Why bitcoin is doomed: I can't couterfeit them

[hashman]

https://quantiger.wordpress.com/2012/06/29/why-bitcoin-is-doomed/

tl;dr :
Suppose I have 10 bitcoins.  If I want to loan you money, I have to actually give these coins to you! 
Where's the profit in that?  Ridiculous.   

Note to quantiger:  you can still defraud investors.  Happy now?     

haha! [/captain haddock]
reposted here for the lulz

[firefop]

https://quantiger.wordpress.com/2012/06/29/why-bitcoin-is-doomed/

tl;dr :
Suppose I have 10 bitcoins.  If I want to loan you money, I have to actually give these coins to you! 
Where's the profit in that?  Ridiculous.   

Note to quantiger:  you can still defraud investors.  Happy now?     

haha! [/captain haddock]
reposted here for the lulz

Isn't it sad that how 'experts' don't understand basic economics?

[hazek]

Isn't it sad that how 'experts' don't understand basic economics?

You can't blame them really, they were never taught how to think logically and rationally.

[herzmeister]

It's true that in a perfect monetary system the money supply is linked 1:1 to the GDP.

But this concept is incompatible with an incorruptible Cryptocurrency.

I still believe though that Bitcoin won't be the only currency in the future, there'll be many different systems for different purposes in parallel (precious metals, local currencies, LETS, Ripple, privately issued ones, business-to-business clearance etc), and this will make such discussions obsolete.

[justusranvier]

Nobody remembers what capital formation means any more - they are so accustomed to central planning via credit allocation that the idea that business expansion can be funded by allowing producers to retain their profits is completely alien to most economists.

[Evolvex]

I still believe though that Bitcoin won't be the only currency in the future, there'll be many different systems for different purposes in parallel (precious metals, local currencies, LETS, Ripple, privately issued ones, business-to-business clearance etc), and this will make such discussions obsolete.

I'm with you on that dude, even if bitcoin fails, I think the concept that it has brought to the table will carry on, I think its basically going to turn what everyone things about money on its head - about time these "symbols" of wealth had a new shake up, its been a while.

[Come-from-Beyond]

"There are reasons why the money supply needs to be something that can enlarge. Creation of new value, new products, new capabilities that never existed before is one of them.  When new value appears it must be accounted for somehow. If you cannot enlarge the money supply to account for new value then when ever something new appears, the price of everything must go down to account for it."

This sounds sane.

[DublinBrian]

The Fed is the biggest employer of economists in the world. 22,000 employees, mostly economists and statisticians. Anyone who does not support the inflation doctrine is not eligible to work there.

Moreover, any school that doesnt teach the "Inflation is good, deflation is bad" doctrine will not have any of their graduates gain employment at the Fed. So as a result, no schools or universities are willing to teach the truth.

The "deflation is bad" doctrine is a religion. A church that has power over its congregants minds. The blog author is a member of this church. His religion is about to be swept away by a reformation.

[JoelKatz]

https://quantiger.wordpress.com/2012/06/29/why-bitcoin-is-doomed/

tl;dr :
Suppose I have 10 bitcoins.  If I want to loan you money, I have to actually give these coins to you!  
Where's the profit in that?  Ridiculous.    

But that's not true. I can equally well just note in my own ledger that you have 10 bitcoins in a demand account without giving you any actual bitcoins. If the scenarios envisioned in that article ever happened (and I don't think they will, but let's assume it) then people would just do exactly that, using demand notes denominated in bitcoins to inflate the money supply.

[hazek]

"There are reasons why the money supply needs to be something that can enlarge. Creation of new value, new products, new capabilities that never existed before is one of them.  When new value appears it must be accounted for somehow. If you cannot enlarge the money supply to account for new value then when ever something new appears, the price of everything must go down to account for it."

This sounds sane.

It does and here's how that happens in Bitcoin: move the decimal point one to the right and BAM you just increased the supply of bitcoins by 10 times!

[Fjordbit]

The Fed is the biggest employer of economists in the world. 22,000 employees, mostly economists and statisticians. Anyone who does not support the inflation doctrine is not eligible to work there.

Moreover, any school that doesnt teach the "Inflation is good, deflation is bad" doctrine will not have any of their graduates gain employment at the Fed. So as a result, no schools or universities are willing to teach the truth.

