins. Which in the end, help me make money.

Bitcoin is a young money.  It"s thus quite turbulent.

What?
Keep thy moral to thyself.

There's nothing "immoral" to gambling, if you take any non-subjective moral (ethics). And it's not bad to bitcoins either!

What worries me is somebody who thinks he can claim what's legitimate for somebody else to do with his own money and his own money only.


"Bad aspects" to you! What you call a vice, for others may be amusement. As utility is subjective, what you say ("does not product something useful") makes no sense. If gambling is what Joe wants, that's something useful to him. Stop wanting to impose your personal values on others.


 :o  :o  :o

Understand something, really: nothing can be stolen by consent. This is contradictory in terms. Not understanding the difference between lack of consent and presence of it is like saying sex and rape are the same.

Speculators are not stealing anything. Speculators are just people who try to predict future prices, aiming for profit. And, as always, profit adds wealth to society. Even the profit of a speculator.
A successful speculator is someone that correctly predicts price fluctuations. So, for example, he buys when a certain resource is less scarce, and save it to sell when it's more scarce. The action of the successful speculator helps to flatten price fluctuations, since he buys when the resource is more available (pushes up a downward price) and sells when people are lacking the resource in question (pushing down an upward price).
Interesting to note that the inverse also apply to failures. A speculator that fails will make things worse. As anyone that has losses, he'll be destroying wealth.

Memorize this: The more successful anyone is in pursuing profit through voluntary means, the more this person will help society.

+1 !

Speculation was bound to happen and there is very little we can do about it because the whole point of Bitcoin is that nobody is in control.  

Truely free markets have a lot of benefits but one of their downsides is that they are intrinsically unstable. A bit like the weather. Positive feedback loops are a bitch, but to get rid of them you'd have to change human nature.

If Bitcoin will be anything like other disruptive technologies in history, we should expect a huge bubble as early adopters get overexcited, followed by a crash, followed by a few years of disillusionment and consolidation, followed by mainstream adoption.

Actually, I do think that certain technical modifications to Bitcoin could mitigate the excesses of speculation,  for example damping (Tobin-Tax-style transaction fees) and inflation (more bitcoins awarded for mining).

But those modifications would reduce the usefulness and desirability of Bitcoin, and they probably wouldn't prevent the coming bubble either.

I very much hope no such thing will be done.  If it is, I might very well sell my bitcoins as I will lose confidence in this money.

Speculation is a zero-sum game.  It is mainly harmless.   Doing something against it would only add useless complexity into the system.


If some people would like to see an non-fixed aggregate cryptocurrency, I suggest they fork bitcoin.  NOW.  Or as soon as possible.  The sooner they fork bitcoin into such a currency, the more sure we will be that bitcoin will never be like that.

If you know there is a bubble coming you can speculate against it, making a nice profit for yourself and at the same time help everyone by smoothing down the bubble.

Speculation is not zero sum. Speculating is making an offer. If the offer is accepted it makes the speculator better off. No one will take the offer unless it makes them better off. So by their own values both are made better off.

This is what I'm talking about ... the bitcoin community is infested with mindless cheerleaders for profit thinking it s ok to completely divorce economy from human values and physical production. This is the EXACT same nonsense we were bombarded with when deregulation of US economy was pushed bringing rise to such "useful financial instruments" like derivatives, "encouraging 'investment'", "stimulating economy" ... we've heard it all ... in the meantime industry was destroyed, physical production plummeted, millions of people found themselves on the street all the way speculators made wonderful profits, charts were happily jiggling on the way up ... that's how "important role" they play.

If this is the kind of people using bitcoin then it is already dead, it just doesn't know it yet. Exactly as many people knew US economy is done and over with when they saw that 99% of it was in worthless paper traded by speculators robbing regular people blind, who just now are waking up to the fraud when they realize they've lost everything while banks are making record profits.

keep thy moral to thyself? this is the exact mindset of financial sharks who do not give a damn about the consequences of their actions, the only thing that matters is profit. Am I going to make million people starve to death by my food speculations to jack up prices and make profit? Who gives a flying fuck ... these people are scum, lowlifes of human society. What do you provide anybody by speculation? Who does it help? It does nothing ... the fairytales you recite here are excuses for you to not feel guilty robbing people. What good does it make to buy rice at certain price with the intent to sell it for higher price? NOTHING! It just creates artificial demand, a bubble, making rice more expansive that it really should be according to real market making people starve in the process! If you do this kind of thing, you're a leech on human society feeding of off others and I despise you!

