No central bank + fixed money supply == banking crisis? (US between 1834 - 1913)

[justusranvier]

Robot will replace most of the human workers sooner or later, but in a future society when only robot are working and producing, who is going to buy the products that robot produced? Everyone becomes a robot owner, or government owns all the robot and dispatch the work results of robots to each household?

One thing that is very hard to grasp is our inherent inability to predict the future. Think back to the time when 90% of humans had to be involved in agriculture. If you were to go back in time and tell the people of that era that in the future less than 5% of the population would be involved in agriculture they would have no ability to guess what the rest of the people would do. The things that people do now would simply be incomprehensible to them.

It's the same with us and the future. If robots end up doing most of the jobs that humans are doing today we simply are not capable of imaging what kinds of actives humans will find to fill their time. There's no reason to worry about it. The most we can say is that if people are free to trade voluntarily for mutual benefit the solutions they will arrive at will tend to be optimal.

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[herzmeister]

Right, my words.

A welfare state won't be required because if things are really so efficient and automated, basic necessities of life will become very very cheap. You'll probably have to work 10 minutes a month for your food supply. But you won't be content with that, because you'll also have more desires.

We software developers are the working class of the 21st century. We'll be in charge of actually automating everything. They're already trying to "industrialize us" with these agile, scrum, kanban (from Toyota!) methodologies to streamline our efficiency and make us replaceable.

In the period after that, maybe in 200 years, we'll probably be colonizing the solar system. Everybody will want spaceships. 10 years after that, everybody will actually *need* spaceships in order to get any job at all.

The working class in 500 years will be, I don't know, maybe space-time curvature architects.

[Adrian-x]

... There's no reason to worry about it. The most we can say is that if people are free to trade voluntarily for mutual benefit the solutions they will arrive at will tend to be optimal.

@ AbelsFire thanks I always do enjoy your posts.

The reality is we all should be enjoying the benefits of the industrial revolution today, by my calculation we are about 10,000 times more productive than we were 300 years ago (given you use the technology commonly available today) , but we work harder and longer (on average) than at any time in history.

Analyzing this phenomenon from an eco-design perspective lead me to seek solutions to optimize  our natural resources for maximum human benefits. (And my attraction to Bitcoin and dissatisfaction with current banks and economic thinking ) 

So the lecture while very informative did reiterate when looking at the Canadian and the US graphs that the demand for money is just that, a want to have more, A fixed supply prompts a different type of behavior one I believe is more ecologically and more  socially sustainable.

[justusranvier]

The reality is we all should be enjoying the benefits of the industrial revolution today, by my calculation we are about 10,000 times more productive than we were 300 years ago (given you use the technology commonly available today) , but we work harder and longer (on average) than at any time in history.

I agree there's a huge gap between how much we should need to work and how much we actually do, the question is why.

I think the answer is more likely to be a deficit of freedom rather than a surplus.

[Fjordbit]

It's not really worth discussing the fiscal merits of one system over the other. The problem is that everything still leads back to the question of morality. Let's just assume that there are more banking shocks and people are more likely to save more as value rises and all of the things that are said about a deflationary currency with no lender of last resort.

So what?

johnyj says the "BTC economy can not grow fast" but why is it supposed to? What kind of value system places a higher priority of economic expansion over freedom? Growth over sustainability?

I'll give you an analogy and then I'll bring it back to reality. A long time ago, we morally justified that one human could own another human. Those owned humans had no legal right to the result of their own labor, and had no freedom of association, and no right to travel. But the areas with slaves experienced great economic benefits from the human ownership, and taking this away would make it so that their economies wouldn't grow as fast. But who here want's to argue in slavery's favor simply because it has economic benefits? It would be madness.

Well if owning 100% of a man's work is slavery, exactly at what percentage does it merely become taxation? We are the slaves, and fiat currency is the mechanism for ensuring our control. They tax our present work, take out massive loans on our future work, and then print 40 billion dollars a year to buy up "toxic assets" that were created because of the moral hazard that companies have when they don't have to worry about risk in gambling investing because there is a lender of last resort.

So why are we even worrying about a bank run here or there? Part of the point of bitcoin is that you don't even need a bank. You can keep those coins on a paper wallet stuffed under you mattress and they will keep their value. Then people are reliant on themselves again and they will trade on their ability to produce, not their ability to create complex financial structures that hide systemic risk.

[Adrian-x]

I agree there's a huge gap between how much we should need to work and how much we actually do, the question is why.

I think the answer is more likely to be a deficit of freedom rather than a surplus.

Freedom is the problem (I have very little) my valuable skills are invested in selling more eyeliner when I could be solving world hunger and pollution problems. The causes are monopolies, (monopoly on money and its manipulation , all monopolies enforced by law) I bet humanity will be way more productive if the monopolies that make the modernized slavery practices, were removed.

Well if owning 100% of a man's work is slavery, exactly at what percentage does it merely become taxation? We are the slaves, and fiat currency is the mechanism for ensuring our control. They tax our present work, take out massive loans on our future work, and then print 40 billion dollars a year to buy up "toxic assets"...

+1
We are still crawling out of the dark ages in reality  (I remember reading some economic theory that free people are more productive than slaves and would out compete them in the end.  I am looking toward to Bitcoin's successor running the world.

[Etlase2]

johnyj says the "BTC economy can not grow fast" but why is it supposed to? What kind of value system places a higher priority of economic expansion over freedom? Growth over sustainability?

It is not a matter of sustainability, but one of viability. If bitcoin cannot encourage people to adopt it, it will not be adopted, and its benefit to society will be nil.

[Etlase2]

I remember reading some economic theory that free people are more productive than slaves and would out compete them in the end.