The "deflation is bad" doctrine is a religion. A church that has power over its congregants minds. The blog author is a member of this church. His religion is about to be swept away by a reformation.

Deflation is generally bad for a constant growth paradigm. If future dollars are worth more, then it reduces motivation to lend and invest. At the same time, it also makes it harder for debtors to repay their debts as their income streams are reducing. The net effect is that economic growth is hampered.

However, this just begs the question that constant growth is a good paradigm. I submit that it is not and instead what we need is an economy at equilibrium. Constant expansion has lead to us using up the resources of the planet and possibly already has us on a trajectory that will result in wide spread famine and loss. Part of the problem is the expansionary money system that makes it appear that we can just add new aspects to the economy without negative effects. An economy at equilibrium that readjusts when new real innovations are introduced is better equipped to handle the issues of a world with a finite limit of power input, finite water supply, and other resource limitations.

[firefop]

The Fed is the biggest employer of economists in the world. 22,000 employees, mostly economists and statisticians. Anyone who does not support the inflation doctrine is not eligible to work there.

Moreover, any school that doesnt teach the "Inflation is good, deflation is bad" doctrine will not have any of their graduates gain employment at the Fed. So as a result, no schools or universities are willing to teach the truth.

The "deflation is bad" doctrine is a religion. A church that has power over its congregants minds. The blog author is a member of this church. His religion is about to be swept away by a reformation.

Deflation is bad only in a fractional reserve (debt based system). The concept that all goods must have monetary backing to hold value is stupid in the extreme. Really the amount of the money supply only matters up to a point because it circulates. That's the purpose of it. As bitcoin deflates (and it should as it slowly begins to replace less reliable currencies) we'll see exactly the opposite of what the 'economists' fear. This is less hoarding. As the value of a bitcoin increases, the markets will show more stability over the long term and this will lead to people needed to hold less btc to meet their personal financial goals - freeing that coin up for riskier investments (the excess will become wealth and be treated accordingly).

Then we'll see trickle down economics really working on a large scale.

[JoelKatz]

If future dollars are worth more, then it reduces motivation to lend and invest.

Not all lending and investing are good. We recently had a global economic collapse due to overly-incentivized lending and investing.

At the same time, it also makes it harder for debtors to repay their debts as their income streams are reducing. The net effect is that economic growth is hampered.

Their income streams aren't reducing. They are reducing when denominated in the deflating currency, but their real value is not reducing.

However, this just begs the question that constant growth is a good paradigm. I submit that it is not and instead what we need is an economy at equilibrium. Constant expansion has lead to us using up the resources of the planet and possibly already has us on a trajectory that will result in wide spread famine and loss. Part of the problem is the expansionary money system that makes it appear that we can just add new aspects to the economy without negative effects. An economy at equilibrium that readjusts when new real innovations are introduced is better equipped to handle the issues of a world with a finite limit of power input, finite water supply, and other resource limitations.

I don't agree. Resource limitations are fictional. If you don't see why, ask yourself this question -- was Uranium a resource in 1790? If not, then resources are not fixed and constant expansion includes resource expansion. If so, then the entire universe is a resource.

[Come-from-Beyond]

"There are reasons why the money supply needs to be something that can enlarge. Creation of new value, new products, new capabilities that never existed before is one of them.  When new value appears it must be accounted for somehow. If you cannot enlarge the money supply to account for new value then when ever something new appears, the price of everything must go down to account for it."

This sounds sane.

It does and here's how that happens in Bitcoin: move the decimal point one to the right and BAM you just increased the supply of bitcoins by 10 times!

I disagree. The same happens with stock split. If u had 100 shares after 10x split u would have 1000 of them. Moving decimal point in Bitcoin helps only to use amounts less than 1 satoshi, it doesn't increase Bitcoin's supply.

[FreeMoney]

Here is my rebuttal:
He tries to present a thought experiment with his quant coins, but completely fails to grasp some of the fundamental problems of the system he's defending.

1) He is the "authoritarian dictator" in that scenario. He has a special monopoly on the right to acquire wealth without earning it, while everyone else has to face the 'reality' of working hard and the risk of going bust. This is just Feudalism in disguise.

2) It's very easy for the system to be unstable, whereby he gradually acquires more and more wealth. It seems that no matter what he does, he, as the central bank, cannot lose. Combine that with greed and other human weaknesses, it's extremely tempting for central banks and bankers to corrupt the system. The so-called "boom bust cycle" is a colossal fraud designed to enrich banks.