Rising rice prices help feed and clothe rice farmers.

If the prices rose too far, the same speculators would lower them to reasonable levels at which people could afford to buy and eat rice.

Macho, what do you think speculation is? If I sell my coins because I think I'll be able to buy them back later for less, is that speculation? What if I buy them now because I don't want to pay higher prices that I expect later?

Do you have any evidence to support this position, or is this a personal opinion?  Is is silly to assume that all business transacted in Bitcoin is going to be advertised on the Trade page.  Nor would it take much of an increase in business to bump up the value of the few bitcoins currently in circulation.  A couple of Bitcoin savvy campus pot dealers could explain the marked rise in price, all they would have to do is tell their existing clients, "I'm switching to Bitcoin exclusively, to protect myself, so you'll have to do the same if you wish to continue to do business" and the demand from a couple dozen potheads per savvy dealer and the price shoots for parity.

Nothing that you have written thus far is rooted in economic reality, or even in economic history.  The causes of the crash are various, but certainly not what you have been led to believe.  I recommend that you either read up on the topic, starting with "Whatever Happened to Penny Candy?" and "Economics in One Lesson".  However, if you are inclined to continue fretting about economic fallacies instead, perhaps you shouldn't expose yourself to our corruptive natures and simply abandon this whole Bitcoin idea.

I think this week's 50% crash should answer your question. Bitcoin is extremely volatile, and like any financial asset, has the potential to experience bubbles. I think we've just burst our first mini-bubble (50 cents down to 23 cents is a huge move for anyone wanting to use Bitcoin as a paypal substitute!)

This doesn't mean Bitcoin won't continue to go up in the long run -- I strongly believe the long-term trend is up for fundamental reasons -- but I certainly could feel the "froth" of excitement on the forums lately. Psychology is at work here as much as fundamentals.

I have nothing against speculation, and I certainly believe attempts to curtail it do more harm than good. I'm just warning, from personal experience, that business is way, way better and more long-term profitable than speculation, and that I greatly would prefer stability to volatility in my choice of cryptocurrency.

Is an increase in stability possible while keeping everything voluntary? Yes. The only way is if we continue to focus on using it as a currency. Speculators will be speculators, but the rest of us need to keep our heads and continue to push Bitcoin businesses. Monetization (usage as currency, rather than investment) always increases stability -- just like gold used to be more stable when it was used as currency rather than as a commodity investment like it is today.

Please explain how risking my neck to provide liquidity(in the form of currency speculation) means that I am feeding off society.

I notice that you ignored the question posed, so I'll assume that it was an opinion.

Definitely an opinion, I don't dispute you on that :). My general point is that a quick 6X rise followed by a 50% crash is definitely a market overheated by speculation. The technical analysis guy posted nearly 100% bulls on bitcoin near the recent top.

That said, I absolutely agree with you that some of that rise is probably very real and based on fundamentals and business adoption, so to an extent I didn't really phrase my opinion fully -- it's a mixture, so we're not exactly in disagreement here (I'm not claiming 100% speculation is where the volume is coming from), but rather that obviously there's a LOT of it going on, and that Bitcoin it nowhere near stable. As to what the ratio of fundamental vs speculative juices are, nobody knows.

I can't believe people are brainwashed enough to actually say this ... the speculators are buying rice for *the sole purpose* of selling it at higher price so net effect is that the rice is more expansive than it would be if the market was untampered with (not manipulated) with a cut going to the speculator. The speculator *does nothing else* than take the cut. There is no value added, he just steals the money counting on the fact that regular people do not have the time or desire to watch for such a thing (because they are honest and actually producing real goods rather than feeding off of someone else's work). Then he can up the game and convince some gullible people to become "investors" and actually buy the stuff he is hoping to sell at higher price (calling it fancy names like "investment fund") ... the suckers invest their money of course again for the sole purpose of making more money, this is how it snowballs. Suckers buying it makes the graph go up helping to convince other suckers that now is the good time to "invest". The increased demand in turn makes the prices rise even more, he repeats this until he can find enough suckers to buy the crud he is selling. Then he goes out of the market being an insider and knowing that he is going to sell it which is going to crash the price. By this time however the crud he created changed so many hands that nobody really knows where it came from so he is safe. Then he sells and makes huge profit because of the bubble he created (or with his insider friends), the suckers loose big time ... oh, investment got wrong, nobody knows why, the invisible hand of market decided ... oh sure, save that crap for another suckers not me. Net effect = few people made huge profits doing nothing else than moving some numbers around, a much larger pool of suckers who "invested" got robbed and in the meantime million people died of hunger in poor countries because of the artificially inflated price of food while the bubble was forming. Yeah and i the meantime few rice farmers made some more money because few of the breadcrumbs from this scam has fallen their way ... but they probably "invested" it in another bubble which is going to implode next year. Final result, everybody looses except speculator who didn't do anything useful in the first place!