I don't see any way to make an argument against this. Maybe it isn't true, but every bone in my body says that freedom > slavery. For everyone, not just the slave owners.

On a very anecdotal note, I have family that works for a very large auto manufacturer. I was told that once upon a time they only allowed "casual fridays" where blue jeans and polos and such were allowed on fridays. At some point, someone noticed that friday productivity was the highest of any day during the week, so they added casual mondays. The trend continued. So why not make all days casual? So it was, and overall productivity was increased. If even such a small token of freedom promotes productivity, what could happen if we could bring ourselves out from under the economic slavery that we are all a part of?

[hazek]

But in that case where would our attentions be directed?

Simple: inovation!

Imagine those 60 or 70% of stuff that we don't really need but we produce because the system incentivizes endless consumption through low interest rates, all that wealth and resources could have been spent on R&D.

It's impossible to comprehend how much further along we as a species in our development could already be, were it not for some people thinking they own others.

[Pteppic]

I agree there's a huge gap between how much we should need to work and how much we actually do, the question is why.

I think the answer is more likely to be a deficit of freedom rather than a surplus.

There are a couple of things worth considering. One is that however automated and productive our economies become, there will always be resources like land and housing that are scarce and in demand. This means that there will always be competition between individuals for those scarce resources.

The second thing is that people are social animals who like to be seen to be doing well relative to their current peers, not just compared to their parents standard of living a generation ago. That means that given the choice between more money compared to their neighbours and more leisure time with their family, people tend to choose the money. That then increases the social pressure on the neighbours to keep up with them, creating a vicious cycle. I guess it is slavery in a way, but slavery to social pressures rather than a government or elites.

[jbreher]

Well if owning 100% of a man's work is slavery, exactly at what percentage does it merely become taxation?

Without their _actual_ consent? At no figure above zero.

We are the slaves, and fiat currency is the mechanism for ensuring our control. They tax our present work, take out massive loans on our future work, and then print 40 billion dollars a year month to buy up "toxic assets" that were created because of the moral hazard that companies have when they don't have to worry about risk in gambling investing because there is a lender of last resort.

FTFY - ~$130 per month for every man, woman, and child.

[jbreher]

... If people don't want to accept bitcoin-backed notes, then perhaps they have moved on to other cryptocurrencies. If they accept bitcoin-backed notes....

Why would anyone accept a bitcoin-backed note? The singular redeeming value of notes is that they are easier to carry and transact with than is specie. However, I can't see how they hold this advantage over bitcoin. In a world where bitcoin is universally recognized, notes would seem to have no advantage over the actual use of bitcoin in transactions.

[Etlase2]

Why would anyone accept a bitcoin-backed note? The singular redeeming value of notes is that they are easier to carry and transact with than is specie.

Expansion of the money supply. It allows for easier credit at lower interest rates. By virtue of being deflationary, bitcoin almost encourages FRB, or at the very least heavily discourages lending without FRB. Some bitcoin proponents have settled on the fact that there will be a banking application layer on top of bitcoin for most everyday transactions, which helps make it ripe for FRB. Without a mechanism to slow deflationary pressure, anyone borrowing bitcoins is likely to default, and this will make for a terrible economy. 50% of all the coins are mined, 75% in 4 years, there will be little incentive for anyone else to use the currency without favorable borrowing.

[jbreher]

Why would anyone accept a bitcoin-backed note? The singular redeeming value of notes is that they are easier to carry and transact with than is specie.

Expansion of the money supply. It allows for easier credit at lower interest rates. By virtue of being deflationary, bitcoin almost encourages FRB, or at the very least heavily discourages lending without FRB...

I guess I misunderstood your original point. I thought you were implying that people would prefer a note representing claim upon a bitcoin, rather than an actual bitcoin. Carry on.

[justusranvier]

Why would anyone accept a bitcoin-backed note? The singular redeeming value of notes is that they are easier to carry and transact with than is specie. However, I can't see how they hold this advantage over bitcoin. In a world where bitcoin is universally recognized, notes would seem to have no advantage over the actual use of bitcoin in transactions.

In some cases a physical note might be easier to obtain and spend anonymously.

[asdf]

The problem with a fixed money supply:

When economy grows and generated more goods and services, the money are not enough to trade all the new goods, so the value of money increased, and that value increasing caused higher interest rate and hoarding, which further decrease the available money for transaction

But doesn't the increased value of savings increase demand? If my cash savings could buy 1 TV then later buys 10 TVs, I'm more inclined to buy a TV.

And this will hit those with a debt very hard, they could not afford higher and higher interest due to the continuously rising value in money. And those who have a lot of saving are not willing to invest, since the return of just hoarding the money is much higher than investing those money and take business risk

But for the supply of goods to be increasing, which is the premise, business must be profitable/growing, but no one will risk investing because they won't profit?

As a result, the economy growth will be stopped and turn to negative, the number of tradable goods and services will reduce, until they become so scarce that their value against money rise again

So it's a positive feedback loop. Eventually the value of money will be infinity.

The number of goods will reduce because the number of goods are increasing.

[odolvlobo]

The problem with a fixed money supply:

When economy grows and generated more goods and services, the money are not enough to trade all the new goods, so the value of money increased, and that value increasing caused higher interest rate and hoarding, which further decrease the available money for transaction

Deflation results in lower interest rates, not higher. There is less demand (and more supply) for loans. However, just like you can have hyper-inflation, you can have hyper-deflation (which is what you are suggesting).

[Etlase2]

Deflation results in lower interest rates, not higher. There is less demand (and more supply) for loans.

http://en.wikipedia.org/wiki/Real_interest_rate

Nominal interest rates are meaningless. Less demand would likely be the result of the increased risk, which applies to both sides of the supply and demand curve.