ie - a promise to print the cash later =)

That's the first time I've heard that before. Seems to me the government defines economic health quite purely in terms of GDP figures, which are a measure of spending, not efficiency. The Gov. doesn't declare us in recession when efficiency declines. It declares recession when GDP shrinks. It measures growth according to GDP, never efficiency.

Take "Cash for Clunkers" in which we were all supposed to destroy working automobiles in order to spend money on newer ones... that increases the GDP of the country drastically, because massive spending occurred. There is, however, no efficiency gain from such behavior - efficiency has in fact been decreased, because now more money has been spent to transport humans in their daily routines.

While it's true you can't have sellers without buyers, you CAN have producers without consumers. You CANNOT have consumers without producers. That's the difference. Those producers who figure out what is most in demand will reap profitable returns, but their production itself doesn't rely on the availability of consumers. One can produce more than one consumes, but one cannot consume more than one produces  (unless others donate their own excess production which they then had to refrain from consuming).

At any given time there is only so much wealth/goods in a usable form that can be consumed by us humans. If society consumes such wealth faster than it produces it, society will find itself increasingly impoverished. However, if society produces wealth faster than it consumes, it will be increasingly wealthier. The corollary is that by refraining from consumption, we enable a surplus of wealth (ie - savings) which can be used and risked in investment toward even greater production.

An easy way to demonstrate this: if everyone was given $1,000 tomorrow, spending in the economy would increase over the following days and weeks and months. IF such spending improved the economy's health, however defined, then all the government needs to do to end recessions is print money and give it to us. Such a theory is absurd. Upon receiving the $1,000, no new wealth was created, but the new money enables excess consumption and after the dust settles, the world will be no better off at best and likely poorer, as they spent some portion of that new money on consuming resources that were limited, and such resources now require human work to replenish.

It is a healthy economy if someone wants to buy lead paint and asbestos underwear, with the obvious caveat that the health costs of those products are not being transferred to other people (ie- pollution). If I want asbestos underwear, and I don't throw it in the river when I'm done with it, then there's nothing wrong with a producer of such underwear making profit by trading it to me (and hopefully he'll accept bitcoins for the purchase).

Mr. Smooth - if that IS your real name - I must respectfully disagree with you. When you eat a burrito, it does not mean someone else is producing a burrito. That is the fallacy for which so many people fall. Conversely, if you produce a burrito, there is typically a market price at which a buyer can be found. Maybe that price is only one penny... but if the market price is above the cost of production, then the production of the burrito was a net creation of wealth. When you say that valuable production requires a buyer, you are correct, but you are ignoring the crucial element of the pricing mechanism.

Consumption is the result and reward for production. Production is not the result nor the reward for consumption. The distinction is very important. And, when the government tells society to "go out and shop" in order to "grow the economy," it is merely telling people to consume resources because it's operating under the fallacy that consumption = production. Rather, a wise government would say, "go out and profitably produce things."  But of course, profits are evil, so the government refrains from such advocacy.

@bcpokey

Your post was full of some important economic fallacies, but I want to focus on one of them in particular. "Spending money" does not equal "contributing to the economy" as you so state. While spending money may increase GDP (as GDP measures... spending), doing so for the purpose of consumption is a net drain on economic health, not a benefit. A poor person buying a burrito is not helping the economy - rather, he has consumed resources by so doing. When he is at work, producing, then he is benefiting the economy. Knowing whether a given expense is "productive" or "consumptive" is very important. But don't worry, most politicians don't know the difference either.

And I never said we should "be on our knees sucking off the rich," did I? I said merely that they ought not be taxed. And you must see the irony in calling my statements "juvenile" when, in the very same sentence, you equate reduction in taxation with oral love-making. 

Hmmm your point here is perfectly valid. My suggestion that the poor be taxed instead of the rich was somewhat sarcastic of course - neither rich nor poor should be taxed. But, please refrain from swearing at me.

Sorry for not stating the source initially. My number came from here, and I suspect their numbers come from the IRS as shown in a preceding comment.

http://ntu.org/tax-basics/who-pays-income-taxes.html

Contrary to popular opinion, "the evil rich" carry this country, not only in productive output but also in providing the plurality of warm blood from which Washington feeds.

In a more fair world, perhaps the poor should pay all the taxes, for they haven't contributed to society as much as the rich (indeed the wealth of the rich is [usually] a direct indication of the value provided to society in the marketplace).

This is the answer ^1.  As the bitcoin economy evolves, people will make use of services which help guarantee returns are possible. Such services become augmented on top of bitcoin. I would imagine that in a matured bitcoin market most transactions will not be anonymous, because it makes sense in most transactions for both parties to be known and accountable. However, entering into these non-anonymous transactions is voluntary.