Scum of the Earth! If I wouldn't be that of a big believer in freedom and personal responsibility I would lock these people up the the worst prison until they rot! Instead I'm trying to educate people about this so the market speaks and people just REFUSE to participate in this and realize what a scam it is ... but I'm being lambasted by religious number and graph worshipers who just don't give a damn about the effects on the actual real world it has. Oh but our graphs are going up, that can't be wrong ... give me a break.

Guess what? You probably called 99% of the bitcoin community scumbags. I guess the bitcoin community is a place of villainy and evilness. Why would you dare to walk amongst some of the most evil people on earth?

LOL, honestly I just re-read my post here and now I'm thinking it's really irrelevant, it's like someone complaining about the way the Earth rotates around the Sun.

Financial markets will always behave the way they do, that is, insanely. Hopefully longer-term Bitcoin will increase its stability, so people can still speculate to their hearts content, but they'll do so with more leverage for smaller moves (like FOREX) so that it doesn't affect business.

So, IMO, the problem will solve itself in the long run. Case closed for me on this issue.

"There is enormous inertia—a tyranny of the status quo—in private and especially governmental arrangements. Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable."

-Milton Friedman

http://en.wikiquote.org/wiki/Milton_Friedman

So, Macho, do your statements actually apply here? You talk about rice, which is bought with money to then sell for more money. Controlling the distribution channels by all means possible (probably by owning the production, or at least holding exclusive rights to it) seems like the only way to achieve that.

Now, bitcoins... you can't control production, anyone can produce. You can't hold exclusive rights to distribution, it's p2p. And, frankly, it's not some basic necessity that you can control people with/for. I have bitcoins because I like many of their aspects, and because I'm a geek. I know that there's much more to bitcoins than that, and the speculation is actually making these bitcoins attractive to at least one niche... the speculators, giving me a good leverage on my holdings.

Of course they can make the coins loose all value, or just make them way to expensive for the average joe but... wait a minute, I can put my computer to work and generate these, or I can trade with the people that, like yourself, do not get fooled by speculators and all round "scumbags" that make a profit out of trading bitcoins, pretty much making these more valuable for everyone else, by the way...

Yes, scammers and copycats will come and hurt everyone. Yes, not so honest hyip schemes will appear and steal people out of their coins. That's just a sign that bitcoins are now interesting enough for that to happen and that's positive I guess. And, frankly, where else do you get someone to ask people to invest in their ponzi scheme by calling the thread "just another stupid pyramid scheme"???? Honesty to the extreme!

So, in the spirit of disclosure, I developed the lottery site, out of the need to have some excuse to try the bitcoin client in a service environment. I'm not a die hard gambler, I'm more the type that loves to gamble because I'm always thinking about a way to beat the house, and I know I consistently fail. Heck, even when I'm the house I end up loosing money :)

I think you are crying wolf too soon in the game. This is a small community that actually plays very well with each other. Yes, everyone has their own opinion about pretty much everything and we all have a lot to learn from each other. Your questions are not without a reason, I'm sure, but it sounds like you are being judgmental and, frankly, that usually just backfires.

If somebody does this, he *is* a scumbag whether he realizes it or not. And not because I'm calling him that ... a robber is not a scumbag because I call him one, he is a scumbag because he robs people. If you want to remedy the situation you need to go to the root cause ... simply, do not do it! And inform everybody else why it is a bad thing to do. The big guns on Wall Street *are* scumbags and a lot of people are suffering because of them ... a lot of people will suffer if you're going to do this with bitcoin too. It's a matter of personal responsibility and yes also of morality ... do you want true production and creative people to suffer because of your thirst for money/profit?

It is a moral question, but we are people, we are supposed to care about morality ... otherwise we are just barbarians running around hitting each other with clubs on the head and seeing who comes out of it alive. Are we civilized or are we not? Do we care about the big picture consequences of our actions or do we not? It's personal question that everybody has to answer for himself.

