The Five Paradoxes of Bitcoin

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crumbs - counterfeit money is money that is designed to fool people into believing it is the currency it is not. It is deception. It does not devalue fiat unless the fiat is easy to counterfeit. What it does is steal fiat from the last person to possess it when it is discovered to be fraudulent, Bitcoin is not even close to counterfeit. It is not pretending to be something else, its purpose is not fraud, and the last person stuck with it is only sh*t out of luck if the currency crashes (true with any currency, confederate dollars weren't worth anything after the U.S. civil war for example)
 
By your incorrect assumptions of what counterfeit is, anything people invest in to hedge against the dollar serves the same purpose as counterfeit. That just is not true.
Please look it up.

I already agreed to call Bitcoin quasi currency, since you didn't like the negative connotations of "counterfeit."   I'll offer another alternative: Faux currency.  Strong, dignified, smart sounding.

I'll repeat my point though, i never claimed that Bitcoin was a case of counterfeiting, but rather was functionally equivalent to counterfeit money in devaluing real currencies.  I've repeated that more times than i care to remember, and i'm starting to feel trolled.
A decent counterfeit bill could be spent at a gas station or a grocery store, a quality clearly not shared by Bitcoin.  So i agree with you, and we could move on, but...

If i *did* wish to make a point for the sheer pedantic fun of it, i *would* point out that Bitcoin is a counterfeit currency -- not because it may be mistaken for a Dollar or Yen, *but because it can be mistaken for a currency*.  I'll grant you a guy has to be pretty simple to mistake it for monyz.  Fingerpointing, GTFO! and guileless laughter are much more common when confronted by Bitcoin, but there's obvious intent to defraud.  Being a lousy counterfeit is no defense.  

About being stuck with worthless currencies:  
I C wat U did their!  But i'll let you slide on saying "currency" in the same breath as Bitcoin.  The folks at Webster's were on a week-long meth binge with their buddies at Britannica, banging ungodly amounts, so when it came to defining currency, they got a bit... sloppy.  No biggie, all in good fun.  

So, keep in mind that a real currency becomes worthless after significant historical events like wars, revolutions & military coups.  Bitcoin can become worthless if Misha accidently int into long while coding on his spring break, and peer-reviewer Pasha accidently too wasted to catch the error.  Or 1337 xaxor finds a weakness in the protocol.  Or one or two governments get bored enough to notice & drop the banhammer.  Or "BRB, Lightcoin  or Ripple is currency de jure!1!".  Or, most likely, Bitcoin gets big enough to get noticed by real players, who use it 'till it's too beat for lulz & send it home with bus fare & a ten dollar rock, but no kissies.

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[AliceWonder]

FinCEN has stated they treat it as a medium of exchange - which is how they define a currency.

It is a currency. It is not a legal tender currency but it is a currency.

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FinCEN has stated they treat it as a medium of exchange - which is how they define a currency.

It is a currency. It is not a legal tender currency but it is a currency.

Oy gevalt!  So you get all pedantic on me, bubula?  Everything from Eve ISK to Monopoly Money is technically a currency.  Hotels could be bought with Monopoly Money, and sold for Monopoly Money.  If you're eager enough to win the game, you may even buy Monopoly Money with $$$, if other players sell it to you for lulz.  The problem comes when the game ends & you want to cash out of Monopoly Money.  Unless you do it before the game ends, and there's also a player goofier than you, who's willing to buy, you're left holding the bag.

If you use autumn leaves or used tampons as a medium of exchange, those would be considered a currency too.  Even by FinCEN -- you'll get taxed, even.  The only remaining questions are "how goofy a currency" & "are you sure you're not being trolled by the older kids, the ones who know how money works?"

[worldtreasurefinders]

Question for crumbs: if I go prospecting with my metal detector, find a gold nugget, have it refined and minted into a gold coin and then trade that gold coin for goods and services, is my gold coin functionally equivalent to counterfeit money?

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Question for crumbs: if I go prospecting with my metal detector, find a gold nugget, have it refined and minted into a gold coin and then trade that gold coin for goods and services, is my gold coin functionally equivalent to counterfeit money?

