2013-04-10 Great, now engineers think that they are economists too

[gweedo]

http://pandodaily.com/2013/04/10/great-now-engineers-think-that-they-are-economists-too-2/

Several months ago, one of my company’s engineers told me about Bitcoin. It wasn’t the first time that I had heard about the concept, but it was the first time that somebody I knew actually bought some.

Did I say some? What I meant to say is that he bought a crapload of Bitcoins. They were worth about $9 each when he acquired them, and he decided to drop a healthy $5,000 on his roll of digital bullion.

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[marcus_of_augustus]

... and we should listen to an apologist for a failed currency system, who calls himself a "failed investment banker" because?

[nebulus]

I'll take an enginner over an economist anytime!

[tjohej]

The problem is that economists and journalists think that they are engineers, or at least that when they report about Bitcoin that they can ignore the Bitcoin technology part. That is what spreads the Bitcoin myths. Damn, now I managed to offend half of Bitcoins community.

Only spend an amount in Bitcoin that you can afford to lose says Gavin Andresen! = Pocket money!

[odolvlobo]

The reason why the U.S. economy is in such bad shape is because of economists like this guy.

They always bring out the hysteria and absurd scenarios when they talk about deflation. This guy says the if a $3.75 cup of coffee drops to $0.05, we are all screwed.

Well, that might be true, but that scenario is incredibly unlikely. Even the deflation during in the Great Depression was not anywhere close to to his scenario. Lets use his logic against him.

He seems to think that inflation is good, but he is so wrong. Inflation is bad because if a cup of coffee goes from $3.75 to $281, we are all screwed.

[thezerg]

What a loser.  We hear this every time we innovate.  "Yes innovation and engineering is good.  But my field is special; you not capable of understanding it.  So go do your engineering thing somewhere else." 

We ALWAYS engineer in someone else's "space".  You think musicians loved the record player?  Funny thing is... soon it becomes our space.  I think unconsciously they know that.

[simplydt]

Well his only valid point is that you shouldn't take out loans on bitcoin because bitcoins are most likely going to go up in value. As I am against taking loans anyway for anything, his main point is a bit irrelevant. Mortgages are the chains of slavery anyway.

[odolvlobo]

Well his only valid point is that you shouldn't take out loans on bitcoin because bitcoins are most likely going to go up in value.

That's just another lie spread by economists suffering from deflation paranoia. Interest rates are affected by the rate of deflation just like they are affected by inflation. Let's assume the prevailing real interest rate is 5%. Then with inflation at 2%, the nominal interest would be 7%. With deflation at 2%, the nominal interest rate would be 3%. It is that simple.

According to the paranoia, a problem occurs when the deflation rate is greater than the prevailing real interest rate. In theory, fewer people would borrow money because lenders are not going to charge a negative interest rate and real interest rates would be too high. However, the paranoid economists are inconsistent in this area. Inflation causes a similar problem: When inflation is above the prevailing real interest rate, fewer people will lend money because they will lose money on the deal.

Economists who like inflation and are terrified of deflation are not being rational. Both hyper-inflation and hyper-deflation are terrible. Both high inflation and high deflation cause economic problems. Both low inflation and low deflation are tolerable, but are not ideal. The ideal is no inflation and no deflation.

[herzmeister]

Economists who like inflation and are terrified of deflation are not being rational. Both hyper-inflation and hyper-deflation are terrible. Both high inflation and high deflation cause economic problems. Both low inflation and low deflation are tolerable, but are not ideal. The ideal is no inflation and no deflation.

Or abolish any central monopolistic "official" currency. 

Let people decide what to use as a currency. Then basically everything is an asset. Like Hayek's free market of currencies, but today it would be more than that, it would be more like a rich eco-system. There'd be different exchange and value systems which are native to different main use cases. There'd be regional currencies, metal currencies, internet (crypto-) currencies, business-to-business clearing, company-issued vouchers, and so on. As there'd also be some overlap, they'd all balance each other out.

[marcus_of_augustus]

Economists who like inflation and are terrified of deflation are not being rational. Both hyper-inflation and hyper-deflation are terrible. Both high inflation and high deflation cause economic problems. Both low inflation and low deflation are tolerable, but are not ideal. The ideal is no inflation and no deflation.

Or abolish any central monopolistic "official" currency. 

Let people decide what to use as a currency. Then basically everything is an asset. Like Hayek's free market of currencies, but today it would be more than that, it would be more like a rich eco-system. There'd be different exchange and value systems which are native to different main use cases. There'd be regional currencies, metal currencies, internet (crypto-) currencies, business-to-business clearing, company-issued vouchers, and so on. As there'd also be some overlap, they'd all balance each other out.

This is the vision ... I'm glad other people are seeing it too. 

[Severian]

I'd rather an economy designed by an engineer than an engineering project designed by an economist.

[teknomunk]

I'd rather an economy designed by an engineer than an engineering project designed by an economist.

Quoted For Truth

Economists who like inflation and are terrified of deflation are not being rational. Both hyper-inflation and hyper-deflation are terrible. Both high inflation and high deflation cause economic problems. Both low inflation and low deflation are tolerable, but are not ideal. The ideal is no inflation and no deflation.

Economists that like inflation are not completely irrational, as they are assuming that economies must be debt-based.  This assumption is false, which makes their conclusion that inflation is good and deflation is bad not correct in all situations.

In a economy where all money is created as part of issuing a loan with interest charged, deflation will always cause massive defaults because people earn the money to repay debts.  The majority of the world lives in this kind of debt-based economy.  In a debt-based economy, perpetual growth is manditory, along with perpetual growth in the money supply.  Otherwise, loans cannot be repayed and the entire system will collapse.  In this kind of economy, bankers are guaranteed to become rich off interest.

Bitcoin has an asset based economy.  Deflation does not cause systematic defaults in an asset based economy.  Some defaults, sure.  Massive, widespread defaults, no.  Instead what happens with deflation in an asset based economy is that as production increases, the value of the currency increases, and hence people and companies with savings have had their savings appreciate to the point where they can spend a portion of those savings to expand, and further increase production until somewhat of an equilibrium is reached.  In this economy, everybody including bankers are on a level playing field.  Other asset based economies are based on either metallic standards (gold, silver, copper, etc.), cryptocurrencies (bitcoin, litecoin, etc.), or a combination of the two.  Personally, I think some combination of cryptocurrencies and metallic standards will be what the world settles on once the dust clears from the fiat money collapse.

I will take the level playing field and the asset based economy if I can.

[TraderTimm]

An engineer can't be an economist - they have to build things that work, not get paid even if their bridge falls in the water.

As you can tell, I don't have a very high opinion of people who use obfuscation and psuedo-science as a "profession".