As for me, I'm absolutely unwilling to compromise my personal integrity and morality for profit or I would loose what I consider making me human. I'm not an animal to be ruled by my primitive urges.

Whoa Macho, you totally hijacked my thread ...

The best thing about Bitcoin is that it is indifferent to your opinions, or mine, or anyone else's... that's why it's so wonderful. It's 100% voluntary. Unlike the USD, which is subject to Bernanke's every whim. If anything, the Bitcoin community is the anti-Fed, anti-Wall Street, anti-monetary centralization. It is not here to rip anyone off like fiat currency, Bitcoin just IS. What is there not to like?

Walter Block's Defending the Undefendable
http://mises.org/books/defending.pdf
Chapter 22, pg 165 in book (pg. 183 in pdf)

A nice refresher on the socially beneficial role of the speculator.  Small excerpt:

Kill the speculators! is a cry made during every famine that has ever existed. Uttered by demagogues, who think that the speculator causes death through starvation by raising food prices, this cry is fervently supported by the masses of economic illiterates. This kind of thinking, or rather nonthinking, has allowed dictators to impose even the death penalty for traders in food who charge high prices during famines. And without the feeblest of protests from those usually concerned with civil rights and liberties.

Yet the truth of the matter is that far from causing starvation and famines, it is the speculator who prevents them. And far from safeguarding the lives of the people, it is the dictator who must bear the prime responsibility for causing the famine in the first place. Thus, the popular hatred for the speculator is as great a perversion of justice as can be imagined. We can best see this by realizing that the speculator is a person who buys and sells commodities in the hope of making a profit. He is the one who, in the time-honored phrase, tries to “buy low and sell high.”

XC

I brought bitcoins for six dollars. I have never stolen from anybody anything. I brought and sell everything fair and square. I also wrote a bounty and fund part of it through my own personal expense for a bitcoin google chrome extension to make payment easier. I also organized the donation campaign to the CCC and the EFF.

This is a false accusation of my character. Name a person that I have actually robbed from.

Glad you came to that realisation.  When you said 'Maybe Bitcoin businesses should peg to the dollar' I was starting to question your nickname :P

Anarcho-capitalist-libertarian-mises signing out.
Btw don't feed that Macho troll.. no good will come from it.

Merchants  wont take a risk to buy and sell products if there is a risk they will lose half their money overnight. That said speculators smooth the market out and prevent things getting out of hand. You can always depend on people buying low and selling high...which is the opposite of the state monopoly :P

Things recover a lot quicker when the bulls and the bears are allowed to do their thing.

I'm sorry, I know my words are strong ... I understand that most people do not realize what they are doing. Can you call a child taking someone else's apple a scumbag because he "stole it"? I do not think so ... but it is expected that the child grows up and as a grown up is going to be held liable for the same action. It's time to grow up ;)

It's the intention that counts, from the outside it is very hard if not impossible to distinguish speculation and genuine demand. Of course if you buy bitcoins to do some business with them and in the meantime it rises you're not speculator nor scumbag.

What gives bitcoin its value right now? What is backing it? There are not enough real useful services (meaning other than "let me try this" type of things which are driven by pure enthusiasm for the novelty of bitcoin - which is going to go away soon) so most of the apparent "value" is a bubble created by exactly the type of speculators hoping to make a profit. This is not real value ... it's virtual, it doesn't exist ... in the real world nobody values bitcoins for the sake of being bitcoins. It baffles my mind how anybody can see this as something good, why would it be good? For what? because it makes pretty charts? This type of economy is just a giant ponzi scheme snowballing and snowballing until there is enough suckers to believe it will go further up ... when the world runs out of suckers people start selling off unleashing a raging inferno of sell-offs where those who sell off first are at the top of the pyramid making huge profits while the base is going to loose big time ... in the end no real value or wealth was ever created, the money just changed hands (was redistributed) from the suckers to those at the top. there is not value in that ... pretty charts showing rising numbers are not wealth. It's fraud and a scam ... the only real value is physical economy and services that people desire *other than* monetary gain. Selling "investment funds" for the sake of making more money from money is not a service anybody would desire if they wouldn't want more money from it ... the same goes for gambling, casinos etc. - NOBODY would participate if there wasn't a prospect for making more money out of just money. This is the scam ... that *can't be done*, it's zero sum game. You can NOT make money from money this way or create real wealth ... you can just take it from somebody else - and that is just wrong and YES IT IS IMMORAL too! ;)