In the sense that it will do exactly the same to the overall price of gold a lump of lead passed off as gold, sure
If this is counterintuitive, let me try to walk you through this, and you can point out exactly where i fail:

For the sake of clarity & my wish to make you fabulously wealthy, assume that you didn't find just a measly nugget.  You discovered a way to turn base metals into gold.  That obscure alchemy major, the one that your college friends poked fun at, paid off.
The Philosopher's Stone turned out to be a simple trick: a can of sugar-free Red bull poured over an old Buick, while chanting "Ben Bernanke" backwards.  Puff!  A solid gold Buick. 4realz.

When the thrill of unalloyed scientific triumph finally wears off, you ask yourself:  Wat do?

Now that you have the key to turning any Buick, or any *anything* -- manhole covers, piles of scrap metal -- anything -- into gold, what do you do with it?  
Specifically, do you share it with the rest of the mankind?  Will the tired get-rich-quick byline, "turn your trash into treasure," finally become a reality?

The answer is obviously f8ck no!1!  Mankind is no better off -- the amount of *stuff to buy* didn't change, just the amount of stuff to buy it *with.*  If everyone turned rusty Buicks into gold, gold would lose its greatest selling point:  limited supply.  So, wat do?

Again it's obvious: keep your mouth shut, and ffs don't turn entire Buicks into gold!  Let the gold-bugs think the gold they hold is still rare & precious -- otherwise thy won't pay money for yours. They will, though, for a while, and the price will sag slowly as more and more gold appears on the market.  Until the cat's out of the bag & the ensuing panic drives the price of gold down to ~ the price of scrap metal.

The "sugar-free Red Bull over an old Buick while chanting "Ben Bernanke" backwards" trick, as slick as it is, won't enrich mankind -- all it would do is redistribute the wealth.  The gold-bugs, with their puny stashes of a few pounds, will be poorer by the amount of gold they hold. They'll be no richer than an enterprising 12-yr-old who buys a can of Red Bull & finds an untended chunk of scrap.

Side Note:  If the gold-bugs find out about your alchemy learningz before you perfect your trick, they'll try to kill you.  The last thing they want is for gold to become as common as scrap iron.  If the makers of Red Bull find out, Red Bull prices will skyrocket -- as the gold market deflates, they will both mine Bitcoin turn Buicks into gold *and* sell you Red Bull for exorbitant amounts.  By controlling the Red Bull supply, they will be able to manipulate the gold market, while you, the alchemist, will be forced to pay extortionate prices for Red Bull to continue plying your trade.

Are the sad parallels between this fairy tale & Bitcoin too subtle?

*I am not the gold-bug here, i don't like gold-bugs, i welcome the gold Buicks.  What i don't like is all the yelling:  "We're lighting our alchemy torches & sharpening our Buick forks!1!  Ur gold empire is coming to an end, stupit gold-bugs!1!"  Ever wonder why Satoshi didn't want Bitcoin on the radar?  Ever wonder why he vanished in disgust?

[thoughtfan]

Question for crumbs: if I go prospecting with my metal detector, find a gold nugget, have it refined and minted into a gold coin and then trade that gold coin for goods and services, is my gold coin functionally equivalent to counterfeit money?

In the sense that it will do exactly the same to the overall price of gold a lump of lead passed off as gold, sure
If this is counterintuitive, let me try to walk you through this, and you can point out exactly where i fail:

For the sake of clarity & my wish to make you fabulously wealthy, assume that you didn't find just a measly nugget.  You discovered a way to turn base metals into gold.  That obscure alchemy major, the one that your college friends poked fun at, paid off.
The Philosopher's Stone turned out to be a simple trick: a can of sugar-free Red bull poured over an old Buick, while chanting "Ben Bernanke" backwards.  Puff!  A solid gold Buick. 4realz.

When the thrill of unalloyed scientific triumph finally wears off, you ask yourself:  Wat do?

Now that you have the key to turning any Buick, or any *anything* -- manhole covers, piles of scrap metal -- anything -- into gold, what do you do with it?  
Specifically, do you share it with the rest of the mankind?  Will the tired get-rich-quick byline, "turn your trash into treasure," finally become a reality?

