Bitcoin Forum

Hi,

I have a question, but please direct me to a post if already asked:

In case of another GFC, would BTC bitcoin price:

a) stays on the same level  8)
b) skyrockets  ;D
c) tumble down  :'(

?

If you had $1000 in the bank, and they may print a bunch of new money in a few years that $1000 will be worth about $600 today. Bitcointalk would skyrockets soon.

As far as i understand it, BTC would skyrocket, as ppl would run away from fiat into something that doesnt loose value because of crazy limitless printing. Some would run to gold, some to silver, some to other limited things, and some would run to BTC. Once they get in, price goes up, as price goes up, others see it too. Attracted like flies to a flame, they run into BTC, price goes up even more...you get where i'm aiming at...

Take your pick:

https://i.imgur.com/l6BetGA.png

That image nearly sums it up.

Assuming that the USD flops, the value of crypto would increase dramatically, and those who sell mining hardware of any kind (Sheep will buy the ASICs up like mad) will make a massive profit as well. Even companies such as Nvidia and ATI and AMD will earn tons, due to the amount of GPUs people will be buying for coins like Dark.

So in short, if the USD flops toward the flor, cryptos will become the new way of life, almost no contest. It'd be brought down to two things:
1. If power is still runnning
2. If there is a mentality that only "physical" things have value

If you can tell me exactly yes or no to those two questions, then I can tell you if cryptos will increase in value or not.

Hard to say which way bitcoin will go.

Remember, during the last crisis, even gold and oil went down quite a bit.

If the crisis will be constrained to finances only, then the answer is pretty obvious. Bitcoin will evidently skyrocket as it already did after the deposits had been expropriated in Cyprus a year ago. Now imagine the same situation on a worldwide scale and you guess the answer.

Gold has been going up during the years leading to the house crisis, what was a bit surprising to some was to see the USD going up as well

What do you mean by the USD going up - the USD index, i.e. dollar going up against other major currencies?

USD index has been going up steady in the last few years.

People think US is in bad shape, but they don't realize Europe and some export countries has high dependency on US.

Real estate in export countries has been going up the roof. Price went up 100% in a matter of 1-2 years as their own country currency is pegged to USD.

If the exporting countries buy U.S. government debt (i.e. treasuries) in exchange for the goods they supply, then this dependency may ultimately turn out devastating to the U.S. economy. If they don't buy treasuries, then this dependency is mutual overall since the exports should be balanced by the corresponding imports.

It has been to exchange goods that require hard work against IOU's for the US government and the countries exporting were able to build their industry and learn valuable skills but now they are shifting to a situation where it will be more interesting to have a more valuable currency and sell their products to their own people instead of getting paper in exchange of their hard labor

It will be devastating for the US


Yes

So, as long as USDX is not going down, treasuries are ok (i.e. the debt can keep on growing) as well as the U.S. economy, right?

Hypothetically. This could mean everyone is killing their currency faster than the USA.

However, countries with the exchange rate being lowered are now at an advantage. As they export goods, they can pay their employees more, and 80% of the time the purchasing power of the currency stays the same, unless something REALLY goes to crap.

E.x: Canada sells $10 to America. America pays Canada $10, but Canada gets $11 due to exchange rate differences. Purchasing power is nearly 1:1, and so Canada makes a larger profit.

This is constant for all other currencies and countries.

So as every other currency goes down, they are earning more against the USD. It also means that the US may be setting up to import lots of goods, since they can buy said product in the example for $10. And then everything begins to change from there.

It's kind of wierd, but if you do a bit of research, you'll understand.

they forgot one trait

traceability/anonymity

It would likely increase in price as it did when crypress had it's banking crisis last year.

A financial crisis by definition put the financial stability of banks into question. When banks ability to pay depositors is questioned then people will have an incentive to look elsewhere to hold their money. Bitcoin is a likely answer to this

I entirely agree with you; Bitcoin and Gold will increase in price if there is a financial crisis; when the market will understand that the USD will be inflated to death and will be abandoned in world settlements it will benefit Bitcoin (and Gold) as well

The likely scenario is the fall of USD, market panic, big banks failures, interest rates rise that will be fought by the FED via more QE then riots, marshall law and curfew in the US; the world economy is very integrated so everyone will suffer at first

But China and countries that have natural ressources, low debt and/or work well/hard will come up on top while Europe and the US will not be as powerful relatively to other countries; they will still have a lot of human&financial&physical capital, attraction and ressources so they will probably bounce back if the people doesn't fall for the speech of extremists

If there was another major global financial crisis like we recently saw I think it would be almost certain that money would flow into bitcoin and we would see large gains in value. When the capital flows shift in a flight to safety things like bitcoin and gold are very attractive.

Roosevelt had already expropriated gold in the USA during the Great Depression. So I would be very cautious about precious metals as a safe haven in case of a serious financial crisis. They might not try to take it away from you this time, but could make it illegal to trade, for example (or take to other not so drastic measures).

If they start paying their employees more, that would cause inflation, and the purchasing power of the currency will not stay the same, especially if this process takes on (future expectations on inflation would invariably kick in).

They could also make bitcoin illegal to trade. Not that it would stop many people. I think they would do that before they did it with gold.

Inflation is the increase of the money supply, the increase of prices is a consequence of inflation and salaries are a price


Gold is manipulated and can be regulated like everything else : interest rates, wages, human capital, real estate, natural ressources companies ect.

It really depends on the level of severity of a financial crisis. In the 2008 financial panic, the dollar and treasury bonds rose sharply as they are considered to be a safe haven. In general US banks were safe from runs on banks by depositors due to FDIC protection so I think your scenario would be unlikely.

In a financial crisis, credit will generally contract, causing people to be able to spend less money, causing deflation. The Fed would attempt to use low interest rates to battle this deflation. Deflation for large economies is a bad thing because it goes into a positive feedback loop that ultimately result in lower economic activity (even after accounting for the lower prices) and lower standard of living. 

I used the word inflation in this context as overall price increases when currency is losing its purchasing power (as the word is primarily used in this sense). That is price inflation.

The prices going down are the only good thing about a crisis; nobody complains about falling prices in energy prices or electronics; restrain for consuming because prices have been a bit lower than last year and the fact that consumers anticipate lower prices thus delay their spending is a TOTAL myth : who would delay buying gas if the price goes down by 1% or even 5%? Who would delay buying gas if he thinks the price will be 1 or 5% less in a year?? Who would delay buying anything because the price went down?? You will wait a year to buy food, a haircut, clothes, a vacation because you think it will be a bit lower in a year??
When the prices go down you are happy and richer so you buy more

Consumption is a an indirect utility function of the price meaning that consumers consume more not less when the price is lower thus they consume more when the price goes down, it has been proven each time a price has been going down


OK, the "new definition" of inflation is indeed the increase of prices but inflation is really the increase of the money supply

Most business school are taught seeing things from the supplier side. Hence, deflation and low consumption is a bad thing.

Most of your examples are necessities that have fairly inelastic demand.  Without major lifestyle changes, you still need about the same amount of gas, food, electricity, etc.  When you need to cut expenses, you generally look at optional purchases.  Can a new computer wait until next year?  Can I get by with this old car for another year?  And all of that aside, have you never waited for a sale, or a better sale than the current sale, to buy clothing or a vacation trip?  Have you never postponed filling your gas tank because prices are falling and you have a pretty good idea from experience that they will be a few cents cheaper next week (assuming you don't need to fill your gas tank every week)?

Also keep in mind that in a deflationary environment, as a whole, wages also drop along with prices (where a "drop in wages" may come in the form of job cut).  If I think I'm going to be making less next year, or if I fear I will lose my job, then I'm going to save every penny I can this year.  That kind of mentality leads to less spending and further slowing of the economy.

Less spending means the society is saving and make efficiency use of capital. Compare to the west, citizen of the east save at least 20% of their earning, low interest rate allowed the state to take on mega infrastructure project that will benefit the local citizen in the long run.

What about smartphones it is not a necessity but people buy more even when they know the price has been going down and is likely to go down
When the price goes up people can consume less

Salaries going down are a bad effect of a crisis and it is upset by the deflation of prices which is excellent

Fashion do not belong to the necessity category. Consumers are being brainwashed by marketing to buy items that gives marginal benefit. And this phenomenal only occur in big city and 1st world country.

Unlike all the predictions of skyrocketing , I think Bitcoin will fall horribly.
Nobody wants their money invested in anything volatile when they are likely to lose it all.
Hence , most people would divest causing Bitcoin to fall at any time of a major crisis.

Bitcoin's rise relies on the public feeling economically secure.

Say goodbye to bitcoin -> say hello to your savings deprecate to half in ten years.