This is third time I hear this nonsense ... how do speculators "smooth the market"? That's just so immensely stupid thing to say, they actually *create* the swings. I can't imagine by what mechanism would they "smooth" it ... but I can see the mechanism of how they make it swing violently ... hear hear :)

When some commodity is rising in price here come the speculators to "invest" which in turn makes the price rise even more, if enough people do this through "investment funds" and so on, the artificial demand completely overtakes the real physical demand and it is impossible to say which is which ... this goes on again until there are suckers left to be pulled in by looking at pretty charts with pretty lines which do not represent anything else at that point than the number of other suckers who are willing to do the same. Now, the world runs out of suckers ... BOOOM economy is fucked as it's going to cause mayhem, everybody selling like crazy to be first to sell to be as close to the top of the pyramid as possible and/or not lose the most. Have you seen the news lately? This is EXACTLY what is happening right now ... so I'm hardly pulling things out of my ass, am I?

In a number of ways, actually.  First, they smooth out market extremes by their collective 'wisdom of the crowd' creating a predictive market that producers can use to judge future profitability.  In other words, farmers often use the futures market to determine if they will plant soybeans or corn, or something else entirely, the following season because they also wish to maximize their profits. 

Second, the futures markets themselves, which are entirely speculative in nature, provide funding for many of those same farmers to buy the seed to begin with.  This market favoring of productive uses of capital is what evens out the markets later, not now.

Third, speculation increases the costs of things in times of plenty in expectation of times of scarcity.  The pork bellies speculator may expect that the cost of pork will increase sharply in the Northern winter (perhaps he has knowledge of poor conditions for pork in the Southern hemisphere?) so he bets (buys futures contracts) for pork in the winter.  He provides the market signals to the pork farmers to produce more, while also increasing current demand of the lower level (in order to increase pork production, fewer current breeding age pigs may be slaughtered in order to sell now).  When his contracts come due, he sells those contracts to companies that need pork for their products.  It is the successful speculator that provides for nearly all of the "working" capital in many commodities markets.

None of this applies directly to Bitcoin, per se, but speculation is not evil and it is not the root cause of the current crisis.

Seriously, Macho, you should reconsider what you are writing.

If someone thinks that for some reason the price of rice will rise, buying it when the price is low is a way to allocate capital in a way to predict future, thus preventing future shortage.  If he's right, he's allowed the rice market to have a good foresight of coming difficulties.  Which is good.  If he's wrong, then he just gave up some money for no reason to rice procucers.  Do you complain when people give you money ??

I think this is the point you are missing with speculation.  The speculator is never alone.  There is a second party.  THe spectulator buys or sell something to someone.  If Alice trades something with Bob, even if you consider that Alice is a shamefull speculator, the thing is that she helped Bob to fullfill his needs.  And Bob could very well be an honnest, productive person, according to you.  If Bob is also a spectulator, then those two persons have just exchanged some stuffs :  it doesn't change anything to the rest of the economic picture.  One of them will lose, the other one will gain.

I keep thinking that speculation is globally neutral, economically.

When people say that speculation has risen food prices, for instance, this is just non-sense.  Why exactly, suddenly, has speculation arosen ??  Did people, suddenly, become more greedy and more gambled-minded ??  The truth is most probably that a central bank or some other centralised finantial institution has flowded the market with money.  That is the real event that triggered the rise of prices.  Not speculation.  Speculation existed before the buble, and will exist after.  Speculation alone doesn't explain a buble, for it is a human character such as courage, greed, fear and such.  It doesn't appear suddenly to create bubbles out of nothing.

My views on speculation:

1. It's based on voluntary trade, hence not immoral. Banning speculation means to make a threat of violence against voluntary traders. That's also hypocrisy; you need to make an economical speculation yourself if you are to condemn someone as a speculator.

2. Speculation is economically beneficial, as pointed out by others. When speculators see a shortage is coming, their action drives up the prices and adds to the incentive to increase production, smoothing or even preventing the forthcoming crisis. Similarly it helps decrease excess production before it starts causing problems. Speculation, along with other phenomena of the free market, is a beautiful organic and emergent process that channels future expectations and information into the structure of production. :) Doesn't bother me if someone makes a profit out of it. Also greatly improves liquidity.