The answer is obviously f8ck no!1!  Mankind is no better off -- the amount of *stuff to buy* didn't change, just the amount of stuff to buy it *with.*  If everyone turned rusty Buicks into gold, gold would lose its greatest selling point:  limited supply.  So, wat do?

Again it's obvious: keep your mouth shut, and ffs don't turn entire Buicks into gold!  Let the gold-bugs think the gold they hold is still rare & precious -- otherwise thy won't pay money for yours. They will, though, for a while, and the price will sag slowly as more and more gold appears on the market.  Until the cat's out of the bag & the ensuing panic drives the price of gold down to ~ the price of scrap metal.

The "sugar-free Red Bull over an old Buick while chanting "Ben Bernanke" backwards" trick, as slick as it is, won't enrich mankind -- all it would do is redistribute the wealth.  The gold-bugs, with their puny stashes of a few pounds, will be poorer by the amount of gold they hold. They'll be no richer than an enterprising 12-yr-old who buys a can of Red Bull & finds an untended chunk of scrap.

Side Note:  If the gold-bugs find out about your alchemy learningz before you perfect your trick, they'll try to kill you.  The last thing they want is for gold to become as common as scrap iron.  If the makers of Red Bull find out, Red Bull prices will skyrocket -- as the gold market deflates, they will both mine Bitcoin turn Buicks into gold *and* sell you Red Bull for exorbitant amounts.  By controlling the Red Bull supply, they will be able to manipulate the gold market, while you, the alchemist, will be forced to pay extortionate prices for Red Bull to continue plying your trade.

Are the sad parallels between this fairy tale & Bitcoin too subtle?

*I am not the gold-bug here, i don't like gold-bugs, i welcome the gold Buicks.  What i don't like is all the yelling:  "We're lighting our alchemy torches & sharpening our Buick forks!1!  Ur gold empire is coming to an end, stupit gold-bugs!1!"  Ever wonder why Satoshi didn't want Bitcoin on the radar?  Ever wonder why he vanished in disgust?

Are you beginning to wonder by now why not only nobody is agreeing with you on this 'counterfeit'/'quazi' thing but people are also suspecting you're trolling?  You say you think may be being trolled but I strongly suggest you have a look first at what you're saying and have a think why others think it ridiculous before calling everybody stupid for failing to 'get' what you alone appear to be understanding.

I think if I may be as bold as to summarise your position (without the all the negative and derogatory connotations of which you appear to be so fond):
 
Just as issuance of additional fiat currency without a corresponding increase in things on which to spend it devalues existing notes of said currency in any economy that makes use of them, the issuance of units of any currency (or other medium of exchange whatever its legitimacy) without a corresponding increase in things on which spend it will also result in price inflation.

Counterfeit currency if it gets detected and destroyed may cause a bloody nose but has no overall effect on monetary supply.  Undetected counterfeit currency has same effect as QE.  Common usage of an 'outside' currency also has the same effect e.g. USD in Argentina.  It is especially the case where central banks fail to control inflation.

So are you saying bitcoin is bad because it (like currency inflation, like undetected counterfeit currency or any 'outside' currency) is contributing to inflation in the US?  It would be very easy for Bernanke to counter this simply by switching the 'printing press' off a few minutes earlier than he would otherwise have done! As it is if people are spending money on bitcoin that they would otherwise have sitting in the bank or hoarded in gold then we are doing Bernanke's job for him in having more money circulating!

Or might you be saying bitcoin is bad because on the assumption it will become worthless it is like detected counterfeit currency because its holders will get a bloody nose when everybody simultaneously 'discovers' it has no value because something in an old rule book says it shouldn't have?

Surely it can't be both other than in the very short term?

[thoughtfan]

First up is the expectation paradox, a consequence of Bitcoin’s deflationary model. The conundrum is as follows: as a deflationary currency, Bitcoin lends towards hoarding–a predictable but unfortunate phenomena, because for Bitcoin to thrive, it must not only be used as a long-term store of value, but also as a means to transact value, quickly and cheaply. To spend or not to spend, that is the question.

