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3841  Economy / Economics / Re: Freicoin (was Re: Deflation and Bitcoin, the last word on this forum) on: September 22, 2011, 01:11:05 AM
A demurrage system that is rigid is not likely to achieve the social goals, if the users can take no other actions for reducing their loss other than leave the currency in favor of another method of storage of value.  In this respect, a rigid demurrage fee system isn't much better than a rigid/predictable inflation target.

You are missing the point. Freicoin is not meant to be a store of value, it gives up that property in order to encourage investing and spending.

But that is a contradiction.  In order for there to be investing and spending in relation to a currency, it must also be fairly good as a storage of value.  At least as good as the Euro or US $.  Otherwise, your spenders are never going to spend in Freicoin, because they never have an incentive to earn it.  Credit works in our debt laden economy because the credit is based upon the US $, which is still a decent store of value compared to a demurrage rate of 10% APR.
3842  Other / Politics & Society / Re: Libertarian Capitalism vs Social Democracy - A metaphor on: September 22, 2011, 12:51:33 AM
just seems a bit unwieldy. its simpler to just go and govern and make things happen rather than let weeds take over the garden? dig a hole, plant some fruit trees. And eat fruit. You might get lucky with some wild berries. But they might be poisonous.

If you are referring to the concept of a private police force patroling a public or private network of roads as being unwieldy, I would agree.  I was pointing out that it's possible within the current social order without changes that would be dramatic to the casual observer.  I'm not suggesting it as a solution, only an example of how a lib society could actually solve the problem of "enforcement of the traffic laws" in a post-government civil society.  We can't even know how it would actually happen, and I don't even personally support the absolute 'anarchist' ideal anyway.  I think that governments exist because they serve a particular niche (justice, collective defense) very efficiently.  The problem that I have with governments is that they have a perverse incentive to expand the mission into ever more facets of private life.
3843  Other / Politics & Society / Re: Libertarian Capitalism vs Social Democracy - A metaphor on: September 22, 2011, 12:42:55 AM
Governments don't build roads in America.  They never have.  They fund roads and maintaince via taxation, but there are other ways to fund roads if need be.  The roads are built and maintained by construction contractors, and governments (at most) function as management.


You contradict yourself immediately...


1 ) The government decides to build roads (except in the case of a new tract under development by a developer).
2 ) The government sets up a planning commission which involves public and private planning firms.
3 ) The government decides on a plan, involving many government organizations, ranging from the ESA, the EPA, city councils, and so on.  

Based upon the research, work and recommendations of private planning firms.  Governments don't have planning firms, btw.

4 ) The government contracts various firms to do the actual surveying, grading and paving.
5 ) Some government agency (state transportation agency, etc., depending on jurisdiction) oversees the project to completion.

Most people would consider that project management, would they not?

6 ) Some government agency (state transportation agency, etc., depending on jurisdiction) maintains the completed road, installs signs, etc.

Some government agency finances and manages the maintaince contracts of completed roads.  Only very large cities such as Chicago and NYC do this kind of skilled labor without contracting out the work to private contractors, and even they do it sometimes.  It's literally impossible for smaller cities and independent towns to do it without contracting, because they can't maintain the expertise.  And states don't do it because of the distances involved and political issues with county governments that make such a thing a logistical nightmare.

EDIT:  A single paving machine can cost over $100K, and unlike a fire truck which sits still most of it's service life, a paving machine needs to be in nearly constant use in order for the costs of road maintaince to remain low.  This also means that the machine itself needs constant professional maintaince as well.  And this is just one type of specialized equipment required in road maintaince.  Can a city own one of these?  Sure, but it's not cost effective for a city to do so, because a single city's public works department is unlikey to be able to keep the machine in service.  At least not as well as a contracting company that owns twenty of them, employs 15 operators full time, and two mechanics.  The kinds of specialized equipment that cities tend to own fall into the catagory of 'physical insurance', such as salt trucks in cities that freeze and fire pumper boats in cities near trade waterways.  Many cities have enough trouble just keeping their police helicopters in flight ready condition.

7 ) Sometimes, that government agency hires outside contractors to engage in significant repairs or improvements.

That sometimes is the vast majority of the time.  I would say almost all of the time, but I have no doubt that there are a few exceptions.


8 ) Utility companies are allowed, as per agreements with the government, to do installation and maintenance on their utilities which lie underneath the road or alongside it.  

And utility companies are private corporations, not mere extensions of government.  And like all companies, they have the right to sub-contract those maintaince duties to other, more specialized, contractors.  And they do, everywhere in America.