HAHA hope you were being sarcastic because if not it is a terrible analysis since people will buy bitcoins to protect themselves; you are going to say people buy Gold when they feel economically secure?

Two countries are currently on everyone radar right now.

Argentina and Bulgaria.

What effect they have on their neighbor countries and their creditors is still not known at this time.

Saving is indeed wise and important.  But there's a difference between saving and hoarding.  I'm talking about the latter.  Even good savers will still spend a little money here and there on unnecessary things like going to movies or occasionally getting a new computer or smartphone.  But if everyone cuts out all those extras, it will hurt the economy.

A country is rich when its currency is strong without inflation or with deflation, low taxes, low government, free entreprise, high rate of savings and investment

Technology in general, especially electronics, is always getting cheaper because of how fast it evolves.  If you want a smartphone, then yes, you eventually have to buy one, even though you know it will cost less next year.  But the question is, have you ever delayed a purchase or bought an earlier generation product because of that fact?  When I look for new computer parts (I build my own), I decide on what I want to get to meet my needs/desires.  Then I wait a little while either for a good sale or for prices to drop when the next generation comes out.  If I were really concerned about money, I'd wait even longer.  If hard economic times lead to consumers buying every other generation of a smartphone rather than every generation, that will have a significant economic impact.

As for the effects of an economic crisis, if prices and wages drop a small amount, that can be beneficial for most (with the exception of those that lose their jobs due to the crisis).  But the danger with deflation is that it's very easy to get into a deflationary death spiral.  People spend less which causes prices to drop and people to lose their jobs, which leads to less spending, lower prices, and more jobs loss, which leads to even less spending, lower prices, more jobs lost, etc.

True.  Smartphones are convenient, not necessary.

Actually, I'd say a country is rich when its people really care about one another and help each other out.  But that's a different topic. :)

Setting aside governmental manipulation, a country's currency is strong when its economy is doing well (generally speaking, anyway--technically, from a value standpoint, a country's currency will increase in value relative to other currencies as long as its economy is doing better than that of other countries).  As deflation and economic contraction generally go hand-in-hand, it would be hard for a country's currency to do well during deflation.

I'm not interested in nitpicking (and it seems that you are), but this "new definition" of inflation can be traced back as far as the beginning of the 20th century... 8)

It is not a myth. It has been proven many times through history that when prices are falling (or people get an increase in wages, which is effectively the same), they tend to save more, not spend more. If it were not so, there would be no ground for a deflation spiral... 8)

Exactly there is no ground for a deflation spirale! People spend more when prices go down; you must have never bought anything if you don't know that : are you a politician in Washington or an Economics professor??


Deflation can arrive when there is a crisis but it is not the deflation which is the problem, it is the only good thing

Why the government is saying that when the gas prices go up or when the truiton go up it is bad if inflation is good??


It is not hard at all : the US during the 19th!!
Switzerland has stable prices for decades

Being a corrupt politician in Washington or a backward professor in Chicago won't change human psychology. In this case it shows itself in what is called the marginal propensity to save, i.e. the increase in income brings about an increase in saving (the same happens when prices go down). :)

Wrong! if prices are falling that means wages are also falling and business is prob cutting back on production -- laying off workers.  In other words aggregate demand is contracting.  Thats why there is deflationary spiral. 

What you are describing is just a store having a sale.

Increase in income brings an increase in savings but when prices are going down people buy more not less, it doesn't make sense not to buy because you think the price will be a bit lower in a year. If it was true nobody would buy on credit, when you buy on credit you are going to pay more for the product when you could wait and pay less because you would save the interests but people want the stuff they want sooner rather than later

Agree that in rare cases maybe people restrain from buying to have a lower price but it is the exception, not the rule; look at tv screens sells in the last ten years : people knew the prices were going down but they wanted to buy immediately on credit anyway!

When the prices go down you are happy and you can buy more and usually you will

But what about all the people that lose their jobs?  Where are they going to get the money to take advantage of the lower prices?

You do bring up another very important point that was only touched on briefly in one of the above posts: credit, which is probably much more important to this discussion than fear of job loss or waiting for lower prices.  I should have brought this up earlier.  The world runs on credit.  Without it, the world would come to a virtual standstill.  During economic crises and deflation, credit dries up.  Banks don't want to lend for fear of borrowers defaulting.  If few people can get loans for cars and houses, that removes a lot of demand from the economy, which greatly exacerbates a deflationary death spiral.

Oh, and one other thing about waiting for lower prices--even if this doesn't have a large impact on some sectors of the consumer economy, it has a HUGE effect on the stock, bond, and commodity markets.  While I may not care about whether I can get a TV a little cheaper a couple months from now, you bet I'm going to care if I think I can buy stocks cheaper if I wait a little while.

They will buy less but not because the prices went down but because they lost their jobs; the fact that the prices went down is a good thing especially for them, do you think they will be better off if the prices go up while they earn less?


We may be getting somewhere because agree that the deflation that comes with a crisis is happening while a lot of other bad things happen maybe the deflation will even be bad for some companies if they are force to reduce the prices (to get people to consume more! Not less) and it decreases their margin

But people shouldn't say that the consumer will consume less because the prices are going down and that he will delay his purchases because it is not true at all, only people really out of touch of the real people can say that consumers delay their purchases and consume less if the prices go down and that prices going up make happy custumers!

Consumer credit is a problem, not a solution; people going into debt to buy tvs, appliances and such (even cars) is a bad thing for the economy but maybe shouldn't go there because we were starting to agree ;D


Interesting point but we are not talking about consumer prices anymore but prices in general there; let me think about this one a bit

In a case of global financial crise, as the 2008 one, the price of each and every financial asset and commodities will go down (oil will go down, stocks, precious metal, and also bitcoin). In such a scenario the only safe haven will be cash and money market securities. (all the rest will crash)

However government will never let it happen, and they are ready to print even more in order to avoid this situation.

Gold went up from the dotcom bubble explosion to 2012; if we see hyper inflation most commodities will increase in nominal terms
The crisis that is coming will not destroy all wealth, it will redistribute the cards and some will come out on top

The unemployed will certainly do better with lower prices, but the overall loss of wages hurts a lot more than the gain from lower prices.

Let's step back for a moment.  Where are you from, and what are economic crises like for you in your country/region?  I live in the US where it's not uncommon for the savings rate to be negative.  For a lot of people, if they lose their job for any significant amount of time, they've got nothing except for some government assistance, and are very likely to default on their debts.  The 2008 crisis resulted in an increase in the US real unemployment rate (U6) of almost 10%.  Additionally, many homeowners finance 80% or more of their home, and then they further borrow against what little equity they have with home equity loans and lines of credit.  So when the economy turns sour, a lot of people have no money left and no way to borrow more to make it through the crisis.  So it's not that the unemployed are just buying less--they're hardly buying anything.


At least in the US, this is simply not true.  During the 2008 crisis, everything turned negative, including retail sales (see this chart: http://www.macrotrends.net/1371/retail-sales-historical-chart).  US consumers bought less in 2008 and 2009 than they did in 2007, despite any reduction in prices.


Credit is a double-edged sword.  You're absolutely right that it can be bad for the economy, but it does increase growth when used well.  Lots of easy credit leads to spectacular busts, but it also leads to spectacular booms.  The economy would be a lot more stable without it, but it would grow more slowly.


Consumer prices are very much affected by some markets, especially the commodities.

It's generally true that assets and commodities go down during economic crises, but that's not true all the time.  In 2008, oil did crash, but only after it spiked to all-time highs.  US Treasuries, because of their safe haven status, went up in value quite a lot.  It just depends on where people decide to put their money.  If everyone decided to pile into bitcoin during the next crisis, it could shoot up.  But if people need fiat to pay their bills, bitcoin might crash if everyone cashes out.

And btw, there's still some risk in money market securities.  We haven't seen a crisis bad enough to really jeopardize the money markets, but it's possible.


This will only work as long as investors have faith in government, the world reserve banks, and that there's enough room to print more money.  The US has been printing money at an insane rate the past several years, and it's worked so far, but it can't go on forever.  No one knows exactly where, but there is a tipping point at which investors will seriously start to lose faith in the ability of the US to repay its debts.  If that happens in a disorderly, crisis-like fashion, the whole world is screwed.  No amount of money printing will be able to save the situation.

People don't buy things just because the prices go down.  They buy things when they have more money.

Its psychological.  Japan experienced deflation in 90s with falling prices.  But when people are worried about their future they tend so save not spend

You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be. :)

Your example with credit actually works against your logic, by the way.

We agree


Globally the US didn't have deflation
Government computed inflation (therefore minimised) :
2008 3.8%
2009 -0.4%
2010 1.6%

They went more into debt, started QE putting more air in the real estate bubble and in the US bubble  : more of the problem to solve the problem like always to avoid a necessary recession, like Bush before; Greenspan had set higher interest rates than Bernanke and that created the housing bubble!!