I really don't get why so many people still seem to have a problem with this one.  Providing if/as/when it becomes necessary additional decimal places can be added it matters not how much of the bitcoin in existence is 'hoarded' and not in circulation.  It doesn't matter if the total bitcoin available for all world transactions is a small fraction of a single bitcoin.  It will still be plenty.  Its value is determined by demand which is determined by the the cumulative number and value of the transactions people want this tiny amount in circulation for.  Obviously the value of those not in circulation is determined by the value of those that are.

Needless to say in this extreme situation anything other than the tiniest amount of hoarded bitcoin coming back into circulation would play havoc with the price because unless it was only used for a tiny number of vary low value transactions the value of bitcoins in this circumstance would be immense - which is also why we are very unlikely ever to get to this.  Because way before the price got that high people would be bringing some of their savings into use.

I'm failing to see why this is so widely perceived as a problem.  Of course none of us knows. Paul Krugman and his ilk may be right.  This is one of the things that makes this experiment so exciting.  We will all find out in due course.

And I suppose it's kinda fun seeing people saying they 'know' what the results of the Bitcoin/cryptocurrency experiment will be because they are so certain that their knowledge of economics or the theory of money tells them what is 'inevitable'.

[crumbs]

Question for crumbs: if I go prospecting with my metal detector, find a gold nugget, have it refined and minted into a gold coin and then trade that gold coin for goods and services, is my gold coin functionally equivalent to counterfeit money?

In the sense that it will do exactly the same to the overall price of gold a lump of lead passed off as gold, sure
If this is counterintuitive, let me try to walk you through this, and you can point out exactly where i fail:

For the sake of clarity & my wish to make you fabulously wealthy, assume that you didn't find just a measly nugget.  You discovered a way to turn base metals into gold.  That obscure alchemy major, the one that your college friends poked fun at, paid off.
The Philosopher's Stone turned out to be a simple trick: a can of sugar-free Red bull poured over an old Buick, while chanting "Ben Bernanke" backwards.  Puff!  A solid gold Buick. 4realz.

When the thrill of unalloyed scientific triumph finally wears off, you ask yourself:  Wat do?

Now that you have the key to turning any Buick, or any *anything* -- manhole covers, piles of scrap metal -- anything -- into gold, what do you do with it?  
Specifically, do you share it with the rest of the mankind?  Will the tired get-rich-quick byline, "turn your trash into treasure," finally become a reality?

The answer is obviously f8ck no!1!  Mankind is no better off -- the amount of *stuff to buy* didn't change, just the amount of stuff to buy it *with.*  If everyone turned rusty Buicks into gold, gold would lose its greatest selling point:  limited supply.  So, wat do?

Again it's obvious: keep your mouth shut, and ffs don't turn entire Buicks into gold!  Let the gold-bugs think the gold they hold is still rare & precious -- otherwise thy won't pay money for yours. They will, though, for a while, and the price will sag slowly as more and more gold appears on the market.  Until the cat's out of the bag & the ensuing panic drives the price of gold down to ~ the price of scrap metal.

The "sugar-free Red Bull over an old Buick while chanting "Ben Bernanke" backwards" trick, as slick as it is, won't enrich mankind -- all it would do is redistribute the wealth.  The gold-bugs, with their puny stashes of a few pounds, will be poorer by the amount of gold they hold. They'll be no richer than an enterprising 12-yr-old who buys a can of Red Bull & finds an untended chunk of scrap.

Side Note:  If the gold-bugs find out about your alchemy learningz before you perfect your trick, they'll try to kill you.  The last thing they want is for gold to become as common as scrap iron.  If the makers of Red Bull find out, Red Bull prices will skyrocket -- as the gold market deflates, they will both mine Bitcoin turn Buicks into gold *and* sell you Red Bull for exorbitant amounts.  By controlling the Red Bull supply, they will be able to manipulate the gold market, while you, the alchemist, will be forced to pay extortionate prices for Red Bull to continue plying your trade.