This is a field that I have worked within in the past, from several different perspectives.  I know how things actually get done.  You should try to consider your practical understanding of a topic before posting about issues for which you know not.
3844  Other / Politics & Society / Re: Libertarian Capitalism vs Social Democracy - A metaphor on: September 21, 2011, 09:16:02 PM

 For example, I can't figure out how I would be driving a car or a bicycle around the city if there were no government to draw and enforce the rules of traffic. How would it work? Who would yield whom at an intersection? What would we do with dangerous drivers? Who's to say? These are not trivial questions. Of course, one can say how people would come up with rules "by themselves", but there would need to be some kind of framework for discussion, decision making, and even enforcement. And that, to me, is the government.

These are not trivial questions, but they are questions with real world solutions besides government.  In fact, I'd be willing to wager that the roads that you drive on were no built by government, are not maintained by a government, and could also be policed by a private contractor even though they are not presently, and you would likely never notice the differences.

Governments don't build roads in America.  They never have.  They fund roads and maintaince via taxation, but there are other ways to fund roads if need be.  The roads are built and maintained by construction contractors, and governments (at most) function as management.  In fact, none of your vital public infrastructure is provided for you by any direct actions of a government official, beyond the funding aspect.  Even in areas that the water or electic companys are publicly owned monopolies, the work of maintaince and expansion of the infrastructure network is done by employees of private industry.  Hell, even the police and military were somewhat private enterprises in the United States once upon a time.  The term 'constable' (where we get the term "cop" from, i.e. "constable on patrol") is an English word that literally refers to a privately hired policeman.  To this day, the county that I live in, and technically every county in the state, has two publicly elected positions for constables, who are not paid by any government agency for the office.  They are private security companies with state honored police powers.  One guy gets elected to the office, and hires off-duty cops to patrol banks and ride along with bounty hunters and serve private civil court summons, etc.  It's likely similar in your own city.  The enforcement of the traffic codes could likewise be performed by private companies.  For example, what if the funds from a traffic ticket went into the coffers of the constable's office after being proven in an independent traffic court?  Enforcement would be both better, and more just, then is presently so.
3845  Other / Politics & Society / Re: Ron Paul Cheering Entrance California on: September 21, 2011, 08:55:06 PM

lol I hear you. I mean there are some good things he does say but this idea that churches would support the unemployed is just crazy lol .....

Why is that crazy?  That's exactly what commonly happened before the New Deal.  It was the role of the Church to guilt the rich into funding the missions that supported the poor.  It still happens, just not to the same degree.  The government has mostly muscled the charities out of the charity business.  And not just religious groups, either.  Before the New Deal, fraternal societies were enormously important social organizations; providing benefits to their local memberships that were hard to come by for middle class families by any other means until the 1950's.  Such as group health and life insurance coverage.  The American model of unionism is directly based off of the fraternal orders, and is the primary reason that unions don't function the same way in most other countries.  Those fraternal orders were, for the most part, forced to stop providing member benefits by the increasing regulations imposed by governments.  Many of those orders only existed for the purpose of collective social benefits, and thus simply faded out of existance.  Of course, many were racist by their nature, refusing to accept members who didn't look like them or pray like them; but every race and social group had their own order, so that didn't limit options much.
3846  Bitcoin / Bitcoin Discussion / Re: Gavin and TruCoin on: September 21, 2011, 08:34:12 PM
You guys worry too much, all of you.  A large number of core GNU/Linux developers worked at IBM.  That favored IBM, but it also favored Linux.  They didn't hide their affiliations, nor did they declare them to every Linux user.  This doesn't qualify as a conflict of interests.
3847  Economy / Economics / Re: Freicoin (was Re: Deflation and Bitcoin, the last word on this forum) on: September 21, 2011, 08:27:45 PM
I looked up Freicoin, and I'm not impressed.  How did you impliment demurrage into the codebase that manages the blockchain?  By what method do you actually impose the demurrage fees upon the addresses with a positive balance without also introducing security issues into the blockchain?  10% per year is way too high, 1% is probably too high.  And is that percentage applied to the individual balances, or only to the total monetary base?  If the former, how?  If the latter, what are the details of applying demurrage to transactions buried deep into the blockchain?  A demurrage system that is rigid is not likely to achieve the social goals, if the users can take no other actions for reducing their loss other than leave the currency in favor of another method of storage of value.  In this respect, a rigid demurrage fee system isn't much better than a rigid/predictable inflation target.
3848  Economy / Economics / Freicoin (was Re: Deflation and Bitcoin, the last word on this forum) on: September 21, 2011, 08:08:37 PM
I thought you claimed "there's nothing wrong with deflation" too. Sorry, my fault.