3) He doesn't actually present any arguments as to why deflation is bad. Population growth is not good enough. There is more than one way to double the number of coins in circulation: you can mint them, or you can cut them in half.

And FOUR, the point that obliterates and renders his entire article null and void...
Bitcoin's decentralised, open-source nature actually does allow money supply expansion! The caveat is that the expansion will only occur organically. I.e.: if there's a sufficient profit motive for people to FORK the damn project! This solution is staring him and all the other sceptics in the face and they still don't get it. Likewise, if Bitcoin-compatible parallel currencies fall out of favour due to some depression, the market exchange rate will take care of that automatically.

He's got all the money and is pretending a reasonable goal is to get more money. It's just not reasonable at all. This dictator ought be happily lending out the money at a loss to get new stuff. Beyond that, he can get paid back amply even in money terms by buying stuff when it's ready, getting paid back and buying more stuff.

There is so much strange about his system that it doesn't isolate the variable he's trying to criticize.

[hazek]

"There are reasons why the money supply needs to be something that can enlarge. Creation of new value, new products, new capabilities that never existed before is one of them.  When new value appears it must be accounted for somehow. If you cannot enlarge the money supply to account for new value then when ever something new appears, the price of everything must go down to account for it."

This sounds sane.

It does and here's how that happens in Bitcoin: move the decimal point one to the right and BAM you just increased the supply of bitcoins by 10 times!

I disagree. The same happens with stock split. If u had 100 shares after 10x split u would have 1000 of them. Moving decimal point in Bitcoin helps only to use amounts less than 1 satoshi, it doesn't increase Bitcoin's supply.

I don't understand. In your analogy you say I start with 100 shares, and then I have 1000 shares and yet you say this is not an increase in supply? What is this then?

[JoelKatz]

I don't understand. In your analogy you say I start with 100 shares, and then I have 1000 shares and yet you say this is not an increase in supply? What is this then?

It is not an increase in the total value, but of course printing more money or lending out money doesn't increase the total value either. What bothers them is that this isn't any value that they can appropriate, because it's shared by all currency holders equally. In their view, printing more money and giving it to everyone is bad, but printing more money and giving it to banks to lend out is good, because lending is good. And giving it to governments to spend is good because government spending is good.

What they really want to do is punish saving, which they slander by calling it "hoarding". This is really the broken window fallacy writ large. Saving is actually producing. To "save money", you must earn it and do nothing else.

It's true that in a perfect monetary system the money supply is linked 1:1 to the GDP.

This presumes that there is one fixed ideal balance between saving (deferring consumption) and investing (consuming now). A monetary system whose value was determined by the market such that it tended to deflate when saving makes more economic sense and inflate when investing makes more economic sense would make more economic sense overall.

[MoonShadow]

It's true that in a perfect monetary system the money supply is linked 1:1 to the GDP.

But this concept is incompatible with an incorruptible Cryptocurrency.

I still believe though that Bitcoin won't be the only currency in the future, there'll be many different systems for different purposes in parallel (precious metals, local currencies, LETS, Ripple, privately issued ones, business-to-business clearance etc), and this will make such discussions obsolete.

The very metric we call Gross Domestic Product has no practical meaning in the bitcoin economy.  Gross Global Economy would, but doesn't tell you anything useful.

[Etlase2]

It's true that in a perfect monetary system the money supply is linked 1:1 to the GDP.

But this concept is incompatible with an incorruptible Cryptocurrency.

I disagree. See signature.

[Come-from-Beyond]

I disagree. The same happens with stock split. If u had 100 shares after 10x split u would have 1000 of them. Moving decimal point in Bitcoin helps only to use amounts less than 1 satoshi, it doesn't increase Bitcoin's supply.

I don't understand. In your analogy you say I start with 100 shares, and then I have 1000 shares and yet you say this is not an increase in supply? What is this then?

It's similar to using "micro" and "nano". If every bitcoin was a coin with "1 BTC" printed on it, then we would have 21'000'000 such coins. If we decided to split Bitcoin 10x times then we would have "10 BTC" printed on the same (21'000'000) quantity of coins. Increase in supply would be if we added more coins to those 21 million ones.