Are the sad parallels between this fairy tale & Bitcoin too subtle?

*I am not the gold-bug here, i don't like gold-bugs, i welcome the gold Buicks.  What i don't like is all the yelling:  "We're lighting our alchemy torches & sharpening our Buick forks!1!  Ur gold empire is coming to an end, stupit gold-bugs!1!"  Ever wonder why Satoshi didn't want Bitcoin on the radar?  Ever wonder why he vanished in disgust?

Are you beginning to wonder by now why not only nobody is agreeing with you on this 'counterfeit'/'quazi' thing but people are also suspecting you're trolling?  You say you think may be being trolled but I strongly suggest you have a look first at what you're saying and have a think why others think it ridiculous before calling everybody stupid for failing to 'get' what you alone appear to be understanding.

I think if I may be as bold as to summarise your position (without the all the negative and derogatory connotations of which you appear to be so fond):
  
Just as issuance of additional fiat currency without a corresponding increase in things on which to spend it devalues existing notes of said currency in any economy that makes use of them, the issuance of units of any currency (or other medium of exchange whatever its legitimacy) without a corresponding increase in things on which spend it will also result in price inflation.

Counterfeit currency if it gets detected and destroyed may cause a bloody nose but has no overall effect on monetary supply.  Undetected counterfeit currency has same effect as QE.  Common usage of an 'outside' currency also has the same effect e.g. USD in Argentina.  It is especially the case where central banks fail to control inflation.

So are you saying bitcoin is bad because it (like currency inflation, like undetected counterfeit currency or any 'outside' currency) is contributing to inflation in the US?  It would be very easy for Bernanke to counter this simply by switching the 'printing press' off a few minutes earlier than he would otherwise have done! As it is if people are spending money on bitcoin that they would otherwise have sitting in the bank or hoarded in gold then we are doing Bernanke's job for him in having more money circulating!

Or might you be saying bitcoin is bad because on the assumption it will become worthless it is like detected counterfeit currency because its holders will get a bloody nose when everybody simultaneously 'discovers' it has no value because something in an old rule book says it shouldn't have?

Surely it can't be both other than in the very short term?

Let me forget my manners, humility & good taste by quoting myself:
"*I am not the gold-bug here, i don't like gold-bugs, i welcome the gold Buicks."
If i failed to make it clear that the gold Buick is a standin for Bitcoin, i'm spelling it out now.  So, forgive the eye-raping boldface, but i never said that Bitcoin is bad.  I do not think Bitcoin is bad.  Please, re-read the few lines at the very end of my previous post, starting with "Side note:" to get a fair summation of my views on Bitcoin.  Forgive me for not joining the din of children who, along with inventing sex, drugz, rat racing & muzak also invented the concept of monyz.

Your comment about shutting down the money presses for a few minutes is either shortsighted or outright disingenuous.  If you think that Bitcoin is destined to forever remain no more significant than a scavenging pilot fish to the dollar shark, than your "how much harm can it do?" argument has some validity.  As would allowing counterfeiting -- how much harm could a few million $20 notes do?  Just shutting down the money presses for a few minutes would more than make up for the measly amount.   Does that sum up your point?

As far as your "the monyz would otherwise be sitting in banks & buying bitcoins is helping by circulating it" goes, it is simply absurd.  You know as well as i do that banks don't stash the money in a safe for safekeeping, it is invested -- it circulates.  And then there's that fractional reserve bit.  And spending the money on Bitcoin is anything but "circulating it."  Step up ur game & make things interesting.

As far as "not having it both ways," "arguing in the alternative" is valid, accepted in law, and common as dirt. see here: http://en.wikipedia.org/wiki/Argument_in_the_alternative
So yeah, it surely can't be both, but just as surely will be *either.*
 

[crumbs]

First up is the expectation paradox, a consequence of Bitcoin’s deflationary model. The conundrum is as follows: as a deflationary currency, Bitcoin lends towards hoarding–a predictable but unfortunate phenomena, because for Bitcoin to thrive, it must not only be used as a long-term store of value, but also as a means to transact value, quickly and cheaply. To spend or not to spend, that is the question.