In the same way, a mature bitcoin economy would not have every participant storing his/her coins on their personal computer. Rather, companies will exist to protect money and individuals can decide to utilize such services.

There is a market demand for security and safety in trade. Entrepreneurs will figure out the best way to deliver, building services upon Bitcoin's fundamentals.

You want a refutation in the form of a video or short essay or what?

I love the built-in rhetoric of the Fed's contest. It's not a video to argue why central banks are important (because we all know society can't exist without them!), but rather why "independence" of the central bank is important.

If you need a written refutation, I'll happily provide one for 5 btc

Precisely. The inherent value of the Bitcoin currency is in its properties as a useful money-commodity. Anyone who understands why certain things make good money shouldn't have a hard time grasping Bitcoin.

It's scarce, fungible (divisible), homogeneous (every piece is the same), secure (so far), anonymous, easily transferable across vast distances, easily storeable, and besides all that it's damn cool. 

Napolitano's show is fantastic - I've never heard the word "libertarian" used so frequently on tv, and he doesn't water down the message. However you feel about Fox, give them credit for airing this show at prime time on FBN. It's sure to piss off just as many republicans as democrats. Everything from full-scale drug legalization to abolishing the Federal Reserve is covered on a daily basis. Best news commentary on TV currently IMO. Would be awesome for Bitcoin.

That's what asymptotic means... the increase decreases over time down to zero.

Um no, sorry. We're talking about personal income taxes here, not corporations. The top 5% of individual earners in the US pay for 60% of personal income tax revenue.  This means, if there are 20 people, the richest one pays for the government "services" used by 11 of the other people. It's absurdly immoral for one person to be forced to subsidize the lifestyle of someone else... much less 11 others. 

First of all, there is no deflation of Bitcoins as they are always increasing in quantity (but at a diminishing rate). Bitcoins will always be inflating asymptotically, thus no deflation.

Second of all, even though the number of goods and actors in the market will increase relative to the number of Bitcoins, there is no reason to assume this phenomenon is a problem. So what if we live in a world in which prices tend to fall slowly over time as opposed to rising over time? There is this funny fear amongst people that if prices tended to fall people would horde money in perpetuity - but this is an economic myth. People will only "horde" money until that point at which the value they obtain from purchasing real goods outweighs the value of having the money. Hording is, in all cases, limited by the human need for consumption in the present.

Electronics are a great example. We all live in a world where computer prices fall by great amounts each year for any given level of processing power. We all know that if we wait another 3 months there will be a better processor available, or we can get the same processor at a lower price. And yet, how many of us wait in perpetuity to get the better computer in the future?  This example highlights the absurdity of the deflation argument. Falling prices does not create a positive feedback loop of doom. It DOES, however, encourage a higher level of savings than does an inflationary environment, and this is a benefit, not a problem.

So long as the quantity of money is relatively stable and relatively predictable, prices will adjust to the supply of money over time and the market will function relatively smoothly.

Krugman and Bernanke would disagree with everything I just said, btw.

You want to "actually tax the rich" when the top 5% of income earners currently pays about 60% of Federal income taxes?  Exactly what percentage of other peoples' earnings do you think you're entitled to?

I have a quad-fire PC setup with four 5850's... They are tightly packed and overclocked and are stupid-hot even with open case and good ventilating fans. Coolest card stays around 75c, hottest stays at 95c. Oddly enough, the first and third card are  the hottest, even though the second is sandwiched between them. Would love to figure out how to cool these down!

Yes, which timezone do prophecies adhere to? And do they adjust for daylight-savings time?

I assume this question is hypothetical, because Bitcoin will never be in deflation. It's programmed to continually increase in an asymptotic pattern. Unless someone destroys a vast amount of Bitcoins by dropping their wallet file in the ocean, Bitcoins will increase in quantity each day.

No decrease in the money supply = no deflation. And people saving or "hoarding" as some like to call it does not reduce the money supply, the money is still available to the market it's merely a question of at what interest rate holders of the money will be willing to part with it. The price of money changes, but it isn't "deflating."

Our society has been trained that deflation=prices falling, but that is confusing a cause and a symptom. One symptom of a decrease in money supply is falling prices, but that does not mean falling prices = deflation.

And yes we can thank Krugman for perpetuating such absurd notion... for goodness sake I read one of his pieces arguing against the privatization of airports because planes would be crashing into each other without Government oversight. The man is a fool with a very loud microphone.

Haterz gonna hate.