By "undeniable truths" I mean premises that are obvious to anyone and that no one will discuss. Logic is part of math, is not a social science.

Logic is logic.  Logic involves proofs, but that doesn't make it math.  Praxeology involves logic and reason and math, but it's still a social science.  The core concept of praxeology, and thus all included disiplines, is the study of human actions.  Thus, there is no way to separate the social aspect of the science without significant flaws.

I agree, I prefer gold over USD. But national inflationary (I prefer this term over fiat because I don't think fiat is bad per se, in fact I consider bitcoin fiat) currencies are not the only alternative.

I can see how you might consider Bitcoin to be similar to fiat currencies, lacking any obvious non-monetary use value; but how could you rationally consider it fiat?  The very term requires the imposition of a government agency, since it literally means "by decree".


I think business cycles are avoidable because I think their root cause is interest.

I'm sorry to tell you this, but this is wrong.  The business cycle's root cause is malinvestment.  The social aspect is that, during the boom, investors are as upbeat as everyone else and are more likely to investing borderline projects.  Artificially low interest rates, manipulated by central banks, make this pattern of malinvestment worse but are not themselves the cause.  The root cause of the boom is a form of collective sentiment, what Keynes called "animal spirits".  Keynes was not wrong about the role of the mood of the collective in the business cycle, he was wrong in his belief that it could be forced via monetary policy.  The malinvestment of the boom cycle is what then makes the correction inevitable, but there is always a trigger event that draws the attention of the collective towards the developing cracks in the system.  Once the first true crack is identified to the collective, it starts looking for more, and it finds them; and then the mood changes.  And this continues until the correction resolves the cracks, and the recovery begins.  After a time of no cracks, the sentiment slowly turns to a 'feeling' that there are no more cracks to worry about, and the boom starts again.  In the past, both a gold standard and the more local regionality of the credit & productive markets tended to limit the scope of the boom, and thus the severity of the bust.  The boom from 1992 to 2001 was the longest national (worldwide?) boom period in the history of the US, thus we can expect the most severe correction in the history of the US.  But only once those with the power to manipulate monetary and fiscal policies finally resign to allow the correction to occur, or simply fail to continue to prevent it.


I consider gold and bitcoin flawed because they have interest. I advocate for ripple and freigeld (freicoin if you want to keep the state out of its issuance) and ripple instead. Well, I advocate for bitcoin (it's enough hard to explain it without the demurrage, one step at a time) and I recommend people to buy gold and silver (to protect themselves against what I see as the "unavoidable global fiat system collapse"), but I think they won't be the "money of the future" because of their flaw.

Neither gold nor Bitcoin have interest by their design (or nature).  Interest exists only because two parties are willing to engage in contract.  Do you believe that there is some mechanism inherent to either Freicoin or Ripple that prohibits interest?  Ripple is a web-of-trust credit system, and not a currency at all, so there is certainly not any means to prevent interest contracts from forming in whatever currencies that Ripple users ultimately settle upon using.  I admit I'm not terriblely familiar with Freicoin, care to enlighten me?


I bet you're going to answer with one of these two:

-Without interest people invest in stupid things.
-Demurrage is isomorphic with inflation.

You would have lost that bet in whole.  People invest in stupid things because of interest, or more precisely in the pursuit of improbable interest.  And I am aware that demurrage is not equal to inflation.  Inflation is rot, udderly unavoidable while value is stored in the currency.  Demurrage is a security or storage fee, which can usually be reduced under certain situations, which players will then tend to favor.  I've started an older thread on this subject, stating my concerns about the lack of an artificail equivialnt to demurrage in Bitcoin, but the thread died because there doesn't seem to be any way to do that in the blockchain security model without also breaking the cash-like features of Bitcoin.  It also might not matter, as I'm concerned but not actually convienced that demurrage is neccessary for a cryptocurrency.
3849  Economy / Economics / Re: Does America Really Need More Jobs? on: September 21, 2011, 07:25:22 PM
All these projects are real and are offered at trade shows, so I don't really understand why no country invests into these things. I mean if just one of them can be successfully deployed it this will be a huge improvement for countries - in many ways.