I really don't get why so many people still seem to have a problem with this one.  Providing if/as/when it becomes necessary additional decimal places can be added it matters not how much of the bitcoin in existence is 'hoarded' and not in circulation.  It doesn't matter if the total bitcoin available for all world transactions is a small fraction of a single bitcoin.  It will still be plenty.  Its value is determined by demand which is determined by the the cumulative number and value of the transactions people want this tiny amount in circulation for.  Obviously the value of those not in circulation is determined by the value of those that are. [...]

If you quoted what you're replying to, the "decimal places" bit sounds like a non sequitur.  As far as the value of coins not in circulation being determined by the coins that are, that's not obvious & also false, currency trading != circulation.  If i sold bob 5 bitcoins for 5 dollars, and he sold them to me for 5 dollars, there's no circulation, no matter how many times we rinse & repeat.

[thoughtfan]

I really don't get why so many people still seem to have a problem with this one.  Providing if/as/when it becomes necessary additional decimal places can be added it matters not how much of the bitcoin in existence is 'hoarded' and not in circulation.  It doesn't matter if the total bitcoin available for all world transactions is a small fraction of a single bitcoin.  It will still be plenty.  Its value is determined by demand which is determined by the the cumulative number and value of the transactions people want this tiny amount in circulation for.  Obviously the value of those not in circulation is determined by the value of those that are. [...]

If you quoted what you're replying to, the "decimal places" bit sounds like a non sequitur.  As far as the value of coins not in circulation being determined by the coins that are, that's not obvious & also false, currency trading != circulation.  If i sold bob 5 bitcoins for 5 dollars, and he sold them to me for 5 dollars, there's no circulation, no matter how many times we rinse & repeat.

I was pre-empting the pedants who I could hear chiming in that bitcoin as it is only has 8 decimal points therefore if the whole of the circulating bitcoin economy was say .00001 bitcoin it could not be used.  The fact that a quick non-controversial hard fork could when required make more decimal places available renders this argument moot.

My point is the save or spend thing is a false dichotomy.  Of course nobody can both save and spend the same bitcoin but we have the option of acquiring to save then acquiring some more to spend where we are spending bitcoin instead of spending the equivalent in pounds.  In the bigger picture I was pointing out that it has zero effect on availability of bitcoins to use for spending because whatever's left can be divided into however many units and their value will reflect demand for those available.

...As far as the value of coins not in circulation being determined by the coins that are, that's not obvious & also false, currency trading != circulation.  If i sold bob 5 bitcoins for 5 dollars, and he sold them to me for 5 dollars, there's no circulation, no matter how many times we rinse & repeat.

Apologies.  Obviously not obvious to you.  Not false, just incomplete.  I was not referring to the currency market.  I was talking about what one can buy with bitcoin.  The currency market is a means (made possible by liquidity provided by speculators) of getting bitcoins from those who don't need them to those who do without having something to trade for them.  And whilst the speculating might have a big impact on what can be bought and sold with them the bottom line is demand for the purposes of purchasing or sending money electronically.

But if I've got 50,000 bitcoins and I'm not doing anything I have no say in what people choose to pay for those that are on the market.  Of course the absence of my 50,000 will have an indirect influence.  That was my argument against the point in the OP - that having the vast majority 'hoarded' and out of circulation is not a problem for Bitcoin because for however little is left, the active buyers and sellers (who are using it) along with the speculators (providing liquidity) mean demand can meet supply at a price that will enable it to be used for whatever purpose they wish it.

[thoughtfan]

Let me start by fessing up to my schoolboy error regarding 'money sitting in the bank'.  You are correct of course that it is 'it is invested -- it circulates' and the fractional reserve thing may actually mean it is more harmful in giving the banks an excuse to create more debt than if it were sitting under the mattress.  'Money sitting under the mattress' would actually have been closer to what I had intended.

...
"*I am not the gold-bug here, i don't like gold-bugs, i welcome the gold Buicks."
If i failed to make it clear that the gold Buick is a standin for Bitcoin, i'm spelling it out now.