Think it would grow more

Credit is good if you get a return higher than the interest rate thus if you invest the money well


Yes


It did jeopardize the money markets in 2008 but the government intervenes and guaranteed the funds, they double the bet once again and got lucky, remember?


YES


Disagree here, most if not all countries will suffer at first but it will be great for hard working countries with natural ressources low taxes and regulation and high saving rate


Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!


They have been buying like crazy and saving like crazy as well; Japan problems don't come from deflation, you have been too long in school or you are reading Bloomberg
Prices went up recently and they consume way less now with abenomics

You seem to be missing the whole point. It is not a question of buying less, it is a question of saving more! When prices go down, people (me included) don't necessarily buy less, but they do save more shrinking from additional expenditures and consumption that you would expect from the fallen prices. And this has been known since long ago (and written in the textbooks, by the way). :)

And this is enough to cause negative or even devastating effects on the economy.

Read your message twice but am still not sure if it's a joke or not : if you buy as much and you save more it is a bad thing?

Savings are good because they will be reinvested and will create wealth, if you can have the same things plus save more it is a win!

Could go either way but if fiat is worthless, I don't know how people will get bitcoins. Other than mining, I guess maybe by selling something on a BTC ebay market, or performing work for someone who pays in BTC.

If you think it a joke, I don't think we're going anywhere, sorry. Additional savings due to prices falling reduce producers' profits. This can only be compensated by expanded consumption (provided all other things being equal), but as I said before, increased saving evidently holds back this. :)

And consumption is an investment by itself, but saving postpones it, so that you can't have it both ways, whether you like it or not.

Consumption is not an investment and do you prefer a nation of consumers and borrowers with a weak economy or a nation of producers and savers?
Saving didn't hold the States of becoming the first economy; going into debt to consume will make them fall of the most wanted first place
Prefer the latter; the USA was the latter, enjoyed many liberties, low taxes and small government and that is what made this nation so great; now they have consumers, debts, unfunded liabilities and they produce less and less; it will only be justice when the hard workers and savers of this world like chinese will enjoy wealth, consumption and a strong currency

I see the problem here.  You are looking at it from a micro point of view.   But we are talking about macro

You re right, but this happened after the the dotcom bubble explosion, when the FED decided to decrease it's interest rates. However during the crises, Gold and commodities prices went down. It was the same scenario for the 2008 crises. During  the 2008 crises all prices went down (deflationary process), after the FED lunched its QE, prices started going up (inflationary process).

If inflation was -0.4% in 2009, how was that not deflation?  If you want a better example of how bad deflation can be, look at the first part of the Great Depression.

1929 0.0%
1930 -2.3%
1931 -9.0%
1932 -9.9%
1933 -5.1%
after 1933 it turns positive again for a few years


Yes, that's a better way of putting it.  Thank you. :)


I suppose it would be possible for such countries to do ok, but there aren't many countries like that (can you think of some examples?), and they would have to be very isolated from the global economy.  Usually countries with strong economic growth and a good industrial base (e.g., China) are exporters.  If a significant portion of a country's economy depends on demand for their exports, they get screwed during a global crisis because no one has the money to buy their exports anymore.


This doesn't have to do with desire.  This has to do with capability.  There were some good price breaks/sales during the 2008 crisis.  I would have loved to have taken advantage of them, but I couldn't because I was unemployed for a couple months at the beginning of 2008.  As a result, my family and I didn't have extra money to spend on cheaper products.  The whole reason they're cheaper in the first place is that fewer people can afford them.

This doesn't have to do with preference or what's better in the long run.  I, too, would prefer a more stable system that's full of producers and savers.  But the fact is that credit and consumption drive economic growth faster and "easier"--they are shortcuts to greater wealth.  And with today's prevalent instant gratification attitude, that's the path most people pick.  It's a lot easier to take out a loan and get that shiny new car now than it is to work hard, save for it, and pay cash later.

If so, then how people are going to invest later according to your own words, that is "savings are good because they will be reinvested"? :)

And as I understand, now you don't deny that savings will increase even if prices are falling, right?

Prices going down were the only good thing in the Great D, do you think prices going up would have been better for people having very limited ressources?

People have less money in depression times so it is good that prices are lower not higher

China will fair well after the USD collapsed and the dust has settled

tee-rex : savings are good, consuming on credit is bad

slimus : the bubbles arrived because the FED created them with low interest rates, when Greenspan increased the interest rates it was the solution to get a much needed crisis to eliminate the bad debt but they decided to re-inflate bubbles because they care about the present not the future

What about savings versus direct consumption? Which one is better? You won't get away with this question so easily. :)

It really depends on how bad the crisis is. If it is the scale of what we saw in 2008 (in the tens of trillions of dollars) then bitcoin price would likely fall. If it is a much more modest crisis then it could potentially rise.

In order to see the price of bitcoin, gold and all commodities goes up, we need the dollar's price (or value) to go down. In other words : inflation. With QE infinity, the world is heading towards inflation !. So good news for US  :D

Sure it's beneficial for consumers for prices to be lower when they go to the store and buy things, but the lower prices don't make up for the lack of consumption due to the hard economic times.  Aggregate consumption falls, even though prices are lower.


I guess it depends on how far in the future you look.  They would almost certainly recover better and faster than the US, but a USD collapse would greatly hurt their economy.  It would destroy a lot of US demand for their exports, and because of our close economic ties with Europe, the European financial system would also probably collapse, which would destroy their demand for Chinese exports as well.  It's impossible to predict how bad it could get, but I could see a USD collapse leading to a global depression.

There is certainly a correlation (and sometimes a strong one) between the strength of the dollar and the price of commodities and other currencies, but it's not a perfect correlation.  If the dollar weakens, that could help the price of bitcoin rise, but not necessarily.  Ultimately, the price of bitcoin in USD is simply determined by how much USD people are willing to pay for it.  The price of bitcoin in USD will only rise as a result of USD weakness if people believe that bitcoin will hold its value better than USD.

And btw, the US is still on course to continue tapering its bond purchases, so QE infinity is (theoretically) coming to an end.  The Fed is also expected to start raising interest rates within another year or so (of course that prediction keeps getting moved back), which will remove the last of the stimulus.

Its pointless to discuss in macro terms when the guy can only think in micro terms.   Just write anecdotes from consumers point of view so he understands

Price of gas drops so I'll just buy double the amount and store it in my garage.   Same goes for food, clothes.   

I just got laid off but cars are 20% less this year so I'll just buy a car instead of worrying how I'll pay my rent or feed myself until I find work again

Or

I just made  bonus this year so I'll buy a new car,  take a vacation,  etc.. Cause I have some extra money

This is true regarding the value of the dollar. However in times of economic (and geopolitical) crisis the dollar tends to rise as it is considered the least risky asset class.

Dollar has value because you can still buy oil with it.

In time of crisis, people and central banks usually flock to gold.

Correct but you cannot have a healthy economy with increasing salaries (in real terms!) and increasing standard of living if you consume on credit but your industry is stable or decreasing, your taxes are going up, your trade&public deficit are going up, your unfunded liabilities is going up, the number of employed people compared to the total of the population is going down and the quality of the jobs is going way down (look at the last jobs reports : mostly part time jobs and full time jobs are destroyed at an alarming rate!)


It is reasonable to make those assumptions; the collapse of the USD will have huge negative consequences for many but China will be able consume what they produce, the shifting will not be overnight but it will happen eventually; many other asian countries are on the right track and some European countries are strong as well
It is stupid to say the world economy cannot live without the USD, the world economy will be better off without the price to pay to have the USD as a world reserve currency and world payment currency

You didn't answer my question... 8)

The dollar has value because it is the most widely accepted form of payment accepted throughout the world.

It doesn't mean they can create USD in any amount and it won't lose its value

Countries and companies can stop using USD


In the states it would be healthier and better for the economy in a long term perspective if consumers were saving more and consuming less

The world absolutely can survive without the Dollar as the reserve currency.  China and many other countries would eventually be fine without it.  The US would eventually recover, too (although probably not to where we are today).  The problem is that the transition would be very very painful.

So you are essentially saying that producers should bear losses or withstand profits shrinking (since people would spend less and save more), and that would serve the economy better in the long run, right?

I think the transition from everybody being continually robbed to everyone not being continually robbed will not be as painful as you think. 

The world will survive ultimately (no doubt about it), but the standard of living will fall down dramatically, at least temporarily. And the more developed a country is, the more it is intertwined into the global economy, the stronger will the impact be on it.

