Oh, if we're only talking about traders that don't know anything that everybody doesn't already know then sure, I agree. But shouldn't the fact that they don't outperform chance be obvious?
I fail to understand what it is you want to discuss. I didn't realize at first that what we were discussing wasn't interesting.  |
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I'm still not sure I understand what in the bitcoin world was "centralized." People were free to put their money in mybitcoin or not. Same goes for mtgox. They had no authority except over people who chose to be their customers. How is this a "free market" versus "central authority" issue?
Centralization can be the result of imposition or free choice. In any case, it brings with it a loss of resiliency in the event of failure. |
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Usually, sure. But not if you can find informational edges. Then it's predictable. Outsiders trading well-regulated, deeply traded stocks probably aren't the traders we're looking for here. The ones we're looking for probably just aren't part of your data set, perhaps for good reason.
Insider trading or outright theft is not considered trading in this aspect, no  We're talking your regular naïve fund manager or TA scammer. Oh, if we're only talking about traders that don't know anything that everybody doesn't already know then sure, I agree. But shouldn't the fact that they don't outperform chance be obvious? |
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If we're no better at this than chance, then this is the logical conclusion, correct? The conclusion is simply that the market is not moving in a predictable way. Usually, sure. But not if you can find informational edges. Then it's predictable. Outsiders trading well-regulated, deeply traded stocks probably aren't the traders we're looking for here. The ones we're looking for probably just aren't part of your data set, perhaps for good reason. |
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I think it's ridiculous and ignorant as hell to think there aren't traders who beat markets in the long run, in fact it's fairly certain that there are successful traders in pretty much every market possible. Belief is not relevant, actual data is. Yes there are successful traders. In fact, just as many as chance predicts there will be. It doesn't mean that they're better than anyone else, it just means that out of a population of X performing essentially at random in a non-deterministic market some will "win", some will "lose". The wake up call is when you realize that the above means that it's irrelevant whether a certain fund manager/TA-specialist/Buffet-clone has beaten the market for 10 years straight - historical performance is no predictor for the future. This has been tested and tried over and over again. If you want to claim differently, we eagerly await your data And no, "I believe" is not data. It seems weird to me that the data would show that human beings do not have the capacity to foresee future unmet demand. If we're no better at this than chance, then this is the logical conclusion, correct? I think the data actually shows that humans are no better on average than the average. But that's not really surprising, is it? |
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Human greed and egotism destroys any ideology, all of the time.
I'm no ideologue, but I imagine any sane ideology would take these obvious human characteristics into account. |
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...It's almost as if Economic situations gravitate towards centralisation since it offers easier use for everyone involved...
And then people eventually get pissed off with the problems introduced by centralization and create decentralized replacements or make existing ones easier to use. Bitcoin is a good example of this. I'll quote myself here, since it seems relevant: So to avoid having shitty over-regulation where young children are harassed while running lemonade stands, you throw the baby out with the bathwater and would advocate a system that makes something like the MyBitcoin fiasco possible instead?
So I presume the obvious solution to MyBitcoin would be for its risk to be externalized upon taxpayers by undercapitalized federally mandated deposit insurance managed by people with no skin in the game, and blatant conflicts of interest? Or how about this: bitcoinjs.org (specifically, the Webcoin project being built using the bitcoinJS libraries) http://www.youtube.com/watch?v=3yoduTFjZW4This will allow for a web-based wallet service to never have the ability to spend or lose your coins, and the only added responsibility on your part is to keep one single, never changing, rarely used key safe (print it out, and store it safely offline!), and only dig it out when you need to enable a new device to access your wallet. So much more is possible nowadays than was possible in the early 1900s. Be a little more creative... |
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I simply mean to say that in an unregulated environment such as we have here, there is no justice available, private or otherwise. Given the nature of bitcoin, I doubt there ever can be.
There is with cash, and it's more anonymous than Bitcoin. The BP fiasco happened because many of the regulators were/are too close to the ones they are supposed to be monitoring. It came out afterward that BP filled out many of its own inspection reports, including the ones on the failed blowout preventer. The oil industry is one of the ones more rife with corruption in the world and it was that corruption along with their not following the regulations that resulted in the massive amount of damage that happened. The laws limiting the damages were put there by politicians that were paid lots of money to do so after Exxon-Valdez. It is not justice, though why you pulled that specific example out in this thread is confusing.
