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1  Bitcoin / Bitcoin Discussion / Agorism, Politics, and Future Directions on: June 18, 2011, 01:44:25 AM
As a (relatively) long-time follower of these boards, I've found the entire discussion of removing political discussion interesting.  There was certainly a different 'culture' back in the days when bitcoins were just hitting parity with the US cent.  I guess it's a sign of our growth as a community that we now have calls to 'remove politics' from the forum discussion.  But still, I sometimes long for the old days when the forums felt a bit more 'exclusive.'

Nonetheless, I find Konkin's words reassuring:

"There will be a spectrum of the degree of agorism in most individuals, as there is today, with a few benefiting from the State being highly statist, a few fully conscious of the agorist alternative and competent as living free to the hilt, and the rest in the middle with varying degrees of confusion." -Samuel E. Konkin III, New Libertarian Manifesto

The truth is bitcoin is a deeply political development whether most people consciously recognize it or not.  When you have a currency that is decentralized and pseudoanonymous with a predicitable money supply, of course it's political.  Its usage is by definition counter-economic.  But in our own agorist version of slowly raising the temperature of liberty from room temp to boiling so that the frog doesn't notice, we have to focus on the larger audience. 

We have to remember that our ace-in-the-hole is the immediate, tangible benefits to the individual utilizing our developing ecosystem: minimal fees, increased stability, freedom of association, tax avoidance, regulatory avoidance, ease of contract enforcement, etc...  They may not recognize the ultimate political ramifications, but they will quickly appreciate the system's practical value.

Here are just some of the many ways we can continue to draw them in:

More exchanges in more countries and less emphasis on the West - particularly the developing world where black/gray markets are already well established and the absurdity of government beneficence is well-known.
Distributed Contracts and Arbitration - in my mind a real potential game changer.  Much more effective enforcement of contracts resulting in lower legal fees, more business relationship predictability, and increased commerce
Futures and Options - increased pricing stability, ability for merchants to lock in a price and mitigate bitcoin exchange risk
Meta-trading - trade oil, corn, wheat, stocks, etc... in BTC
Bitcoin capital formation markets
International Transfers
Micro-payment platforms
More Agoras

It's exciting to see that much of this work is already being done by so many.  Much of this involves repackaging the growing Bitcoin toolkit for ease-of-use by end-users. We have much to be optimistic about.  What happens to these forums just doesn't matter.

2  Economy / Marketplace / Buying BTC: $2000 cash in Austin, TX on: April 23, 2011, 05:33:44 PM
A close confidant of mine is looking to purchase BTC face-to-face in the Austin area at a public location with hard cash.  Please PM if interested.

3  Economy / Economics / Bitcoin does NOT violate Mises' Regression Theorem on: July 27, 2010, 02:09:27 AM
The Money Regression and Emergence of Money from the Barter Economy
The entire purpose of the regression theorem was to help explain an apparent paradox of money: how does money have value as a medium of exchange if it is valued because it serves as a medium of exchange?  Menger and Mises helped break this apparent circularity by explaining the essential time component missing from the phrasing of the paradox.

As Rothbard explains in Man, Economy, and State (p 270),
"...a money price at the end of day X is determined by the marginal utilities of money and the good as they existed at the beginning of day X. But the marginal utility of money is based, as we have seen above, on a previously existing array of money prices. Money is demanded and considered useful because of its already existing money prices. Therefore, the price of a good on day X is determined by the marginal utility of the good on day X and the marginal utility of money on day X, which last in turn depends on the prices of goods on day X – 1. The economic analysis of money prices is therefore not circular. If prices today depend on the marginal utility of money today, the latter is dependent on money prices yesterday." [all emphasis added]

Rothbard then goes on to explain that in order for money to emerge from a barter economy, it must have a preexisting commodity value.  This commodity value arises from barter demand for the potential money in direct consumption (i.e. ornamentation).  This value seeds future estimations of the value of the money as a medium of exchange.  The natural market emergence of money is thus fully explained.