Good point ;D


Am saying that going into debt to consume is extremely bad for the economy; nations that succeed like the USA before are nations of savers, producers, a stable country with a strong currency; you cannot consume with debt forever, it ends badly so the USA would fair better in long run if consumers were not going into debt to consume like it used to be; you use to save to buy something

You might have noticed that I didn't mean consumption financed by debt. Producers would have to take losses or see profits diminishing even if the decreasing consumption is directly financed by household earnings, right?

In order to be able to consume you have to produce wealth first and you have to produce

Producing come before consuming, no production no consumption; consuming is not hard, everyone can do it, being able to produce is what matters and being able to trade your time and skills for money is what able to you consume

The good from production also need to be priced competitively and have demand from the market.

Planing before anyone else and predicting what the market want is no easy task. The window for good profit is also small (ie: Apple and Samsung competition on smart phone)

Why do you shrink from answering my question? You can only save from money taken from your household earnings (you won't save from loans), that is money which you would otherwise spend on consumption. Please try to explain how this can be any good for the economy in the long run (as you previously claimed)?

The problem is not the demand, the problem is producing; everyone wants iphones, cars, tvs or to travel...

Answered your question, consumption made by going into debt is bad for the economy because of the debt; consumption made from savings is not better than savings; if any savings would be better because they are invested and produce a profit

You didn't answer my question. Actually, I see that you're trying to avoid answering it as much as possible. I am asking whether saving is better than consumption (I mean consumption financed from household earnings). Yes or no? ;)

Yes it is better

Saving is contrary to spending which means that money saved doesn't return into circulation but is lost for the economy, at least temporarily. If you say that saving is better than spending, this with logical necessity means that there was surplus of money in the economy in the first place. Besides that, it is assumed that ultimately the saved money will be spent, so this also implicitly implies that there will be shortage of money in the economy at the moment of spending (since your assumption states that saving is better than consumption). Don't you think that these two assumptions (surplus of money and shortage of money) are in a downright contradiction with what I previously explained to you about human psychology and how it works in respect to saving and spending? :)

"You can only save from money taken from your household earnings (you won't save from loans), that is money which you would otherwise spend on consumption. Please try to explain how this can be any good for the economy in the long"

How can it not be good? Where do you think your consumption comes from, if not someone has produced them? How can you get it, without producing something of comparable value and trade? The savings in money and investments from prudent producers is the root of increased productivity, that benefits all.

The advantages of inflation is promoted by those who want to deceive you into accepting the theft just abit longer. Speaking of word theft, I saw a definition of money as "something that looses value over time..." How is it possible for any mildly intelligent person to close their eyes to this?

They can stop using USD but even when the Fed creates massive amounts of dollars, the dollar is still more stable then alternatives that countries have

Sorry, but I don't understand how what you say is related to what I am talking about. Yes, someone has produced what I consume, so if I decide not to consume (but prefer to save instead), there is overproduction (as simple as that). We are not talking here about producers' investments.

There can never be overproduction in the free market. When one individual produces, sells his product and saves money, prices will decrease and others will be able to buy more. Saving is letting others in front of you in the consumption queue.

Overproduction and under supply can happen in free market.

Planning and mis-allocating capital can go horrible wrong even in the total decentralized system.

So will the profits of producers, right? And here we go where we started at, that is how saving can be better for the economy than consumption? ;)

Overproduction here obviously means the quantity of goods that a producer can't sell at a given price (that he would otherwise sell had the consumer not changed his preferences). If you set the price next to nothing, there will never be overproduction indeed. :)

... said he without even trying to argument for it.

I did. Read my post before yours at the end of the previous page. ;)

Over production happens when more is produced then what can reasonably be consumed. A merchant can only sell so many products before there is no demand for the product anymore and merchants often have a time limit to how soon something much sell either because of seasons or because a specific product will "go bad" after a certain time

When supply strengthens, and demand softens, the profits of that specific market is eroded, and the capital is taken to a more profitable market space. There is no overproduction. Temporalily, prices can go lower than the producers are happy with, but that is also a temporary advantage for people just on the edge of purchasing that exact stuff. Conversely with the absurd notation of under-supply.

On the other hand in a nonfree market, that is someone disturbs the free market using the threat of physical force in violation of human rights, meaning government, prices and volume is always suboptimal. Compared to what consumers and producers want, which is the only important thing. Some random person, voter or not, is not entitled to push his values on to others.

And now we return to the initial issue, that is the increased level of savings causes producers to lose some of their profits, right?

Companies are not always able to react to the market this quickly as it takes time to build new factories, to train workers to do new processes in order to make different products. Companies also need to have work in progress so they would be forced to continue building some product even after demand falls a lot because they would finish the work they have started. It is also natural to have ebbs and flows in demand so a company may think that a decline in demand is just a natural ebb in demand.

This would happen when markets are 100% efficient and have all of the real time information that is relevant to the market

Market are still the most efficient and when the State intervenes the prices go up, the service quality and innovation go down

D) aliens invade and bring us $. THere is no solution without destruction, we are in point where wars started in history, now it's the time, sadly.

I mostly agree.  However, there are times when free markets get out of control (bubbles and crashes), and some limited state intervention may be required to let a little air out of bubbles and "soften the landing" when markets crash.  Like a lot of people, I think governments went way overboard after the 2008/9 recession, but I do think that some kind of response was necessary during the crisis to keep things from spiraling further out of control.

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it. 

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Both lending practice and low interest rate contributed to housing bubble.

Yeah thats what I said.  But interest is lower now than during bubble.  So interest didn't "create" the bubble.  And you can't blame the Fed for bubbles in multiple countries

And 0% is a bank rate.  Not consumer rate.

I think that when another GFC will come bitcoin price will fall down too because bitcoin is not an independent currency.

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Of course the price will skyrockets a bit
But BTC will dead, if :
1. no power
2. no internet connection
3. no miner  ???


I pick Fiat & Crypto  ;D

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

The only way I could see bitcoin being a store of value is if people simply decided that it would be.  As you pointed out, you can't use bitcoin for anything but payments, whereas real estate is quite useful--people will always want real estate.  If people simply decided that bitcoin would be a store of value (and it would appear that they have for right now given the price), they can also simply decide that it won't be anymore (which is something that concerns me about bitcoin, but that's another topic).

Money didn't appear by itself, people needed it and the functions it fulfills, so there is a need for a payment system. Its usefulness (utility) is as objective as a need for a home (though not as vital indeed). In this aspect, it is not that people just decided to use Bitcoin per se but for its usefulness in attaining their purposes. And since Bitcoin is deflationary by its nature at that (through limited emission), it can be used as a store of value.

Bitcoin needs to have price stability for it to have a store of value. It has nothing to do if people decide that it does or not.

Well houses are used as a store of value, and thus acquires a higher value than its use value. If good money is available, that money will be used as a store of value. Then you don't have to realize half your house to pay for your kids college, that involves moving to a house of half the size, which is costly and maybe not what you want. So at any time you will have a right-sized house, and your savings in good money.

A house is not an investment, it is more like a durable consumer good that takes many years to consume.

The idea that a house is an investment, comes from the fact that it rises in the bubble build-up phase, combined with low interest loans which are the effect of government credit creation.

So it will be solved (if all goes well) in the way that the money value of houses will be sucked into bitcoins instead, leaving the houses with only the use value. I don't have a timeframe, other calamities may happen first.

The real estate bubble was caused the CRA that forced banks to lend to people who are mot qualified for the loans in order to serve enough of the communities

Real estate is an investment if you collect rent on it.   However,  the mortgage is a liability but equity is an asset

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function,  except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

Correct. It is an investment (it is capital) if someone owns it and rents it out for profit.

But if you own the house and use it yourself, it is a (durable) consumer good that is consumed in roughly 50 years. It lasts longer of course if you keep it well (for a cost) and modernize it (for a cost), but the original expence is consumed in about 50 years. Therefore, a consumer good.

The raw land value, is of course kept indefinately. Housing economy is rather complicated, there must be at least 5-6 other factors determining the profit of a house as investment, and the cost of a house as a durable good.

I'm a little confused here.  You say that bitcoin and fiat have no value for direct use, with which I agree.  You then say that fiat does not work as a store of value.  But then you imply that bitcoin can be a store of value that will suck in all of the extra stored value of the housing market.  Why wouldn't bitcoin and fiat be the same in this regard?  Yes, bitcoin has limited supply, but why does that mean that it should be considered a safe store of value (it would have to be considered even safer than real estate to suck in its stored value)?  Or are you thinking of a future in which bitcoin basically becomes the reserve currency of the world, or at least the dominant currency of a particular country or region?

The price of the house can potentially increase in value as well. However it is very difficult and time consuming to extract what value the hose does have.

The problem here is he isn't using financial/ accounting language.

