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Author Topic: The Future of Bitcoin—by a famous economist  (Read 5024 times)
Boldhawk
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May 28, 2011, 05:52:56 AM
 #1

The potential value of the Bitcoin is staggering, and it can reset the economy, in the same way a computer is reset.

We must acknowledge and applaud the creators of Bitcoin for generating the one single feature that would allow a parallel economic system, that would eventually make the  present system disappear by default... that people would stop using it... and governments would not be able to do anything about it, unless they went on a concerted campaign to shut every single user down... which, given the desperate situation Bitcoin could generate, it is not something that the powers that be would give up easily, thus not inconceivable that they would try. Blood on the streets is putting it mildly. Remember, all wars, famine, poverty, and nearly every single social ill is sourced by the current economic system, and the way money is created, controlled, and distributed.

However, nothing of the sort would happen without some radical changes in Bitcoin's economic ideology:

Some key elements in Bitcoin which simply parallels the existing system, are the same mistakes made by the modern system from ever working for the benefit of mankind, and not just a group of privileged elite.

Let's start from a mission statement of the purpose of an economy, but not using the traditional idea, but what most people, intuitively, know it has to be:

The intelligent, and sustainable management of earth's resource for the benefit of the world population.

So when you think that way, you begin to understand that if one uses a monetary system, it has to be a stable value exchange, and based on real resources; i.e.: the currency represents one to one value to money.

Modern Money Mechanics, a booklet produced by the Federal Reserve, give some fundamental which work exactly against their stated goals of maintaining a stable balance of currency to products in the market place: They state that the value of money comes from scarcity. Be that as it may, resources are forced into scarcity when it is necessary to render money more valuable. At any rate, there has to be a continuous relationship of money to goods/services.

Mathematically, profit and interest are inappropriate, as they are designed to transfer wealth to those who already have it, and take it away from those who have little; that's built into the system. That is why the huge wealth and income gap, where 1% of the population owns and/or controls in excess of 40% of the wealth. Increase that 1% to 5%, and that 5% controls and/or owns nearly 80% of the wealth and income.

Any rational human being can see that the system as it is now, it simply isn't for the human beings of the planet, but for the select few that created and control the system.

So if Bitcoin does nothing but parallel what the current system is doing, it is bound to the same drawbacks and failures of the current system. The simple fact alone that there is no direct relationship between the creation of bitcoins to real resources/production, and the fact that bitcoins are created at a far slower rate than the production of the world, will bring about its own destruction, not only because of the mathematical problems of the system, but the reckless management of earth's resources. We should add to this the problem that is already in the horizon with the use of bitcoin as a financial trading instrument... another form of careless gambling as it is now taking place in the financial markets and Foreign exchange markets. 

A more equitable, and better managed system would be to treat the economy as a complex navigation system, where the money is represented by water, and the economic participants are represented by boats. The navigation system is made up of locks, gates, reservoirs, and channels. The trick is to watch the system real time, and add or withdraw water to make sure all boats are afloat, by automatically controlling the gates and locks. The water flow would be controlled by an intelligent algorithm that would be ruled by the idea that all boats must be floating, and not, as otherwise trickled by the Fed, using the pseudo-science of macro-economics. This would immediately remove the power of the elite, and with the bitcoin system, it could be done, nilly willy... so long as the bitcoin staff doesn't decide to ally with the institutionalized power system. After all, it should have become clear with this illustration, that the latest economic depression was no more than the people in charge, draining the water from most of the channels, specifically those in the real production economy. Most people understand this! If you don't, you need to catch up with the rest of us. Another drawback is that most people might not like the idea of having their money supply reduced when production is down... They'd love it when their accounts were increased, but not decreased. That's just social conditioning, which might or might not change after the system is in use for a bit of time.

Of course, the navigation system model will go just so far. Modern technology can create in excess of human needs, including food, and “things” under an ecologically sound system that manages resources intelligently. Technology will continue to displace workers, and take away the grunt jobs. So unemployment would be a problem, UNLESS, the philosophical implications of this are understood: Technology is a human creation. If humans can replace their grunt work by machines to produce all their needs, isn't it their right entitlement that they should benefit from their creation, and receive the good and services provided by the technology, without having to work?  This is not a strange idea. That's what our economics teacher told us in high school more than forty years ago: "You'll work for a few hours a week, for the pay you were getting when you worked an entire week," they said. Then, people would be able to transit to a new form of human society, where humans spend more time learning, and developing creative abilities, to add to society's heritage, and further benefit mankind.