Knowing nothing about the projects that you are referring to, the fact that no one is interested in investing in these projects suggests that their application is limited.  Nations shouldn't really be investing, anyway.  The US "invested" into the Apollo program in order to be the first to put a man on the Moon, but the goal there was a display of technical superiority, not profit or sustainability.  One of the greatest projects for public investment in the US would be a right-of-way, pipeline and pumping station on the Mississippi River to force water up, through or over the Rocky Mountains in order to supply freshwater to populations beyond such as Los Vegas.  Or simply a pipeline from San Diego to siphon seawater to refill the Death Valley Basin, which was an inland saltwater sea (like the Dead Sea) up until about 800 years ago that provided rainwater (via the natural water cycle) to the entire area up until the last of the water dried up and left the salt flats.  Those would be investments worth of a national effort, but they are never going to happen due to interstate political issues and environmental issues.  A power plant is something that the private capital markets handle best. 
3850  Economy / Economics / Re: Deflation and Bitcoin, the last word on this forum on: September 21, 2011, 12:52:42 AM
I understand that deflation cannot be as high as inflation can. So what? I'm not advocating for inflation.
Deflation doesn't last for long. It

1) Liquidates the unsustainable debt that interest (very often with the help of politicians and/or monetary inflation) has created.
2) Destroys (or just stops to produce) enough real capital so that capital yields can be high enough (higher than interest rates) again.

And then disappears. Deflation is unsustainable in the long run. By sustained deflation, an ounce of gold could buy the world with enough time which is nonsense, but it still is a destructive force.

I suppose that our disagreement is more of a matter of degree.  I don't contest that deflation can be a destructive force.  I do think that a monetary system that tends towards deflation (gold standard, Bitcoin) and is naturally moderated is preferable to one that tends towards inflation (fractional reserve fiat) and is actively moderated.  The reason that it's preferable is because the consequences of the business cycle are more muted in a deflationary monetary model.  Thus, deflation is not "good" so much as it's better than the alternative, generally speaking.


Probably my view of praxeology is too simple, I just learn about it last year. I just wanted to say that I prefer to rely on logic and undeniable truths rather than "historical evidences" in our discussion.

Although praxeology attempts to use reason and logic, it's still a social science.  There are no such things as 'undeniable truths' in any social science.  And the greatest folly of most self-described economists, both in history and modern, is the failure to recognize that economics is a social science.  Otherwise, mathmatical models really could be developed that consistantly predict economic events.  People have been trying to do this for decades in some form or another, but none are particularly good.  The best predictive model ever devised is the predictive market, such as Intrade, that leverages the collective wisdom of society itself in an organized fashion.  Even the best prophet among us isn't as good as all of us.


 If you master that methodology, then use it to make me see the light. I just don't see how you can convince me that "deflation is good/innocuous" (as many people here claims) with logic.

Again, I'm not making such a claim.  I'm been arguing that it's better than the alternative.


The argument to defend deflation that I've heard more times is "look, inflation is bad because...". I don't want to solve the problems of deflation with inflation. I prefer to look for the source of deflation. As far as I can tell the sources of deflation are:

1) The downside of economic cycles, debt and credit destruction (the worst and bigger cause).
2) Hoarding (that allows parties with enough money to cause deflation on their own)
3) Economic growth

What causes economic cycles in my opinion is interest, a quality of scarce and everlasting moneys (capital-money).

Again, I have to say that you are correct, but not completely so.  Economics is a complex topic, and any such simplification of causes such as you present are bound to leave out or gloss over non-trivial contributing factors.  But it doesn't matter what the root causes are, if one accepts that any market is 'unstable' and always seeking it's equalibrium.  Once you accept that, then it becomes obvious that the business cycle, as the agragate view of that unstablility, is inevitable.  If the cycle is inevitable, then the best overall solution is to use a monetary system that is self-regulating and generally less likely to reach extremes.  The only monetary systems that fit that description are commodity standards and Bitcoin.

We could talk about gold instead of bitcoins, both are flawed as money in the same way.

In what way do you consider them flawed?
3851  Economy / Economics / Re: Does America Really Need More Jobs? on: September 21, 2011, 12:26:27 AM
Machines actually create wealth and make things less expensive in society and free up innovation to fill more desires.

This is dead on correct.  By hindsight, we now know that the most important change in society that led to the equal rights of women was not the Women's Sufferage movement.  It was the invention of the automatic washing machine.