It simple, if you buy a house w a mortgage the asset - liability = equity or asset = liability + equity.   If you buy bitcoin w cash its just an asset.

The asset price is the market price.  There's no reason to say houses are money (good or bad).  It makes everything confusing.  The money part is the mortgage not the house.

Sorry my prior explanation was incorrect.  I should have said:  When you have the mortgage, what you owe is considered a liability.  Depending on the asset price you can have negative or positive equity.

I don't see why bitcoin should affect housing price.  Its not related at all

Plague here means continual trouble which you can't get rid of. You say that houses take on a store of value function of money since "current money is not good for that", but this leads to housing bubbles, correct? So if Bitcoin is good as a store of value, this will also bring about now Bitcoin bubbles.

Besides that, being a good store of value doesn't make a good means of exchange, and vice versa.

The difference between fiat and bitcoin is precisely that fiat is unlimited, and bitcoin is limited in supply. Since fiat is unlimited in supply, it can not be used as a store of value. Each  time the supply is doubled, the stored value is halved (well, after the new fiat is dispersed). This is the main difference that bitcoin makes. It is in effect now, no need to wait until all others use bitcoins, if they ever will.

In a bubble inflation phase, houses work just like "deflationary money", a money type where general prices, expressed in that type of money decreases. Ex: A car can be had for 100 milli-houses, next year maybe 90 milli-houses.

Since houses have bad money characteristics, the money value can go to better money types, and money value of houses can disappear.

Bitcoin can be a bubble that never deflates, because there is no better money where the value can go.

You are not telling the whole truth here. Your point that each time the money supply increases, the value of money decreases is only valid if all other things stay the same. If the money supply stays on par with the economy growth, there will be no decrease in the purchasing power of money. So fiat supply limitlessness is not enough per se to make it different from Bitcoin as a store of value.

Houses is a very complicated investment (or durable good) where lots of different aspects of the situation has been taken into account. I speek only of the added value that is the effect of people using houses to secure their savings, or expand their savings if they think house prices will go up after inflation adjustment.

The store of value function leads to bubbles for houses when houses are used for money.

Bitcoin can be considered a bubble for the same reason. The exchange value part of the good is the bubbly part. The bitcoin bubble may never deflate because it is the best money.

Bitcoin solves the problem with housing bubbles. There is never a tooth-paste bubble - because nobody uses toothpaste as a store of value.



When a country's fiat money become exceptionally bad, other things will be used as money. In an article from the mainstream source wsj, you will find this:

"With inflation at 60% a year, among the highest in the world, Venezuelans protect their earnings by buying cars, among other big-ticket items."

You also see the rise in prices in this statement from a taxi driver. Note that the price rise is in dollars, that means that the car increased in real terms:

"I can't find anything. Prices are climbing daily," said Jesus Ramirez, a taxi driver who has spent a year trying to replace the 2008 Renault he purchased new for $7,441. He sold the car for over $30,000 five years later.

http://online.wsj.com/articles/in-venezuela-old-cars-become-investment-vehicles-1405972426?mod=yahoo_hs (http://online.wsj.com/articles/in-venezuela-old-cars-become-investment-vehicles-1405972426?mod=yahoo_hs)

The parameters I hold invariable in the consideration, is the number of people and their holding preferences (the saving rate is 0, or the amount saved does not change).

I do not consider economy growth as input to the money value function. Some do, but that is based on flaky statistics, which are trusted even when they fail. I consider the growth thing as an allegedly plausible way to get out of the current mess.

The value of the money is the supply (people willing to part with their money), and the demand to hold (people offering things for money because they want to hold more money, e.g save money).

I wouldn't say that Bitcoin will solve the problem with housing bubbles, just because there is no direct use value behind it. The house prices can't fall down and reach null for evident reasons (people need homes to live in). Though this doesn't in the least mean that some decrepit houses in dangerous places would be worth anything.

Also, I'm not sure about a tooth-paste bubble, but there had already been a tulips mania (you know what I mean). ;)

Look, if houses fall down to the use value like you describe, and stay there forever, the house bubble problem is solved.

This is flat-out wrong. Consider there are twice as many goods and services with the same amount of money in circulation. How are you going to sell all these new articles unless the purchasing power of coin increases (that is prices decrease), provided all other things like velocity of money stay the same?

I don't care about volume of goods or velocity of money. Goods and services are sold for goods and services, money oils the trade by enabling indirect trade, there is always enough money, and with bitcoin we don't even have to worry about changing between notes and coins of different number of units.

But this would have nothing to do with Bitcoin. If you still doubt my words, consider "paper" gold instead of Bitcoin. Did it prevent housing bubbles? It didn't, and the reason for this is just the direct use value which is present in the case of homes and absent in the case of gold (paper gold, I mean).

There could be enough money only if the velocity of money turnover increases in the case the amount of money stays the same while the volume of goods increases in the economy. If you are arguing with this, it proves that you just don't know how money works.

There is always enough money. If you are arguing with this, consult the policy of the reichsbank of the weimar republic, as expressed by its president Rudolf Havenstein. During the whole hyperinflation, he thought there were not enough money. (Because the value of the sum of money decreased, even if the amount of marks increased). You could also read any of the austrian economic writers.

At first you stated that the economy growth is not relevant to the money value function ("I do not consider economy growth as input to the money value function"), now you are saying that "there is always enough money". Okay, but would you care to explain how the latter is related to the former (provided the amount of money in circulation stays the same)?

More goods and services mean more wealth, because that is the definition of wealth. More goods and services compared to last year, means that the productivity has gone up. If this happens and nothing else changes, prices measured in money go down and the value of the money goes up, because that is the definition of value of money. So you don't need more money. You never need more money, a fixed supply is always enough.

And now compare what I made bold in your quote with what you said before, that is "I do not consider economy growth as input to the money value function. Some do, but that is based on flaky statistics". You seem to be contradicting your own words.

In one sentence, you say that fiat can't be used as a store of value, and then in the next, you talk about the stored value of fiat being halved.  So can fiat be used as a store of value or not?

I think fiat can be, and is, used as a store of value.  The stored value does fall over time with inflation, but it is still used as a store of value.  When you save money, you're storing something of value that can be exchanged for goods and services.

If bitcoin stabilizes in price and becomes an ingrained global currency, then its limited supply might make it a better store of value than fiat.  But for now, fiat is a better store of value because of its stability.

The fact that bitcoin has been so volatile with lots of bubbles and crashes makes it very bad money.  You want money to be stable.  Yes, the bitcoin bubble may never deflate, but it easily could.  Right now, bitcoin is acting much more like a speculative investment than a currency.

Edit: I also think that bitcoin is likely going to have a lot of problems with ever becoming stable because of its limited supply.

Fiat is a store of value, but not a good store, as the value evaporates with time. Other money, with a near stable value, is better. Bitcoin is more risky as it can go down further, but since it can also appreciate, it can be described as stable with volatility, or stable with a risk. But I expect the value to go up as far more likely than to go down, so as a store of value it is far better than stable money.

If fixed supply is always enough then why inflate btc to 21M?  Why not premine 21M and give everyone an equal amount?  Let the people decide which money they prefer to use?

That could have been done (see Auroracoin). The mining is partly for initial distribution of coins.

What you're describing is a good investment, not a good currency.  Bitcoin is anything but stable.  Stable plus a little volatility is what the price of a bitcoin on Bitstamp has been for the last few days: it's oscillated only a few dollars around $621 or so.  For normal currencies, a 1% change is big deal.  Look at that article about Venezuela.  60% inflation is insane.  Compare that to the 7000% that bitcoin has gone up in the last 2 years.  You can't tell me that bitcoin is stable.

Look the price is not supposed to be stable right now. This quest that some people seem to be on is idiotic. They don't understand how the price mechanism works at all.

It's a speculators game all the way to the top. When we have reached full adoption, and spent a number of years riding out the last volatility, then we can begin to talk about stability. Before that it's a waste of time.

Because Satoshi is not a dirty commie.

But let's entertain that idea once more. For starters, define "everyone". Then explain how the distribution would happen without someone to distribute it and why it would be worth something, anything, under such a scenario.

I agree, except will bitcoin ever be stable, even after full adoption, etc.?  The issue with limited supply is that everyone expects the value to increase over time as the global economy expands.  This would invite perpetual speculation, which would result in bubbles and crashes.

And there is nothing wrong with that. Not even a little bit. People trade in fiat volatility right now. Most people just don't know it.

I didn't.

And look at how well that worked out for Auroracoin.  While I wish I had a bigger slice of the bitcoin pie, slow distribution is important for adoption, and people need incentive to get into bitcoin and develop businesses around it.