I think speculation has been entirely positive for the Bitcoin project. It's fascinating how Bitcoin got its initial value when the real economy didn't exist yet, out of the expectation that it would be more valuable later on.

+1

Government is pure evil.

The more I use Bitcoin the more the idea of using fiat money makes me physically sick. Honestly one day I hope I can completely get out of the government's coercion-based money system and solely use something like Bitcoin.

It is the most freedom I have ever experienced... quite a rush, really, to do business in Bitcoin. Nothing quite like listening to the QE2 talks on CNBC, the taxation talks, the national debt, etc etc... and knowing... some small part of me is now safe from all that violence, safe from the majority and their whims of fancy, safe from the predation of government goons... such an amazing feeling.

It's small but it's something. Bitcoin is precious.

Read those wise words, Macho.

*wishes he had an ignore button.

Forgive him for he knows not the bullshit he speaks.

It's seems that I sent our resident 'soph more' on a wild goose chase.  Searching for the phase, "The Two Laws of Civilization" does not bring up the relevant text.

For those who are interested, or simply annoyed by my error, here is the relevant text...

"Mr. Maybury bases his work on common law, namely

1)Do all you have agreed to do
2)Do not encroach on other persons or their property.

The first law is related to contract law. A contract is an agreement between two or more parties, in which they promise to perform certain actions for and recognize certain rights of the other parties. The second law is related to some criminal law and tort law. Violators of these types of laws have committed acts like theft or violence against other people. (When referencing these two laws, Maybury has at times requested they be known as "Maybury's Laws," and stated exactly as above.) He has also mentioned that there may be an other (or others) undiscovered law related to the subjects of law that the two he shows don't cover. He also thinks that if the world would have used these two fundamental laws for a longer period of time, with out the British corrupting them and making them useless, we might have discovered the other fundamental law (or laws) that he mentioned."

http://en.wikipedia.org/wiki/Richard_J._Maybury#Maybury.27s_Two_Laws

No button, but there is an "ignorelist" in your profile.

lol

First rule of the internet is don't feed the troll. Or even if he is for real, you guys still shouldn't waste your time on him. People who are dead set on feeling morally superior won't be convinced by any amount of reason and logic.

It was a fascinating debate, in any case. I really enjoyed the articulate posts detailing the role of speculators in the market. It was Educational for me. Hopefully Macho learned something too.

I do not think it is "morally superior" to care about exploited or starved to death people, do you? The problem is many people just ignore it, they do not think about it because it is too painful and overwhelming to think about. They think, what am I going to do about it? So then they also do not think about the causes of it. There are very specific causes for that suffering and it's not because they are lazy, stupid or wouldn't have resources. They are being held back by other forces ... but that is just the most extreme example where the kind of economic thinking leads. It affects everybody, the current crisis is also just a symptom of this kind of thinking ... we've been listening to the kind of fairytales recited in this thread for at least a decade, it's like broken record and it has nothing to do with reality. The only ones advocating these theories are those at the top because they give them power and a tool to exploit other people. The simple truth is that speculation is harmful and serves no purpose, you can make up all kinds of abstract complex "reasons" detached from reality of why not admit it but in the end it's just excuses. It does nobody any good when someone is just shuffling numbers up and down, left and right just to make profit. It's just so obvious to realize with simple common sense. But some are trying to confuse it with some fairytales that are so tangled up that they ultimately do not even make sense.

Like speculators "smooth out" prices, what does that even mean and even if it was true why would it be a good thing? We are just expected to accept all this assertions without basis. If the market price of some commodity it supposed to go down because of lower demand, then it should go down - otherwise the price is not reflection of a true market, smoothing out, swinging it, or whatever else done by speculation is bad, very bad ... it introduces "fog" so that it's impossible to say what the real price is ... we do not need high price, we do not need low price or smoothed out price, we need *real* price. The only ones who can see trough the fog are the speculators themselves as they are closer (insiders), they use this advantage of course to make money - taking it from everybody else. They are parasites. The bigger/denser the fog, the more people are confused and misinformed, the more money they make ... so they ultimately make a huge mess out of the economy. I'm not making this up people, turn on the TV! What do you see? How do you think that happened? Someone waving a magic wand? Think, think!