Those who are wealthy enough to afford a maid to clean their homes pay them because they favor their free time over their money.  The maid cleans the home because they favor the money over the free time.  It's a difference in wants and values.  The wealthy don't value money as much as the poor, because they have more than enough to satisfy their primal needs.  Thus they are willing to pay the poor woman to be their maid.  So who benefits most from the advancements in consumer technology?  The middle class and the poor.  Because of the inventions of washing machines, vacuums and automatic dishwashers; both middle class housewives and those nearly destitute maids of the rich are better off then their predecessors a few generations ago.  If a man is wealthy enough, he didn't have to labor to meet his own needs even back in Roman times, since he just had to hire more servants (or by more slaves).  The modern maid, however, directly benefits from the effectiveness of labor saving devices designed for the American middle class homemaker.  Because of a washing machine, the maid does not need to commit so much time or personal effort into the washing of clothes.  Because of the Roomba, she might be able to vacuum personally in one room while the robot vacuums in the next room; so that the maid only need to check the robot's work and finish up the details.  To sum it up, machines don't actually displace workers unless you are looking at a particular subset of work.  Before the machines, the maid did the work while her employer (or a manager) surveyed the results.  Now the maid has taken over much of the tasks of the manager, while the machines do much of the labor.  Thus she is more productive overall, and can earn more money (by doing the same work that would have required many more maids two generations ago, perhaps by freelancing and cleaning a different client's home each day of the week rather than laboring all day every day for one rich guy) while her employer benefits from lower labor costs as well.  This doesn't actually remove jobs, because although there is less need for professional maids, the rich man still has other unmet desires.  For example, since he doesn't have to pay two maids because one is enough, now he also hires a gardener (or a landscaping company, same principle) so that he doesn't have to worry about the yard work either.  Or a poolman.  Or he buys a home theater, which employs not just engineers to design the thing, but also those factory workers; who now rather than standing on an assembly line driving two screws into the product 1000 times each workday monitors three or four screw driving robots.  Now he is an 'operator', or a 'tech'.  So the employee makes more money, performing a less (physically) demanding task; while the consumer gets an improved product at a more affordable cost.

Literally everyone in society benefits from the improvements in productivity that automation provides, from the wealthiest industrialist down to the unemployed drunkard whose beer costs half as much because the brewing process is now controlled by a computer rather than a trained brewmaster.
3852  Economy / Economics / Re: Does America Really Need More Jobs? on: September 21, 2011, 12:01:04 AM

You can blame the FED, corporatism, the welfare state, regulation, whatever you want, but in the end there is something else that is driving this disparity, something naturally occurring in a market situation. 

You assume that the 'something' is a naturally occurring force in a market situation, but you can't offer any evidence to support that.  You can't, because it's not true, and it's provablely not true.  The 'something' that is driving disparity presently isn't a naturally free market mechanism, but the long predicted side effects of intervention into the free market.  It's just taken this long to accumulate to the current crisis.  I can actually support this premise, but I don't have the time and you wouldn't likely accept it anyway, so take the above however you wish.
3853  Economy / Economics / Re: Does America Really Need More Jobs? on: September 20, 2011, 11:54:17 PM

Your examples are trivial - the types of income/employment that you list have always been in existence, they just take a different form these days thanks to computers.

Trivial to whom?  They are not trivial to those who engage in free agency in order to earn an income.  And the addition of the Internet into the mix ultimately only makes free agency more efficient, otherwise it wouldn't happen.  Higher efficiency and effectiveness in the realm of using the Internet to match up individual desires with individuals willing to fill those desires (be it shippable products, or personal labor services) only increases the market share that free agency can effectively provide.  In the beginning, the new 'TaskRabbit' type people who can make a real living will be rare and annecdotal, but over time those jobs will increase with the increasing public awareness that such a system can satisfy their needs in less expensive or less frustrating ways than are presently possible.  A decade ago, anyone making a living from home via the Internet who wasn't an accomplished author was a news article.  Today most people know someone who does or could make a living solely from home via the Internet.  Craigslist is another example of the improvement of efficiency of the Internet altering an existing market, resulting in it's massive expansion compared to the prior model.  In the case of Craigslist, the local market of used goods is what changed.  Not only did Craigslist improve the advertising of yard sales, it permitted sellers of single used items to avoid the need for a yard sale or the purchase of a classified ad in a local newspaper.  Thus allowing those people looking for a deal on a used item that is impractical to ship (think used refrigerator) to find sellers locally.  I have an android app that scans Craigslist for me, looking for items that match keywords, so that I can be quick to reply to any such ad that I should be interested it within a few minutes.  I know that I'm not the only person to use such a thing, because I've been beaten to the item by a matter of minutes in the past.  Search Craigslist for refrigerators and you will find a number of ads that ask too much for what they are selling, because the good deals are claimed quickly and those ads are removed.