I agree, there's nothing wrong with a little volatility.  But even the more extreme daily moves in the Forex markets are a percentage point or two, not 10%+.  Although I guess it will depend on how much bitcoins are worth when we reach full adoption.  If they're worth a lot more than they are now (like 10x, 100x, or more), that would limit the volatility.

At full adoption, as in everyone in the world use it, a "whale" will be anyone with a tenth of a coin. Math provides the answers we seek.

Um, yes you did.  See the bold text from your previous comment.

I think this will never happen. Think in terms of real wealth. Why would anyone want to sell you a plant, a bank, an oil derrick just because there is a limited supply of new coins?

I doubt that bitcoin will reach that level of adoption any time in the next few decades, if ever (I have a hard time seeing it as more than another major world currency like USD or CNY unless the organization of the world changes drastically).  But if it does, or if it comes somewhat close to that, then I can see volatility being reduced to the level we see with fiat currencies today.

Why would they sell you a pizza now?

I think the idea is that someday a majority of the world may choose to use bitcoin over fiat currencies because they've had it with their governments messing with their money.  If BTC becomes the world reserve currency, then most people would use it.  But as I said, I think the world would need to change drastically for this to be feasible.  At some point, if governments feel threatened by it, they may try to damage or kill it.  And it probably wouldn't be too hard to do that, either.

If governments would mess with their money to a degree when you think the majority of the world would choose to use Bitcoin, people will actually switch to anything which has "real" value (say, gold).

That's possible.  But I think such a movement would have to occur among us common folk, if you will (a lot of the rich and those in power probably prefer things they way they are), and bitcoin is more accessible to the average citizen than something like gold.

Average (and below) citizens would obviously switch to either direct barter or will use something like seashells as a means of exchange, using gold or silver for big purchases and settling accounts.

Once more. Dollar is perceived as stable, but slowly depreciates at 1.5% to5% per year. That is maybe stable day to day, but it is not at all stable over a decennium.

Bitcoin is designed to be stable over decennia, but is currently not stable day to day. There is a risk of 10 % down at any day, but after 10 years it is either stable or going up. So it is stable over some longer period, but it is volatile day to day. So, it you can stomach the day to day risk, it is stable over 10 years or even 3 years. Better than that for savers, it is expected to go up, even if there is a day to day risk.

I don't care to feed you with a teaspoon on this any more. Take it or leave it.

My guess its B. Bitcoin will be seen as a safe haven by many if the dollar collapses.

Safe heaven requires not only stability of the value but law and regulation on its side to enforce contract and agreement.

I hope so too, but I am skeptical. I remember a few years ago people were predicting gold price to be $2000-$5000 by now. Well, it did not happen.

This doesn't seem like a convincing argument.  Here's why:

1) If after 10 years the value of bitcoins is stable or going up, then  it's *not* stable and going up.

2) There's no reason why after 10 years the value of BTC can't go down.

3) There's no reason that guarantees the value of bitcoins will be stable in 10 years.  It *could* be, but there's no mechanism that ensures this.  

4) If the value of bitcoin goes up (i.e. like a good investment might), you run into the problem of currency hoarding, and this conflicts with the importance of liquidity.  

5) Expecting BTC to go up doesn't mean it will happen.  Ask all the people that bought BTC just before or shortly after the ATH what their expectations were upon buying in.

6) No matter how you spin it, fiat is historically a better store of value as it is less volatile and more predictable.  Imagine having $1000 in USD and $1000 in BTC and asking yourself to predict how much purchasing power you will have in one year.  I can estimate with great confidence how well my $1000 in USD will hold up over that year, but I can't estimate the same for BTC.  Just look at all the predictions on BTC price made on this forum.  A year ago, we had some expecting BTC to be $10,000 by now while others expected it to be closer to $10.  

7) Stemming from this last thought, it's simply a non-sequitur to conclude bitcoin is a better store of value because of a personal expectation you have that leads you to believe it's more probable that BTC value will increase rather than decrease.

8) There are a handful of scenarios which could wreak utter havoc on BTC as a store of value.  For example, consider that while the total supply of BTC is known, the market supply is not, and this could be very, very problematic.  Many people have stated something to the effect of, "If BTCs/private keys are lost or irretrievable, this decreases the market supply and it just makes the rest of us richer!"  Okay, that's great, but let's say that some large number of BTCs that are assumed to be lost or irretrievable actually aren't.  It's already been estimated that the total number of lost or irretrievable BTCs already tallies into the hundreds of thousands, if not millions.  The problem is there's really no way to make a good estimate.

To illustrate with an extreme example, let's say that all but 1 BTC are considered lost or irretrievable.  Since BTC can be divided infinitesimally, this shouldn't be an issue since the global economy could still function with only 1 BTC in existence, right?  Can't you just shift a few decimal places?  Theoretically this could work, but then imagine what would happen if those BTCs assumed to be lost/irretrievable are discovered to be found and active?  What if the ~1 million BTC that Satoshi mined started moving when all that was assumed to remain was 1 measly BTC?  What do you think about BTC as a store of value then?  Don't you think that it's realistic to expect that, if BTC value continues to rise for many years as you expect it to, there *will* be many BTC hoarders who will also wait years before making their own personal supply known to the markets (i.e. by moving them)?  

TL;DR:  You might want to reconsider your position...

Your logic is rather perverted and lacks grounding at all. Bitcoin doesn't have 10 years behind it to give you any viable reasons for saying that "after 10 years it is either stable or going up". There is just nothing to base your argument upon so far.

Yet because the Gold market is highly manipulated by the US government and big banks, the market will see clearly that the USD will be printed exponentially and the price of Gold will go up tremendously

Patience! Some US officials seem to want to create a war to hide the upcoming problems, Gold will go up in price to new highs

Even if the US continues to print money, that doesn't guarantee that the price of gold will increase.  It's likely, but not guaranteed.  And even if it does go to ATHs, there's no guarantee when that will happen or if the increase in gold's price will beat inflation.  Gold is a commodity on an auction market.  If someone big wants to sell, the price will go down.  And if it's being manipulated, which is likely, then it's hard to predict where the price will go.  It just depends on what the manipulators want.

Good points.  I don't think I can improve on this response to what Erdogan said.

Something else to consider about those "irretrievable" coins: they may not be permanently irretrievable.  As technology progresses, it may eventually become feasible to brute force the keys in a reasonable amount of time (although I'm not exactly sure how this would work, so I could be wrong).

It's not and never will be. It's not a matter of technology. There is simply not enough energy in this solar system to brute force private keys, even in theory.

I wonder how many times humanity has claimed the impossible only to be surprised by a very rude awakening.

Let's modify that to, "Based upon our current understanding, we believe this will never happen."

Brute forcing *does* seem overwhelmingly infeasible (but NOT impossible as there is a known chance of a collision, and though this likelihood is unfathomably small, it's still there).  But, there may be alternative methods to brute forcing we haven't considered.  In *theory* an advanced quantum computer would contain all possible private key solutions -- an analogy of how such an advanced computer can be imagined is to think of a library that contains all books that ever have *and* that ever will be written, and that there simply needs to be a method to find the book you're looking for.  Accordingly, it's not so much about solving for the correct answer, but rather removing everything that's unnecessary to leave only the correct answer.  Take this with a grain a salt; I'm by no means an expert on the subject.

The Infinite Library does not exist, and quantum computers only exist in sci-fi novels. Let's discuss this when we have a working model.

Actually, small quantum computers do exist.  I don't know much about the details, but the company D-Wave claimed they did an 84-qbit (quantum bit) computation in 2012.  See wikipedia:

http://en.wikipedia.org/wiki/Timeline_of_quantum_computing#2012

do you think we`ll see something again like 2008? Its been 6 years already ever since that moment.

Will we have more recessions, financial crises, and market crashes?  Of course.  That happens every several years.  Will we have one that's as severe or worse than 2008?  Almost certainly.  Will the next one be that bad?  I really don't know, but I think it's possible.  Reserve banks are still overextended, interest rates are still ridiculously low in some countries, and some economies still aren't doing all that well.  During the next crisis, governments and reserve banks may not have the wiggle room they did in 2008.

In a Crisis, people and companies try to be as liquid as possible, I think if the next crisis strikes within 5 years, then Bitcoins sell off, if its 20 years away and bitcoins have more time to integrated into society then I think they could greatly increase in value.

The 2008 collapse was something that generally happens less then once per lifetime.

The 2007-2008 financial crisis, you might think, was an unpredictable one-time crash. But someone have plotted a set of early warning signs for unstable, growing systems, tracking the moment when any bubble is about to pop. (And he's seeing it happen again, right now.) Here is a video: http://www.ted.com/talks/didier_sornette_how_we_can_predict_the_next_financial_crisis (http://www.ted.com/talks/didier_sornette_how_we_can_predict_the_next_financial_crisis)

I love these things!  If you have time, I found the 'femto camera' video somewhat jaw-dropping...