I think it's probably wise to expect this kind of thing from the system we have. It's just the nature of the incentives, and you can see it play out this way in all different industries - the financial industry being the most glaring. |
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My argument shows that systematic bankruptcies aren't an inevitable result of compounding interest with a fixed base money supply, not that they aren't ever ensured, even in the most absurdly unrealistic cases.
That businesses which can't turn enough of a profit to finance their debts get new management or go bankrupt is a good thing, as the supply of credit is finite, and this process optimizes its allocation for economic efficiency. But it's not as though there must exist indebted businesses in the economy that aren't profitable enough to finance their debts.
I mostly agree with you. I think that business that can't sustain themselves should go bankrupt or change their management. But they don't really need profits. If they can pay all their costs with their inputs, it's all fine, even if they don't produce profit. The bold sentence is key for my claim. Even when the money supply is fixed, the supply of credit is not finite. Practically speaking, there are definitely limits that, ideally, kick in smoothly with rising interest rates. Think of systems like LETS, for example, they're trading directly with credit instead of money. IOUs can be used for trade and debts are sold as if they were capital. Price inflation can appear with a fixed money supply, because the credit instruments are also biding for products.
I still haven't proved that credit must necessarily grow with time, but I proved that if a single lender with enough time wants to, he can make make the debts to him grow exponentially through interest.
And if he does this, it means he's not demanding any interest payments, and effectively continuing to lend to this person. He can keep doing this forever and diminish the real value of the bond to zero*, sure. But so what? It's his problem for being a stupid lender. It doesn't matter what the nominal value of the bond is. I could write you a bond right now for 100 trillion USD. Obviously worthless to you, and wouldn't cause the slightest problem for the economy. * Edit: The "real value" of the bond is the portion that the borrower will end up paying back in a bankruptcy proceeding. Not necessarily zero.
If the total credit in the system grows faster than the economy, price inflation appears. Price inflation also rises interest rates, ruining the plans of some investors.
If the total credit in the system grows slower than the economy, price deflation appears. Price deflation progressively devalues capital and discourages borrowing and investing.
I'll grant you that deflation discourages some borrowing, but I would argue only that for frivolous consumption and investments that can't keep up with the overall long-term growth rate of the economy (plus interest and various risk and volatility factors). It does not discourage pure saving (hoarding), which benefits those competing for the goods in the economy whose prices borrowers would have been bidding up, had they been loaned the hoarded money. So to me it's not clear from pure reasoning if deflation is a net bad, good, or neutral for the economy. You need data. Deflation stops growth,
Reality doesn't agree. For the data, I'll drop this paper on you again: http://ideas.repec.org/p/fip/fedmsr/331.html. but interest needs growth or inflation. It actually requires growth, because inflation will be factored in the nominal interest, so it's like a temporal patch what capital-money really needs, which is growth.
Requires growth for what? To avoid bankruptcies? I think you're thinking too much in terms of averages, and it's clouding what could be a clearer picture. Ignoring consumer lending for now, as long as there are profit opportunities out there, and lenders smart enough to recognize them and avoid lending to losing businesses, then bankruptcies can in principle be avoided completely. So since the total amount of issued credit can and should be expected to vary with the total amount of visible profit opportunities, I think we can conclude that the bankruptcy rate is solely a function of the foresight of lenders. And besides, not all businesses are burdened by debt, so your averaged picture is wrong right away - these businesses could be operating at losses great enough to outweigh the gains made by a bankruptcy-free debt-burdened sector, resulting in an overal negative growth rate without any need for systematic bankruptcies. |
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One thing that I don't like about that equation is that it is too simple. If we ignore other currencies, the left side is fine. But the right side is nonsense, it should really be: (P1*Q1+P2*Q2+...+PN*QN) You can create the quantity P*Q which has the same value, but you are making a huge mistake if you then think of P or Q as having independent meaning outside the product.
I'm no economist, but that's always bothered me, too. Especially since then what sense does it make to take the time derivative of the product (and use the product rule)? This whole business is the basis for the quantity theory of money. And if you can't do this seemingly arbitrary and bogus aggregation, then you can't take time derivatives at all, since the sets of P i and Q i are just discrete collections of numbers for given time intervals, and for the next time interval, the elements of the set are completely unrelated to those from the initial one. Thus, there can be no theory derived from the equation of exchange that has any predictive power. In my limited knowledge of it, it seems like while the quantity theory of money has some value in predicting long-term trends, it's dangerous when used for making short-term predictions. |
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Yes, you can create such examples. If the profits are greater than the interests, the debt doesn't have to grow. But when there's losses, someone will eventually buy the failing business with its debts. Well, or it can go bankrupt. It is hard to prove.