  Freelance income still is reported to the government - its not like officials and economists are blind to the fact that people sell shit on ebay.

Sure, they are aware that stuff sells on Ebay, but that is only an example.  The second hand market is legally taxable, but let me know if you find anyone who sells stuff on Craigslist in November that will even consider reporting that to the IRS come April, assuming that they even remember the transaction while sitting down to do their tax forms.  If there wasn't a check or a credit transaction involved, something I would presume to be very rare with regard to Craigslist transactions, then it didn't happen as far as the IRS will ever know.  It's only because of the third party issue that Ebay transactions are more likely to be reported and taxed.  This is the killer consumer app for Bitcoin anyway.  Whether or not Bitcoin is used in a manner intended to be anonymous by both parties, it's going to be a lot of work for a agent to tie a particular transaction to a taxable event even after identifying both parties to a BTC transfer.
3854  Economy / Economics / Re: Does America Really Need More Jobs? on: September 20, 2011, 07:06:37 PM
I can't watch this video, but if the general argument is that a "job" is a daily defined working arrangment with a legally established company, then the answer to the question posed in the title is "no".

The official metrics are flawed, in many notable ways.  But significantly in error as the "unoffical" grey market increases in relative size.  This has been the trend since the commercial explosion of the Internet since 1992.  For example, many people for the past decade or so have made a part time job out of Ebay dealings.  A minority of these people have lost their "offical" jobs in the recent recession, and are thus offically unemployed.  But if your side job was selling locally made knick-knacks on Ebay prior to the pink slip, what would you do?  I live in a city that has a local artist industry centered around glass, but for the most part the artists themselves don't sell their art on the Internet.  Several fans have filled that niche over the past several years, and I'd bet that more than a few have made a full time income out of their hobby. 

Another example is my nephew.  He recently turned 18, and like many his age have trouble finding "offical" work because they have to compete for those entry level labor jobs with older and more experienced adults who were laid off from higher skilled jobs.  That is not to say that he doesn't work.  He takes one off labor jobs from myself, neighbors, and strangers via a website called Taskrabbit.  It's not as easy or dependable as an "official" job, and he would prefer a regular scheduled job, as there are many advantages; but he doesn't go hungry and he manages to earn enough to pay for the things that he really wants, such as gas in his car, insurance, cell service and bowling fees.
3855  Economy / Economics / Re: Deflation and Bitcoin, the last word on this forum on: September 20, 2011, 06:49:20 PM
There won't be a recovery without deflation.

Yes, but we have already seen some deflation, and attempts to "combat" same.  I would agree that the correction is not yet over, but to assume that we will see general signs in the overall economy (such as consumer price deflation) as opposed to deflation centered in particular industries (such as real estate and industrial commodities) is unsupportable, IMHO.


 I don't remember the 70's, but I've been advised to look forward to it: High price inflation, high unemployment, economic stagnation.

That would be the 'stagflation' that I mentioned prior.  A condition of concurrent consumer price inflation and rising middle class unemployment rates that Keynseian economy theory insists is impossible.
3856  Economy / Economics / Re: Deflation and Bitcoin, the last word on this forum on: September 20, 2011, 06:41:38 PM

Deflation encourages hoarding, which is only one form of saving.
It discourages debt, yes. Are you saying that we shouldn't have financial market?
I agree we must first save and then invest, but if deflation is greater than capital yields, there will be no investment at all.

There are natural counter-tendencies that limit how much deflation can occur within a given working economy.  One might argue that exceeding those limits are possible, and the results would be destruction of the working economy, but there are no cases that affirm this argument.  Deflation tends to be much milder than inflation, if only because the rate of inflation under a fiat currency is under the direct control of those who can legally (or even illegally) produce that currency, thus there is no practical limit to the inflation rate.  There is no case of deflation exceeding 10% APR under a gold standard, but there are several events of inflation exceeding 400% APR under fiat currencies.  A deflationary rate of 10% is very high, and would have some harsh effects; but an inflationary rate of 400% actually destroys the economy based upon the fiat currency.  The risks are not comparable.

No, we do not agree.  Monetary base deflation discourages imprudent capital investments.  Capital investments that deserve funding will always find it.