As for this video, I found it particularly interesting - and interestingly peculiar - that it went so far as to briefly mention the application of the theory to things like landslides and more general ecological or biological patterns.   I wasn't expecting that.   Something that's a little concerning to me is that it seems that this method of analysis would be very helpful for insider trading.  Although, I suppose things would be complicated pretty quick after that, especially if it is widely known and used.  Can you imagine the financial forces of good and evil trying to out-predict each other so intensely they're predicting perturbations ike 10 bubbles from now?  :D

Lots of people see it coming with the insane lending going on in the housing sector. So, it is not unpredictable as the mainstream media portray it.

All my tech and fund analysis points to a crash sometime in 2016 or a little after... should be
bullish btc.. if btc goes down (sub$400) now it will be more bullish as bigger players jump ship to crypto.

I've witnessed 3 crashes in my lifetime

Treating housing as a commodity / investment was never going to have good results for society, regardless if 2008 did or didn't happen.

The conditions to get the 2008 collapse are all there only bigger : reckless doing, 0% interest rate, government manipulation of markets, heavy regulation; except this time they will probably inflate the USD to make everyone whole so the stock market may not nominally go down

You can't just inflate the USD like that without major repercussions.  You'd likely end up with massive inflation, which would cause interest rates to skyrocket and bond markets to crash, which would cause or deepen a recession, which would cause the stock market to crash anyway.  Now, things are more complicated than this, so maybe there's some way they could do it without causing so many problems (or maybe they wouldn't happen quite in this way), but I'm guessing it would be very difficult at best.

Only a few would sell you a pizza right now for bitcoins. And those who do, accept bitcoins since they know how to get rid of them. Even if they stash them away today, they still plan how they would spend the proceedings tomorrow.

Knowing that it's coming isn't usually the problem.  Anyone who knows anything about finance knows another crash is coming.  The problem is figuring out when, how far the markets will fall in the crash, and also how much the markets will go up before we start the descent.  Timing is everything.

Correct, if you pull out now (from stocks, housing), you may loose some appreciation. What you can say, is that those assets are risky, and they become riskier.

Yes, as valuations increase, assets become riskier.  The stock market is starting to get pretty high now by historical standards, so one would think that we'll probably get at least a correction in the not-too-distant future.  But as an old saying goes, markets can behave irrationally longer than you can stay solvent.  So it's by no means a good idea to short, but it is time to be cautious.

a more accurate statement would be, 'as the expected return on assets increase, the assets become riskier'

With that being said, as assets become more expensive, there is a greater chance of a, at least short term pull back in the price.

Anyone know where this image was originally published?

And if another GFC were to happen, I don't think the general public is ready to put all of their fiat into a cryptocurrency quite yet. There is still a liquidity issue and the tech issue.

I'd say more tech issue than anything.

Liquidity would -probably- be high for a while, but it would taper of as time progresses. So it would be pretty good for a while, or at least long enough for people to try and exchange a lot of fiat to Bitcoin, since a lot of the bots would still be active.

And hey, if they can't get Bitcoin, the price would skyrocket, and/or people would start turning to precious metals.

This table is biased for pretty obvious reasons. In today's world of electronic monies fiat is as durable as anything else, highly divisible as well, and by far more secure than cryptocurrencies (cf. breaking into a bank account vs personal computer), let alone counterfeiting.

I think you're right, a lot of people wouldn't.  But if some did such that bitcoin started rising in contrast to a falling stock market, it would look pretty attractive.  That might draw more people in.  Additionally, if a bitcoin ETF is available so that average stock market investors can buy in very easily, such a crisis might give bitcoin price a good boost, at least for a short time (maybe another bubble?).

Bitcoin can't be counterfeited. Can not. Up to you to back up your accusation if you insist on it. And fiat includes the physical kind.

I'm curious how you could misinterpret my message so badly. I was referring to fiat in respect to counterfeiting (actually, all my post was about fiat). How are you really going to counterfeit a Central Bank (or MasterCard for that matter)? Regarding paper banknotes (which still can be counterfeited), I can only advise you to weigh your chances to sell (or buy, just in case), say, a home for cash.

What caused the 2008 collapse was loose lending for houses (this also spilled over into other types of lending as well), we are not seeing that today. A secondary factor that contributed to the 2008 collapse was excess leverage at banks so investors could not determine if they had sufficient capital to survive.

Lose lending was encouraged by the FED and the government with Fannie Mae and Freddie Mac

We have exactly the same situation now with very low interests rates that create the bubble, except now it is bigger, the same that were in denied are still in denied because they are participating to the foolish bubble

How as loose lending encouraged by the Fed? Loose lending was caused by regulations forcing banks to make loans to minorities via the CRA.

It does seem like housing may be getting into bubble territory again.  But what's a lot scarier, IMO, is the bubble in US treasuries.  If/when that sucker pops, interest rates will spike, and the US will be screwed.  We've been borrowing many trillions on the assumption that we get to keep financing all that at a couple percent.  If interest rates go up 2-3x or more, the extra drain on tax money or loss of government spending will probably throw us into a nasty recession.

This won't happen since Congress will pass an act and Fed will print as much money as needed to cover all outstanding debts. And with the newly printed dollars, the happy US treasury bearers would buy even more US treasuries.

So they want to collapse?

"Oh, interest spiked?

Print another 185 billion dollars, halve our currency value, have people start dumping our dollars, and move on to something else, leaving us with a really poor exchange rate and decimated purchasing power."

Yeah, the US is doomed.

And that would be wisely called QE4 (5, 6, etc. ad nauseam). As long as they can keep inflation constrained (as they do right now), it doesn't matter how many more dollars they would print or how high the US government debt will spike.

So, to paraphrase your words, the world is doomed to bear the burden of the US debt.

So is half the world, with their huge dollar holdings.

Yeah, unless some countries decided to just start buying up lots of gold out of no where...
And this.

The world is doomed, the dollar is set to collapse, so now we wait...

Why so? The world economic system would probably collapse if we had an asteroid hit the Earth or the Yellowstone super-volcano blow up one day. Dollar is just a money, a means to exchange things. What really matters are these things that are being exchanged for it, i.e. real wealth created by people. It just can't disappear in a flash.

The FED is an independent government agency that should not be subject to this level of oversight. The Fed's purpose it is keep inflation in check and try to get the economy to reach maximum employment. Nothing else.

Now they created a mandate of minimum inflation! Which is crazy

They are fixing the lending markets and most markets actually; the balance sheet of the FED went from 500B to 5trillions in a few years, we are in a recession and heading to an economic collapse in the US and even in most the western world : bonds and stocks markets are way overprices

The Federal Reserve System was established by an act of Congress, thus it is subject to congressional oversight (and it is Congress that raises the debt ceiling, which is just another way of making the Fed print more money through government (Treasury) borrowing). As I know, they could even dismantle it entirely in the case such a need should arise.

It did seem as though you were indirectly suggesting that fiat is less prone to counterfeiting than cryptocurrencies.

I'm not sure what you're getting at when you talk about counterfeiting a central bank or MasterCard.  This seems irrelevant to bring up.  If you can counterfeit a bank note then what does it matter if you counterfeit the entity that produced it?  I'm really not sure what counterfeiting such an entity would mean, let alone what point you're trying to make.  Clarify, please?

I was not talking about cash, I thought it was evident right from the start. The table thus shows a biased view on fiat as being more prone to counterfeiting than cryptocurrencies. How are you going to counterfeit a digital currency (which is presently the major form that fiat exists in) unless you somehow can counterfeit transactions in this currency? For this you would have to "counterfeit" a central bank (or at least a payment system like MasterCard).

And, in fact, fiat may actually turn out to be less prone to counterfeiting than some cryptocurrencies.

This is a beautiful pic that sums it all. Im going to translate this and show my parents and non geeky friends. It's easy to see how BTC is a legitimate place to put your wealth into. I hope when the world realizes this I have enough BTC to call it a day.

This chart is true for any crypto currency, but I don't see all altcoins succeeding. :D

Haha good point.   

I'm not sure if gold is that portable.  Are you going to chip off flakes to pay for lunch at a restaurant?  Never mind a $1 million gold bar weighs like 25 pounds.  Forget what you saw in some Indiana Jones Movie, nobody can throw 10 bars into their backpack unless they're the Hulk.

There can be only one. ;)

Yes, widespread adoption is the key.
And bitcoin has a head start.

Lots of new coins coming up. I won't dismiss all of them yet.

True. The myspace-facebook analogy could play out in crypto as well.