Just think this. If a single family would have saved an ounce of gold and lent it with 5% compounding interest (the father gives the gains to the son, etc) since the year 0, their wealth would be right now 4.08959621 * (10 ^ 42) ounces = 1.15938102 * (10 ^ 41) kilograms.
The total mass of the earth is 5.9742 * (10 ^ 24) kilograms.
So their wealth would be (1.15938102 * (10^41)) / (5.9742 * (10^24)) = 1.94064648 * (10 ^ 16) times the total mass of the earth in gold. Obviously there's not that quantity of gold, so their compounding loan would be eventually unsustainable. Note that the borrowers could have payed back their loans and then the family lent to other people, but the total level of debt to the family would be always increasing.
My argument shows that systematic bankruptcies aren't an inevitable result of compounding interest with a fixed base money supply, not that they aren't ever ensured, even in the most absurdly unrealistic cases. That businesses which can't turn enough of a profit to finance their debts get new management or go bankrupt is a good thing, as the supply of credit is finite, and this process optimizes its allocation for economic efficiency. But it's not as though there must exist indebted businesses in the economy that aren't profitable enough to finance their debts. |
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2) The compounding nature of interest pushes a quasi-exponential growth of the debt/credit. Since the credit participates as an effective part of the money supply, it produces inflation. When the growth of the debt becomes unsustainable, a process of liquidation (shrinking credit) begins, which causes deflation, which accelerates the liquidation in a positive feedback. The liquidation periods are known as recessions or depressions.
This is the one I was probing for, since I hear it occasionally, and it doesn't seem valid to me. If you play around with toy model closed economies of only a few participants, you can create all kinds of scenarios where the base money supply is constant, and there is prolonged, stable lending going on between participants, without the need for any inevitable bankruptcies. I.e. you can come up with counterexamples to your assumption that "the compounding nature of interest pushes a quasi-exponential growth of the debt/credit." |
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I disliked his statement profoundly, so your original theory doesn't hold.
If my "theory" gets Matthew to take a breather before his next well-deserved verbal beating, then it achieved its purpose. |
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Actually, d'aniel, some of us neither know Matthew nor care, but were genuinely offended by even the remotest intimation that a woman (or man, or boy, or girl) could be held partly responsible for their own rape.
It truly is an argument that was settled well over 20 years ago. Matthew should have known better than to say that.
"a tomato is a vegetable" is a mistake... "a woman should know better than to dress slutty lest she get raped" is a black hole of assholeness.
You were "genuinely offended" that some obvious dumbass who you admittedly don't care about said something dumb on the Internet. Right... |
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Matthew, please would you finally just take the advice I gave you earlier and stop talking for a while?
Here's another lesson for you: Although you did the right thing by emphasizing that you're socially retarded but working on it, you went wrong by apologizing! Apologies are like blood to these sharks! It's not like they're going to forgive you and start to like you if you apologize. You just make yourself look more weak and pathetic, and resign yourself to waiting until they stop out of pity for you. But only a few will stop at any given time. And don't you see that they happily come back to feed after you when you inevitably say the next stupid thing to the ones who haven't stopped?
And don't mistake your attackers for being sincere. They're primarily concerned with fucking with you. The cause of women being able to dress slutty more safely, while extremely noble, is a very distant second priority for these people. Leave the issue alone, it's ancillary. You had successfully dealt with it by claiming stupidity, you just didn't let the dust settle afterward.
Weren't you a schoolteacher? Why don't you know how this works yet?
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the problems of interest
Could you briefly describe here what these are? |
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I guess honesty doesn't have to always be brash and rude though and that's kind of what I got from that.
Oh, brash and rude was what I was going for. By recommending Bitcoin, community members have put their reputations on the line. So when the self-appointed Bitcoin public figures make fools of themselves, they should expect to feel the consequences of the damage they do. |
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Everyone = the whole of all sets
The set of all sets = 1 The set of all sets = 1/0 is that a one divded by zero or its just 1/0? It's a one divided by zero. Get it? If not, ask Russell. |
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