Price deflation discourages all investments, but there's some investments that are so good that are going to be made despite the deflation.
With 5% interest rates and 3% deflation.
Let's see some investments and loans, and if the money owner will make them or not:

7% interest loan with 3% risk premium -> No
7% interest loan with 2% risk premium -> Yes
5% interest perfect secure loan -> Yes
5% yield perfect secure investment -> No

Because unlike the 5% interest loan, the 5% perfect secure investments depreciates at 3% per year.
Seriously guys, what's wrong with my bakery example?

You're view of praxelolgy is oversimplified.  You are not alone in this error.

"Take, for just one example, Galbraith’s interpretation of Adam Smith’s notion of self-interest, an idea that is constantly misunderstood even today. Galbraith seems to believe that self-interest might not lead us to the socially optimal outcome, as the invisible-hand idea would suggest. This is a terrible misunderstanding of the role of self-interest in economics.

First, self-interest does not automatically equal greed in economic theory. It is not assumed that individuals are motivated solely by selfishness or material gain. Economics is not about the particular motivations individuals have but rather is a method of analysis. It assumes individuals attempt to maximize their welfare as they conceive it, which can be selfish, altruistic, spiteful, loyal, or even masochistic. Individuals are attempting to achieve their ends with the means they believe to be the best.

Second, institutional context matters. The rules we live under will determine whether Adam Smith’s invisible hand achieves socially beneficial outcomes or not. The invisible hand guides self-seeking individuals — people who are attempting to achieve their ends — to serve the public good, but only under the correct rules. Private property, freedom of contract, and competition are all necessary to achieve what Smith envisions with the invisible hand. As Sigler says in the review, “[T]o discuss Smith’s theory without mention of competition is to discuss Napoleon without mention of war.”

3857  Other / Off-topic / Re: I Manufacture machines that generate free electricity. A match made in heaven? on: September 20, 2011, 06:25:15 PM
It is thus theoreticly possible for such a disk, of the perfect set of size and rpm's, at an unknown resonate frequency, to draw an incrediblely small amount of momentum from the relative motion of the Earth's field spinning inside of the Sun's, even while itself sitting on the face of the Earth and not in any real motion relative to that field from a macro viewpoint.  This would be akin to those quantum level 'eddys' that plague researchers trying to develop room temp superconductors.
1. Lots of ifs and buts, not even a theoretical model, just a make-believe story about how the Sun's magnetic field can have higher intensities than our Earth's magnetic field at ground level. Allow me to smirk.

Higher field densities are not required....

"Stefan Hartwig, Martin Burghoff, and colleagues at the National Metrology Institute of Germany have now discovered that in fields of 1 µT and lower, water responds to a magnetic perturbation even faster still. To see the increased relaxation rates, they had to measure water’s magnetization in fields less than 1/500 the intensity of Earth’s geomagnetic field—a feat made possible in part by a superconducting quantum interference device. Hartwig and company haven’t yet pinpointed the detailed mechanism underlying the fast spin dynamics, but they suspect that coupling between H+ and 17O nuclei plays a role."

2. You seem to conveniently forget or knowingly exclude the magnetic field depletion from the "fuel" magnets that are constantly moving through powerful magnetic fields. These magnets will decay their power orders of magnitude faster than your perfectly aligned solar magnetosphere resonating positive feedback field increase. Do you understand this?

I understand this, but I disagree that this is the root source of any unexplained energies.  The breakdown of the magnets is certainly a drop in the potential energy of the magnet, but there is no explaination as to how the slow collapse of the magnetic field can transfer it's energy to the momentum of the device in a net positive way.  The individual molecules are equally likely to dump their magnetic energy in a net negative way, simply because when the molecules lose their magnetic alignment with the field, they can lose it in any direction whatever.  Said another way, the failure of the individual molecules that comprise the magnet are just as likely to oppose the overall flow of energy of the device as to contribute to it, and there is no way to bias the process in favor of the desired flow.


3. Supercooled materials, or even a supercooled machine of similar design COULD work at close to 100% efficiency, but certainly not over, again, same reasons as above. A non over-unity machine is useless, and maintaining supercooled temperatures requires significant power. It's useful if you want to transmit power over long distances, but this use scenario is not profitable.

What use scenario are you referring to?  I offered a general explaination as to why we we will never see horizontal maglev flywheels used as storage devices for electric vehicles.  I never claimed that this effect was large enough to develop an over-parity "free energy" type of device.  I did imply that, should this ever be accomplished, men in black suits are going to kick the inventors' doors down and they are going to fully understand the term "extralegal enforcement".