Therefore, when abundance is attained, goods and services would be available at no charge, and money would become unnecessary.

In order for bitcoin to survive the unavoidable transition, it would also have to start monetizing (creating money against) all form of resources, such a man-hours, and skills, and people would otherwise might no have other resources to be monetized, they would always have enough money to survive, or rather avoid crises, because their 'money' would be their time and skills. It would be wise also to start cataloging and recording all of earth resources, so people would begin to learn budgeting based on resources, rather than how much money one had. 

One more thing would be necessary to maintain a relatively stable economic system, before abundance is reached: the money would have to have a stable unit of value, to maintain its value in relationship to the real world. So far, the only viable unit of value is the work-hour.

This article is far from being a comprehensive treatise. It is written primarily to alert those who have taken enough time to understand why modern economics doesn't work. I must add, that propitiously, the number of people who understand economics, and the problems our modern system is growing daily.  It is no longer “radical” to trash the present system, but the norm.
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May 28, 2011, 06:06:13 AM
 #2

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A more equitable, and better managed system would be to treat the economy as a complex navigation system,

And who is the one "managing" your system ?
What are you going to do if people  refuse to participate in your rules ?
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May 28, 2011, 06:48:43 AM
 #3

The potential value of the Bitcoin is staggering, and it can reset the economy, in the same way a computer is reset.

We must acknowledge and applaud the creators of Bitcoin for generating the one single feature that would allow a parallel economic system, that would eventually make the  present system disappear by default... that people would stop using it... and governments would not be able to do anything about it, unless they went on a concerted campaign to shut every single user down... which, given the desperate situation Bitcoin could generate, it is not something that the powers that be would give up easily, thus not inconceivable that they would try.

That would be a major shift in the world. Think of all the rich cats who own trillions of dollars, such as the Rothschilds and mega corporations and large governments. They would all have to switch to bitcoins. And when bitcoins start to become dominant, ordinary currents such as the U.S. dollar, euro, yuan and so on would hyperinflate if people started losing trust in them. The previously rich would sit on huge amounts of money that would be essentially worthless. Shocked
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May 28, 2011, 07:19:17 AM
 #4

The potential value of the Bitcoin is staggering, and it can reset the economy, in the same way a computer is reset.

We must acknowledge and applaud the creators of Bitcoin for generating the one single feature that would allow a parallel economic system, that would eventually make the  present system disappear by default... that people would stop using it... and governments would not be able to do anything about it, unless they went on a concerted campaign to shut every single user down... which, given the desperate situation Bitcoin could generate, it is not something that the powers that be would give up easily, thus not inconceivable that they would try.

That would be a major shift in the world. Think of all the rich cats who own trillions of dollars, such as the Rothschilds and mega corporations and large governments. They would all have to switch to bitcoins. And when bitcoins start to become dominant, ordinary currents such as the U.S. dollar, euro, yuan and so on would hyperinflate if people started losing trust in them. The previously rich would sit on huge amounts of money that would be essentially worthless. Shocked

Quote from: Mencius Moldbug
Note in general the social effect of a total restandardization.  The result is nothing less than a total redistribution of wealth -- or at least money.  When silver goes down the toilet and gold becomes king, all the silver in the world must pass through the gold-hole.  He who exits first is a mogul.  He who exits last finds his portfolio has turned into a small stockpile of industrial metal: a metal the world has enough of right now.  Similarly if he has any Semper Augustus tulips, they do look nice in a garden.

Remonetization, [whether] spontaneous or orderly, is a one-time restructuring event.  The smart rich will profit, of course, by early adoption of the new standard in a spontaneous remonetization.  It is the stupid rich who will suffer, and perhaps deserve to.  Who can defend the stupid rich?

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benjamindees
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May 28, 2011, 07:22:48 AM
 #5

Great, more failed RBE logic.  It's always the same.

Quote
So far, the only viable unit of value is the work-hour.
Quote
they would always have enough money to survive, or rather avoid crises, because their 'money' would be their time and skills

1) Tie money to labor.

Quote
for the benefit of the world population
Quote
goods and services would be available at no charge

2) Encourage population growth.

Quote
the money would have to have a stable unit of value
Quote
there has to be a continuous relationship of money to goods/services

3) Artificially maintain stable prices.