I would encourage everybody reciting these theories to actually independently think about it. Something is not true just because Friedman or Mises says it. Someone here was quoting Mises as if it automatically mean he is right. There was nothing in that quote except unsubstantiated assertions. These theories can not survive the confrontation with reality ... simply said, they are wrong. They are completely idealizing things, it's not reality. It's virtual fantasy world and a belief in it serves only those at the top of the ponzi scheme pyramid which they inevitably create.

Our worldwide economy is a giant ponzi scheme right now and it is already collapsing with its base loosing everything, if we do not realize this, we are all going to work in sweatshops soon. Then you can sing the theories of Mises and celebrate the speculators as you work 16 hours a day for 2$. As somebody said, you are going to be thankful for those 2$ for 16 hours of work because otherwise you would be dead so there is really nothing to complain about, is there?

I think I've never ever seen a starving person with my own eyes.  And as far as "exploitation" is concerned, this is very much a subjective judgement.  We talked about that already.

Is this supposed to be a joke? I do not know what to think about this ... do you others here identify with such thinking? Is this who you are? I'm trying to identify the species I'm talking to because it doesn't appear to be human ...

Well, when is the last time you saved someone's life just by giving him some food ?

If you never did, then where does your concern about starving people comes from ?   If it can't come from personnal experience, then where can it come from, apart from television and other medias, i.e.  mass propaganda ? 

5 Ways How to Not Persuade Your Audience The Macho Way:

1. DO NOT build rapport with your audience. You must insult, call them names, and so on.

2. Always argue against strawman version of the audience.

3. Claim every logical argument the audience made as a construct of authority figures regardless or not if the argument in question is true.

4. Call your audience EVIL.

5. Always claim morality superiority.

I'm very hungry person, if I can't get something to eat it's like torture! I wouldn't wish something like to onto my worst enemy! And those starving people are not even my enemies ... ;)

Anyway, is there any point to these questions?

Are you saying I shouldn't care? Well maybe I really don't, it's actually probably self-interest because I see what caused their starvation and I see the same thing coming everywhere else in the world ... to be honest, I do not want to join them in their starvation nor do I want to work in sweatshop. The only way to save myself from that is to remove the root cause which made starve also them - the religious economic theories.

It is the only way for you also, do *you* want to starve and work in sweatshop? It already is coming to the US, 22% real unemployment (not gov cooked numbers 10% which is high enough by itself), 41 million Americans are on the foodstamps, 1.5 million lives in poverty and this is accelerating ... it is on the way to become a third world country. But this is happening all over the world ... so where is all the wealth going? Are you going to guess it? I've been talking about it for quite some time ;)

We are all going to be "poor Africans" you see on the TV soon if we do not realize root causes of this. Of which some I've been describing here.

How to not understand something that could save you life of trouble:

1. focus on everything else BUT the arguments

;)

It's just that, as I was reading your post, when you were talking about exploited and starving to death people, it seemed to be very very far away from the reality of the society I live in.  There are problems in our society, but ... starvation ?  Hum, I don't think so.

I can get two large french fries and a coke for 5-6 bucks. Yummy.

It's not exactly the most healthy thing in the world, though.

I think the 3 hot dogs a day diet with drinks are a far cheaper diet, yet far more unhealthy diet.

The problem is not the lack of food, but the lack of cheap, healthy food in our society.

that's true ... there is a lot of things to eat, I just wouldn't call food most of it :)

And it is not far away, as I said there are 41 million people on foodstamps in the US! That's supposed to be "the wealthiest nation"? (or one of the wealthiest). Do not assume it does not affect you ... because when it does, you are going to have bigger problems than chatting about it on the Internet - that may be why starving people (yes also in the US and elsewhere) are kind of under-represented on the net?

Millions of people found themselves on the street because of mortgage scam, is that also far away? Several trillions dollars were stolen from the economy by FED printing and "borrowing" money, it that far away? Are all those bankruptcies, closing industries, record unemployment far away? I do not think so ... it is far more possible that you've been living in a bubble not noticing or caring about these things ... maybe you'll start to care only after you're on the street. But then ... then it will be late and other people on the Internet will be saying that you do not exist and that they do not care how you ended up that way.

Macho, I didn't read all your posts, but from what I did read, it seemed you were describing a classic pump and dump market manipulation, and then claiming that this is the strategy that all speculators employ.  This is definitely not the case.

Pump and dumps require the following: 1) the means to take on dominant long positions via coordination amongst several 'insiders' or access to large amounts of cheap enough credit, 2) manufactured hype around the financial instrument to be pumped, and 3) a large enough pool of 'suckers' to fall for the hype.