3858  Economy / Economics / Re: Deflation and Bitcoin, the last word on this forum on: September 20, 2011, 12:55:56 AM
Then there will be a large increase of currency in the market due to QE1 & QE2.
I believe QE* were immediately effective. The talking point purpose may have been to stimulate the economy back to the Greenspan bubble. But in actuality, they effectively kept core CPI above zero, lowered interest rates while allowing the Treasury to increase the bond issuance. More to the point, QE* provided a BASE/M0 money supply on reserve as banks and other financial institutions massively deleveraged M3. Unlike non-debt based economies such as Weimar Germany or Zimbabwe, in our modern economy, credit collapse evaporates the majority of money. The printing of M0 was in the area of 3 trillion which pales in comparison to the trillions of M2 and incalculably less than higher (M3+) derivatives which <pooof> no longer exist. Since the end of 2008, M3 (on the books) collapsed 20% and has only this year come out of negative growth. M0 (printed money) is just the 'stuff' you get when you liquidate your assets, like the soot from an extinguished lamp.

I can't contest anything you say above, but I think that the price inflation will not be truly felt until a recovery is in the works for real.  Most of that QE money, as you said, is sitting in bank reserves because they can't or won't lend right now.  Once that sentiment changes back into a 'boom' mentality, M3 will shoot for the Moon like never before, and that is when the majority of the price inflation is going to be noticable.  In the meantime, deflation is the dominate theme, due to the contraction of M3 outpacing the expansion of M0 and M1.  I'm still not ruling out a 'stagflationary' period in the near term, however.


In so many words, I agree that hyperinflation is not in the United States' immediate future. However, volatility will go wild. Real inflation, including food and energy, is already in the double digits annually. Europe is another story entirely.

I don't even think hyperinflation is in the US's distant future, because as much as I like Ron Paul as a candidate I consider the odds of his success (or anyone else's) at forcing meaningful reform or control upon the FedReserve to be on par with the odds that the world will actually end precisely on December 21st, 2012.  Which is to say, not very good.  The last actual president who tried to reform the monetary system was assassinated about a month after the attempt.  Corrolation is not causation, and I'm sceptical of a connection anyway, but I'm never going to rule it out either.
3859  Other / Beginners & Help / Re: I need cash for my bitcoin on: September 19, 2011, 07:28:30 PM
Not so.  The MadHatter was logged in one week ago, but is not in the habit of posting anymore and may not respond to PM's.  He doesn't send cash through the mail because he has been burned doing so.  Basicly, you can trust him to honor his agreements, or bugger off if he doesn't know you.  I'm sure if you could meet him in person, he would consider buying your bitcoins for cash. 
3860  Economy / Economics / Re: Deflation and Bitcoin, the last word on this forum on: September 19, 2011, 07:12:54 PM

I'm not talking specifically about deflation in bitcoin. I'm just here to remove the "deflation is good/innocuous" dogma. Deflation is very bad for the health of the financial market. I expect the dollar to hyperinflate soon.

We are likely to have some pretty strong price inflation in the next couple of years, if the economy actually starts to recover and people go back to work and pay off those debts without defaulting.  Then there will be a large increase of currency in the market due to QE1 & QE2.  However, hyperinflation is something altogether different.  A currency can, and many have, suffered very large annual inflation rates for a couple of years without imploding; but hyperinflation is always and everywhere a political event.  The Federal Reserve exists for the benefit of the member banks, not for the benefit of the US government or the public.  So long as the Fed exists, and continues to manage monetary policy independently of Congress, then hyperinflation simply isn't in the cards.  That would destroy the golden goose, as far as the bankers are concerned.  The banks would rather see an inflation rate of 20% for a few years and crush the market economy than surrender the power of control over monetary policy.  Congress will have to take it by force, and it won't prove easy.  Still, things don't look secure for the Fed's charter considering how well Ron Paul's retoric has infultrated the Republican base this year.  If Congress cancels the Fed's charter, or takes over monetary policy in some other manner, then hyperinflation is a possibility.  Otherwise, forget it.  And even as bad as inflation could get in the US, it's likely to not be as bad as inflation might be under the Euro or in China.  The US FRN is the safe haven of soverign wealth funds and unscrupulous political officials the world over, and any net influx of captial to the US FRN is going to support it's buying power until such time as the influx tapers off.  But sooner or later, significant price inflation in the US is already a certainty.


Anyway, do we agree that deflation discourages real capital investment?

No, we do not agree.  Monetary base deflation discourages imprudent capital investments.  Capital investments that deserve funding will always find it.
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