What makes you think I didn't get the Buicks metaphor?

...forgive the eye-raping boldface, but i never said that Bitcoin is bad.  I do not think Bitcoin is bad.  Please, re-read the few lines at the very end of my previous post, starting with "Side note:" to get a fair summation of my views on Bitcoin.  Forgive me for not joining the din of children who, along with inventing sex, drugz, rat racing & muzak also invented the concept of monyz.

As for Bitcoin being 'bad' unfortunately I could not remember everything you'd written in this thread so I had to go back and look.  Correct you never said bitcoin is 'bad' but your love of being dismissive about certain aspects of it (along with your preference to talk down at anybody who doesn't see things your way) makes it actually quite difficult to ascertain what your position is.

Had you left out the inflammatory 'counterfeit' out of your first argument the underlying point, which I think I summarised reasonably well, is interesting and I largely agree - that adding another medium of exchange contributes to price inflation for the original currency.

How is Bitcoin different from printing money?

It is different because it is not under central bank control.  And its effect on dollar price inflation is dependent more on total dollar value of bitcoin circulating tin the US more than directly on bitcoin's currency inflation (through mining).

What new "stuff to buy with it" did it bring?

Not very much.  But neither does Paypal.  Yet it contributes to the economy by providing a means of payment some people find useful to enable or ease their purchases.  And Bitcoin, by being that much more efficient, has the potential to contribute more, oiling the wheels of commerce.

What happens to the dollar you bought the bitcoin with?  Does it get destroyed?  Or does the guy who sold you the bitcoin still have it to spend? 

The latter.  If it was a dollar doing nothing it is now a dollar doing something because the likelihood is the person who sold the bitcoin knows better than to put it under the mattress whilst watching its value get inflated to oblivion.

...And spending the money on Bitcoin is anything but "circulating it."  [belittling of those who disagree]

But hang on a minute, surely you just implied the dollar that bought the bitcoin is still in circulation so how is it not circulating it to spend it on bitcoin?  I'm confused!

[more belittling of those who disagree]...  Do we agree that Bitcoin, if it has value, drains that value directly from the currencies which already exist?   

For someone who protests he does not claim bitcoins are bad you do love those terms with negative connotations.  'Drains value' is just another way of expressing what we agreed, that another currency (or more of the same) in the same economy creates price inflation in the original currency.  Is that bitcoin 'draining value' or is it people choosing they prefer at least some of their money not in dollars, the consequence of which is the dollar's worth less?  Ironically your 'drains value' comment was in response to AliceWonder pointing this out to you.

Your comment about shutting down the money presses for a few minutes is either shortsighted or outright disingenuous.  If you think that Bitcoin is destined to forever remain no more significant than a scavenging pilot fish to the dollar shark, than your "how much harm can it do?" argument has some validity.  As would allowing counterfeiting -- how much harm could a few million $20 notes do?  Just shutting down the money presses for a few minutes would more than make up for the measly amount.   Does that sum up your point?

Easy with the 'disingenuous' accusation.  Unless you cease with these petty put downs I'm not going to bother to reply.  Have a little respect.

If by 'shortsighted' you mean I was not assuming bitcoin to have become of a significant market cap in relation to the 'big boys' currencies then maybe.  I will indulge your preferred comparison by saying the effect of allowing counterfeiting (providing they will never be detected) and reducing currency inflation by the same amount would have the same effect globally (and would only make a difference to who gets the initial gain)*.  Likewise for Bitcoin.  If currency inflation is the central bank's primary means of controlling price inflation then the sum of commerce traded by other means of exchange will form part of the central bank's assessment of how much new money to create, whether directly or indirectly.  If bitcoin becomes big enough it will have an influence.  If it becomes bigger still it may become equivalent to QE in which case they would want to stop printing themselves.  If it becomes bigger still they may find they need somehow to deflate USD (apparently in the UK they were originally talking of tightening money supply by selling the assets they've been 'buying' through QE - not that I really understand these central bank mechanisms).  But the 'advantage' they do have over bitcoin is that they do have the means of controlling supply thus reducing or eliminating the impact.