Quote
Modern technology can create in excess of human needs, including food, and “things” under an ecologically sound system that manages resources intelligently.
Quote
the system as it is now, it simply isn't for the human beings of the planet

4) Act surprised when "resource abundance" fails to materialize.

Quote
resources are forced into scarcity when it is necessary to render money more valuable.
Quote
the latest economic depression was no more than the people in charge, draining the water from most of the channels, specifically those in the real production economy

5) Blame it on "elites" artificially limiting resources.

Quote
it can reset the economy, in the same way a computer is reset.

6) GOTO 1

Honestly, most of your goals are attainable.  Most.  But the way you suggest bringing them about is just hilariously wrong.

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May 28, 2011, 09:32:14 AM
 #6

The previously rich would sit on huge amounts of money that would be essentially worthless. Shocked

No, they wouldn't. Only poor people keep a large proportion of their wealth in cash.


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Anders
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May 28, 2011, 10:14:05 AM
 #7

The previously rich would sit on huge amounts of money that would be essentially worthless. Shocked

No, they wouldn't. Only poor people keep a large proportion of their wealth in cash.



Ok, shares in a company for example will still be valuable even if the currency become hyperinflated. And real estate will no doubt still be valuable. I stand corrected.
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May 28, 2011, 03:44:29 PM
 #8

A more equitable, and better managed system would be to treat the economy as a complex navigation system, where the money is represented by water, and the economic participants are represented by boats.

"Their Keynesian models are tidy and neat.
But that top down approach is a fatal conceit."
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May 28, 2011, 04:43:40 PM
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Let's start from a mission statement of the purpose of an economy, but not using the traditional idea, but what most people, intuitively, know it has to be:

The intelligent, and sustainable management of earth's resource for the benefit of the world population.

Wrong premise. Also the kind that is usually the result of the collision between a 12yo mind and a Disney cartoon.


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newMeat1
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May 28, 2011, 04:58:57 PM
 #10

It's not so hard to go from rags to riches. Most people just don't put the effort in.

If anybody ever wanted to destroy Bitcoin, wouldn't it be as simple as... writing a program that makes very frequent transfers between 2 wallets. Then the whole network would be dragged down trying to process those transfers.

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May 28, 2011, 06:24:09 PM
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It's not so hard to go from rags to riches. Most people just don't put the effort in.

If anybody ever wanted to destroy Bitcoin, wouldn't it be as simple as... writing a program that makes very frequent transfers between 2 wallets. Then the whole network would be dragged down trying to process those transfers.

Damn! All these brilliant programmers working on bitcoin missed it. You have found the way to destroy the network. Congratulations!!! You win the Internet
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May 28, 2011, 06:40:35 PM
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It's not so hard to go from rags to riches. Most people just don't put the effort in.

If anybody ever wanted to destroy Bitcoin, wouldn't it be as simple as... writing a program that makes very frequent transfers between 2 wallets. Then the whole network would be dragged down trying to process those transfers.

Damn! All these brilliant programmers working on bitcoin missed it. You have found the way to destroy the network. Congratulations!!! You win the Internet

The whole internet? That's a great prize.  Wink
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May 28, 2011, 11:06:30 PM
 #13

The potential value of the Bitcoin is staggering, and it can reset the economy, in the same way a computer is reset.

We must acknowledge and applaud the creators of Bitcoin for generating the one single feature that would allow a parallel economic system, that would eventually make the  present system disappear by default... that people would stop using it... and governments would not be able to do anything about it, unless they went on a concerted campaign to shut every single user down... which, given the desperate situation Bitcoin could generate, it is not something that the powers that be would give up easily, thus not inconceivable that they would try.

That would be a major shift in the world. Think of all the rich cats who own trillions of dollars, such as the Rothschilds and mega corporations and large governments. They would all have to switch to bitcoins. And when bitcoins start to become dominant, ordinary currents such as the U.S. dollar, euro, yuan and so on would hyperinflate if people started losing trust in them. The previously rich would sit on huge amounts of money that would be essentially worthless. Shocked

Unless the rich are smart and convert their currency early before the hyperinflation. In this sense, everyone has an equal chance to win or lose depending when they jump on the bandwagon.
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May 28, 2011, 11:26:25 PM
 #14

The potential value of the Bitcoin is staggering, and it can reset the economy, in the same way a computer is reset.

We must acknowledge and applaud the creators of Bitcoin for generating the one single feature that would allow a parallel economic system, that would eventually make the  present system disappear by default... that people would stop using it... and governments would not be able to do anything about it, unless they went on a concerted campaign to shut every single user down... which, given the desperate situation Bitcoin could generate, it is not something that the powers that be would give up easily, thus not inconceivable that they would try.