The inverse of this scenario works as well, where market manipulators coordinate dominant short positions, triggering other traders' stop losses.  This creates further fear, snowballing the wave of selling.  Bad 'news' can simultaneously be released to compound this.  The silver market has recently been exposed as being manipulated in this fashion, and the same is pretty clearly true for the gold market.

It may be said that these sharks act to rid the market of speculators who don't know what they're doing, and thus increase the likelihood that speculators in the aggregate will move prices in the right direction.  I doubt this is true, however, since the sharks probably aren't any better at trading based on fundamentals than the speculators they devour.  So I probably agree with you that these guys aren't providing any value to society.

But at the same time honest speculators move market prices based on real economic information, such as expected shortages and gluts.  It is in these cases where what the people in this forum were saying holds true - i.e. what you were denouncing as free market propaganda.

That being said, most speculators do not employ these nefarious strategies, since most speculators haven't got access to the means to gain dominant market positions in deeply traded global markets like food and other commodities.

One of these means is cheap credit, produced by central bank manipulations, so one obvious way of lessening the damage these people can do is to undermine the ability of central banks to manipulate interest rates by creating successful competing currencies.  So I'm glad you're interested in Bitcoin then!

But there is a problem when it comes to small markets like Bitcoin, since these pump and dump schemes can easily be employed by a much greater number of people, since it's much easier then to gain a dominant market position.  (This is why you see pump and dumps happen so often in penny stocks.)  I hope Bitcoin's reputation can weather these pump and dumps, and I hope the people here will discuss possible ways of preventing/mitigating such damage.

The market is providing what choices people want; apparently, large volumes of people want cheap packaged junk food or drive-thru junk food.  Even with "free" food vouchers, via food stamps, the nutritional choices made by the purchaser trend towards unhealthy junk.

I indeed underestimated the problem of food, especially in US.

People who use food stamps do get some food.  So there is no shortage of food, and the demand is here.  The problem is therefore the fact that prices do not adapt to this demand.  I personnaly think this is only due to excessive market regulation and terrible monetary policies.  Maybe a good micro-payment system could solve that.

Great post, thank you.

You're absolutely right that you need dominant position, concerted action or cheap credit to be successful at manipulation. In the case of bitcoin, cheap credit is eliminated which is a major factor in real world economy as you can not create bitcoins from thin air like banks are doing with dollars and other currencies.

As far as dominant position goes I do not think this is that easy to achieve without the cheap credit. Even when some people probably do have significant holdings of bitcoins I do not think they could manipulate the market to such a degree even if they wanted to (but they may contribute a great deal).

So what seems to be happening is spontaneous concerted action of multiple independent people triggered by the same impulse and that is desire to make some profit from the apparent  rising value of bitcoin. The problem is that the rising value may be just a reflection of higher demand caused by these people wanting to speculate. That means that the real value of bitcoins without the speculative factor is unknown. What introduces a problem is that this speculative portion of value is only virtual, it goes away the moment there is a dip in a value and people start selling like crazy all at once crashing the value to significantly lower one. In this process a lot of people are going to loose their money to the ones who had better information and sold first (most often just few insiders).

That's why I'm saying that this kind of speculation is extremely bad for the market, it makes it unstable and distorts it causing all kinds of great problems (even serious ones like starvation). It is always going to be happening on some level but as long as it is overwhelmed by real markets it's not a big problem as its effects are very small.

BUT if people accept it as legitimate way to make money (as seems to be happening on this forum) and a good portion of the economy participants start to "make money from money" it can snowball to such an extent that is destroys the economy as we can see on our real one.

The only way to stop that is to realize that you produce nothing by doing it, you can never produce value and if you make money you take it from someone else who got screwed - this may be another speculator or regular producing trader ... therefore it is bad thing to do and we should make honest profit from producing goods and services that people actually desire and which help them in their life. The solution in my view is to make sure that the real economy is dominant over the speculative one, always striving to make the speculative one as small as possible. It can not be eliminated, but it can be made insignificant by educating ourselves and others that it is harmful and stay away from it.

So next time you see someone offering you good "investment fund" kick him in the nuts for trying to destroy the economy :)

Please use paragraphs.

This is jibberish, i can't read it.
And You are probably a troll.

Done, sorry ... I was in a hurry and I've written gibberish :) It should be better now ...