The Monetary Economy
However, once an economy has been monetized and a memory of price ratios for goods and services has been established, a money may lose its direct commodity value and still be used as a money (medium of indirect exchange).  Rothbard explains (p 275):
"On the other hand, it does not follow from this analysis that if an extant money were to lose its direct uses, it could no longer be used as money. Thus, if gold, after being established as money, were suddenly to lose its value in ornaments or industrial uses, it would not necessarily lose its character as a money. Once a medium of exchange has been established as a money, money prices continue to be set. If on day X gold loses its direct uses, there will still be previously existing money prices that had been established on day X – 1, and these prices form the basis for the marginal utility of gold on day X. Similarly, the money prices thereby determined on day X form the basis for the marginal utility of money on day X + 1. From X on, gold could be demanded for its exchange value alone, and not at all for its direct use. Therefore, while it is absolutely necessary that a money originate as a commodity with direct uses, it is not absolutely necessary that the direct uses continue after the money has been established."

This explains the history of fiat currencies.  They originally started off as simple names for weights of commodity money (silver) that developed out of the pre-monetary barter economy.  Despite later losing their ties to direct commodity value through state interference, paper currency retained status as money because of memory of previous money prices.  This factor is so strong that the relationship between gold and the USD, for example, is somewhat inverted.  Gold no longer circulates as a common medium of exchange.   Prices are set in USD, not in gold.  Most individuals wishing to trade in gold do so based on their knowledge of USD/gold price ratios.  ("Hey, let me buy that $100 couch from you in gold?"  "Ok, USD/gold is $1000/oz. Give me 1/10oz of gold.")  Legal tender laws, state taxation, and the entire financial regulatory environment maintain this inertia of USD prices and make it challenging to return to gold money directly, despite the destructive inflationary nature of fiat currencies.

The Emergence of the Bitcoin Economy
The very first businesses in the Bitcoin economy were exchangers (NewLibertyStandard, BitcoinMarket, BitcoinExchange,....).  This is not an accident, but flows from the analysis above.  In order for Bitcoins to serve as a medium of exchange without commodity value for uses besides indirect exchange, there must be a translated knowledge of money prices.  Market exchangers fill this gap and give Bitcoin users access to this knowledge.  Bitcoins may therefore currently serve as a money intermediary for paypal dollars\pecunix\euros.  But why is there demand for Bitcoin over USD??  This is a subjective valuation arising from properties such as anonymity, decentralized system of clearance, cryptographic trust, predetermined and defined rate of growth, built in deflation, divisibility, low transaction fees, etc.... inherent to the Bitcoin system.

The essential point is that once exchange can occur between a money (USD) and Bitcoins, providers of goods have a means by which to value Bitcoins as a potential medium of exchange.  The money regression is satisfied, because taken back far enough we reach traditional commodity money: BITCOINS -> USD -> MONETIZED GOLD & SILVER [start monetary economy] -> [end barter economy] COMMODITY GOLD & SILVER.  

Of course, if a major meltdown occurred and knowledge of all price ratios was wiped out, Bitcoin probably would NOT directly emerge as a money (assuming Bitcoins have limited value outside of exchange).  Fiat currencies with zero direct barter value certainly would not.  Commodities such as gold and silver that have widely recognized direct value in barter would likely emerge first.  The economy would then be monetized with price ratios in gold and silver.  Bitcoins then, being valued for intrinsic properties amenable to exchange, might then become prevalent in trade.  Initially, creators of value would continue to make their price value ratios in terms of the true money (gold oz/BTC ratio), but with time Bitcoin prices (BTC) can emerge (see as example).  We are in this initial phase now.  

Therefore, so long as exchange of BTC and USD/Euros/etc… occurs, knowledge of existing price ratios can be utilized in the Bitcoin economy.  In time as Bitcoins become increasingly marketable, these fiat<->BTC price ratios will seed direct BTC price ratios.  The Bitcoin Economy thus emerges.  The Misean regression theorem is satisfied.


edit: clarified possibility of direct emergence of bitcoin as money from barter economy.
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