As I stated in one of my posts above, it's not that simple--you can't just print money like that.  There are a lot of extra consequences, and a lot of assumptions that everything else in the scenario we're discussing is as it is now.  If interest rates triple, that already means that a lot of people are losing faith in US treasuries.  If the US just starts blatantly creating trillions of dollars, all faith will be lost and treasuries will crash very hard.  It doesn't matter if people have tons of extra money to invest.  They'll be plowing it into investments that go up with inflation, unlike treasuries and bonds, which go down.

Of course, the other part of this is what's happening to the economy while treasuries are crashing.  If it's sliding into a recession/depression (which is quite plausible), then deflation could take hold, which might make bonds look more attractive.  But treasuries would likely still suck.

You are right indeed. But we are choosing not between the good and the bad, but rather between the lesser of the two evils. The worse being a default, so what would the US choose? Actually, we already know the answer, since the debt ceiling was already raised in the conditions when the US government had been no longer able to pay out interest.

Ok, fair enough.  If we have to choose between printing and default, then yes, printing is preferable.  Ironically, however, if we print too much, we'll probably be forced into default anyway because no one wants to hold on to bonds issued by a country that's massively devaluing their currency.

This would be true if other countries wouldn't actually fdo the same, i.e. devaluate their currencies all along with the US printing money. This is called competitive devaluation (http://en.wikipedia.org/wiki/Currency_war).

When all the countries (or most countries) use QE then the exchange rates stay roughly the same while global inflation rises (or deflation is less)

Yes, very true, which is why it's worked so well so far.  But I'm thinking of an acute case of devaluation brought on by a crisis in which treasuries crash.  For example, the government says they're going to increase the money supply by 10% overnight to pay off a bunch of bonds.  Although, I suppose such large amounts wouldn't be needed immediately anyway since paying off bonds continues to happen on sort of a rolling basis, where some payments are made every week or month on different numbers of treasuries.  In any case, if we have to devalue the dollar a lot in a short period of time, it may make people sell.

This is why QE did not cause such massive inflation. The economy was already on track to have deflation, but QE made the deflation be lower and instead had mild inflation

Exactly and the inflation can be seen in the increase in the money supply (which is inflation) and the consequence is rising prices in the supermarket and stock market
The official US CPI is underestimating inflation

Rising money supply does not necessarily mean inflation. If the additional money supply is not lent and/or spent then it would just be more money sitting in the "bank" (aka the federal reserve). This is one reason why inflation has been so low (apart from the negative inflation prior to QE) as banks have a lot of excess reserves at the federal reserve because there is not enough demand for loans from borrowers that meet an acceptable credit risk.

If in spite of rising money supply and low interest rates, there is not enough demand for loans from borrowers, all it means is that Quantitative Easing has not really been effective.  ;D

You can't say so, since they are targeting the inflation rate and have been successful so far while trying to pass between the upper (run-away inflation) and the nether (stifling deflation) millstone.

Has it really been effective? The target was to get the economy moving again. These funds were supposed to make their way into the economy, not into various emerging market assets.

I'm not very familiar with the effects and aims of QEs, but if I'm not mistaken, one target of the "money printing" campaign was to liquidate toxic assets (read write off). If these funds made their way into the economy that would simply increase inflation rates (now we are heading well into exogenous vs endogenous money debate).

The financial crisis took out a few players (banks / investment banks) in the credit market. The absence of these financial intermediaries would have resulted in lower credit being available to main street. Rates would also have risen, with banks not willing to take on additional risk. QE was supposed to ensure that this did not happen, by making ample liquidity available in the system.

I would say it can sky rocket easy.

The point of QE is to get people/businesses to take more risks with their money, which would mean they would risk hiring more employees.

The fed is not able to control demand for loans as easily as it can control the supply of capital for loans. In this regard the net effect of QE has not been as great as it otherwise could be but has still somewhat worked.

So, in the worst case, QE just didn't work out since there was not much demand for credit from the "main street", but it didn't make it worse either, right?

QE and 0% interest rate are propping up the market but they just postponed a much needed recession to eliminate bad debt, bad players and bad practices

If it worked the FED could raise interest rates and stop QE and everything would be fine which is not the case so we are still in recession and heading towards a major financial crisis and probably the fall of the western financial sector as we know it; they will probably hide it behind something else : virus, russia, war, ect. but the problem has been the FED and US government involvement in market, heavy regulation and low interests rates that created bubbles

How could zero interest rates be propping up the market if no one is/was willing to take loans? Is this what is called a "liquidity trap"?

No matter what the interest rate is, there's always someone who wants a loan.  So it's a question of how much demand there is for loans at the current rate.  And of course demand falls off as rates increase.  So there may not be a huge demand at 0%, but it would be worse if interest rates were higher.  Less demand for loans/credit translates to less economic growth (which could include economic contraction).  So 0% rates have kept credit flowing, which is propping up the market.

It hasn't made it worse, but its efficacy was low.

This means that QE has worked to a degree after all (and didn't whip on inflation), correct? :D


That's what I'm saying.

You are correct to say that overall demand for loans is generally guided by interest rates, however demand for loans by credit worthy borrowers is guided by many more factors, such as economic growth and the regulatory environment, both of which have been horrible over the past several years. If president Obama's economic policies had been pro growth then even without QE demand for loans by credit worthy borrowers would be much higher.

But why would he and his administration choose to oppose the economic policies that would be pro growth? I just can't find reasonable arguments for this unless we don't know (or understand) enough to make a well-grounded conclusion.

QE and low interest rates postponed the crisis but it is going to be worse and will probably end up in hyper inflation and wars

I really don't see QE and wars being linked, especially since most of the modernized world has engaged in some kind of QE (neither wars fought with military or economic/trade wars). Also the fact that banks are keeping the majority of the money they get from QE as excess reserves at the federal reserve is preventing inflation from getting out of hand.

I agree that Obama has been a bad president in many respects, and I wouldn't say he's helped the economy much, either.  But what kind of pro-growth policies could he have implemented?  He could have spent more of the stimulus money on things that would have directly contributed to the economy, like infrastructure improvements/repairs.  But what else could he have done?

WRT Obama

Its an interesting question that can't be answered.   Abenomics did a bigger QE combined with big stimulus spending and that didn't seem to work either.

Some interesting proposals I've heard were things like job guarantee (employer of last resort) .   Its like a type of stimulus spending.   Google Pavlina Tcherneva.   

Fiat allows bigger and more expensive wars; QE and low interest rates is a way not to be honest about the situation and to hide the problems for a while; when the problems will come back and be bigger, the politicians will not accept it and say they were wrong.
QE+low interest rates manipulate the markets heavily which can come back in the form of frustration, protests or wars.

In the US the politicians tend to regulate for the big banks and the big corporations such as the military industry; wars are good for the former so wars are made. Politicians are often sociopaths who want to control everyone so they are likely to start wars when their fallacious economic actions are unsucessful

Fiat allows bigger and more expensive wars than what?

I agree that poor economic policies can lead to wars, and that QE and low interest rates, when taken to excess, as it seems they have been, are poor economic policies.  But I don't think that politicians (at least most of them) just try to start wars like that.  When a country's economy collapses, that generally leads to a lot of unrest as the vast majority of people really get screwed (see Greece).  Some politicians may try to deflect that angry sentiment to their neighboring countries, which could lead to wars.  But I don't think that (most) politicians sit around trying to figure out how they can start wars.

Than no fiat

Agreed that most politicians probably don't just try to start war : politicians do things that lead to wars and are manipulated by people that want war, it is very obvious in the Ukraine situation

If I had to choose a potential result because of such scenareo, I wouldn't know, im divided between bitcoin crashing hard, as people would panic too much to even bother with it, and I also predict it going sky rocket mode, because maybe people on that panic scenareo get that "do what it takes" trigger activated and they all find about Bitcoin and put their assets there hoping they will survive.

War can actually result in bitcoin supply coming down as well, with a lot of private keys getting lost...

How do you figure?  The amount of resources needed to fight a war is the same, no matter what currency you're using.  A country using fiat will just spend more of their currency on the war, but they have more to begin with because they're presumably printing a lot of it.


That's very true, especially the part about politicians being manipulated by other people that want war.

It sounds like you are implying that QE allows for governments to borrow at artificially low interest rates in order to pay for wars. Although this is technically true this has not happened, but rather the opposite. The US has withdrawn from one War (Iraq) and has not entered into really any conflicts since QE started. Instead the US and much of europe has used QE for social programs to give away money to the lazy and less successful.

They've been giving it to the lazy, less successful, and the rich, which include banks.  People that have invested in the stock, commodity, and especially bond markets (i.e., mostly the upper middle class and the rich) have made a lot of money off of QE.

The money given to the social programs is small when comparing to money given to the defense industry.

Beside, much of the social programs were paid by taxpayers having the money deduct every month from the paycheck, I won't call it "free" money.