That would be a major shift in the world. Think of all the rich cats who own trillions of dollars, such as the Rothschilds and mega corporations and large governments. They would all have to switch to bitcoins. And when bitcoins start to become dominant, ordinary currents such as the U.S. dollar, euro, yuan and so on would hyperinflate if people started losing trust in them. The previously rich would sit on huge amounts of money that would be essentially worthless. Shocked

The rich and the famous sit on huge amounts of hard assets, real estate, companies, commodities, IP etc... Switch to bitcoins is not a big deal for them really. If anything it opens up new "estate management" possibilities.

As such, whatever currency is prevalent they will continue being rich and famous. It is just those who jump fiat ship first will be a bit more rich and famous than those who hesitated.


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May 29, 2011, 12:27:14 AM
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The potential value of the Bitcoin is staggering, and it can reset the economy, in the same way a computer is reset.

We must acknowledge and applaud the creators of Bitcoin for generating the one single feature that would allow a parallel economic system, that would eventually make the  present system disappear by default... that people would stop using it... and governments would not be able to do anything about it, unless they went on a concerted campaign to shut every single user down... which, given the desperate situation Bitcoin could generate, it is not something that the powers that be would give up easily, thus not inconceivable that they would try.

That would be a major shift in the world. Think of all the rich cats who own trillions of dollars, such as the Rothschilds and mega corporations and large governments. They would all have to switch to bitcoins. And when bitcoins start to become dominant, ordinary currents such as the U.S. dollar, euro, yuan and so on would hyperinflate if people started losing trust in them. The previously rich would sit on huge amounts of money that would be essentially worthless. Shocked

The rich and the famous sit on huge amounts of hard assets, real estate, companies, commodities, IP etc... Switch to bitcoins is not a big deal for them really. If anything it opens up new "estate management" possibilities.

As such, whatever currency is prevalent they will continue being rich and famous. It is just those who jump fiat ship first will be a bit more rich and famous than those who hesitated.

Those rich who are sitting on assets that are fundamentally a package of set fiat cash-flows (e.g. a bond) are going to be arbitrarily less rich as fiat declines.

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May 29, 2011, 12:34:08 AM
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Rich and Famous have financial advisers and surely sit on diversified asset portfolios. These financial advisers if they are any good before long will advise their clients to include bitcoin as principally new asset class which is not correlated to other asset classes as a component of such portfolios. After this happens even to a small degree one BTC will worth north of 10k$.




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abyssobenthonic
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May 29, 2011, 01:14:01 AM
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Rich and Famous have financial advisers and surely sit on diversified asset portfolios. These financial advisers if they are any good before long will advise their clients to include bitcoin as principally new asset class which is not correlated to other asset classes as a component of such portfolios. After this happens even to a small degree one BTC will worth north of 10k$.

You're making a rather large assumption about the rich and their degree of diversification.

Especially at the very rich end of the scale (say centimillionaire level), most who get there get there by having almost no diversification.  If Microsoft and Berkshire Hathaway go to zero, Bill Gates (and/or his foundation) are a couple of orders of magnitude poorer (which admittedly would still make Bill rich, he'd just only be a centimillionaire).

The average member of the 1982 Forbes 400 had a net worth of $225 million.  The minimum to qualify for the 2010 list was $1 billion.  That's an annual increase in net worth of only 5.3% a year.  The S&P 500, for comparison had an average level of about 120 in 1982 and was 1027 around the time the 2010 list was calculated (7.7% annualized, assuming dividends were spent on hookers & blow).  You could substantially underperform the stock market and stay on the list, yet a majority of the 1982 list that were still alive last year had fallen off (so had a growth in net worth of less than the 5.3%).

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Vitalik Buterin
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May 29, 2011, 07:47:20 PM
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No, they wouldn't. Only poor people keep a large proportion of their wealth in cash.

These days, thanks to credit card debts, car mortgages, house mortgages and all our other debts, most people hold a negative proportion of their wealth in cash.

Argumentum ad lunam: the fallacy that because Bitcoin's price is rising really fast the currency must be a speculative bubble and/or Ponzi scheme.
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May 29, 2011, 10:19:09 PM
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It's funny that nobody thought to ask who this mystery "famous" economist is yet...

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May 30, 2011, 12:54:06 AM
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He looks like an economist.

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