...
As far as "not having it both ways," "arguing in the alternative" is valid, accepted in law, and common as dirt. see here: http://en.wikipedia.org/wiki/Argument_in_the_alternative
So yeah, it surely can't be both, but just as surely will be *either.*
 

Thanks for the reference.  So you're saying if one does not come to be then the other will (or that the first will be true then the second)?  In the latter case for as long as people remain 'deluded' that bitcoin has value it will be bad for the economy (but not 'bad' in and of itself of course) and that when the world wakes up one morning and remembers the rulebook says it shouldn't have any value and it is suddenly worth nothing that those holding it will make a great loss (not that that bitcoin is 'bad' of course)!

...
Please, re-read the few lines at the very end of my previous post, starting with "Side note:" to get a fair summation of my views on Bitcoin.  Forgive me for not joining the din of children who, along with inventing sex, drugz, rat racing & muzak also invented the concept of monyz.

On a 'fair summation of your views' am I right that you believe Bitcoin to be essentially worthless and certainly <i>not</i> a currency (because it has neither the backing of something intrinsic nor by decree of a nation state), that it is pointless as a means of electronic money transfer because we already can take the money to the bank and let them transfer it for us, you believe it is doomed because the powers that be won't let it thrive, you believe all who see a positive future to bitcoin as a disruptive technology are mugs (being played by the 'older kids') and are a bunch of screeming kids that the mature elite including you and Satoshi are fed up of?

Yet you 'welcome buicks' and do not think bitcoin is 'bad'?

Excuse me for not 'getting' what you think of bitcoin!

* I'm not talking about 'allowing' or 'disallowing', 'right' or wrong', just about the practical impact.

[crumbs]

I really don't get why so many people still seem to have a problem with this one.  Providing if/as/when it becomes necessary additional decimal places can be added it matters not how much of the bitcoin in existence is 'hoarded' and not in circulation.  It doesn't matter if the total bitcoin available for all world transactions is a small fraction of a single bitcoin.  It will still be plenty.  Its value is determined by demand which is determined by the the cumulative number and value of the transactions people want this tiny amount in circulation for.  Obviously the value of those not in circulation is determined by the value of those that are. [...]

If you quoted what you're replying to, the "decimal places" bit sounds like a non sequitur.  As far as the value of coins not in circulation being determined by the coins that are, that's not obvious & also false, currency trading != circulation.  If i sold bob 5 bitcoins for 5 dollars, and he sold them to me for 5 dollars, there's no circulation, no matter how many times we rinse & repeat.

I was pre-empting the pedants who I could hear chiming in that bitcoin as it is only has 8 decimal points therefore if the whole of the circulating bitcoin economy was say .00001 bitcoin it could not be used.  The fact that a quick non-controversial hard fork could when required make more decimal places available renders this argument moot.

My point is the save or spend thing is a false dichotomy.  Of course nobody can both save and spend the same bitcoin but we have the option of acquiring to save then acquiring some more to spend where we are spending bitcoin instead of spending the equivalent in pounds.

I'm sorry, you seem to suggest that by splitting the pounds you convert to bitcoins in two separate parcels (one to buy bitcoin which shall be saved, one to buy bitcoins which shall be spent) you avoid the save/spend dilemma.  I may be reading you wrong, but that's not a solution, it's a Rube Goldbergian obfuscation.  If Bitcoin is a better store of value than fiat, the sound thing to do is convert all of your fiat into bitcoins *as soon as you can* & hold the coins.  Each time you use bitcoins in a transaction, having to repurchase them later with fiat, you lose.  Assuming that Bitcoin value continuously rises relative fiat (the very thing which would make it a better store of value than fiat), the bitcoins you "rebuy" will cost you more fiat than the ones you sold.  Think of it in terms of selling a coin on Gox during a rally, and having to buy it back, oh, 5 minutes later

In the bigger picture I was pointing out that it has zero effect on availability of bitcoins to use for spending because whatever's left can be divided into however many units and their value will reflect demand for those available.

In other words, to save the dollar, Americans should simply put most of their money under their mattresses, and what remains in circulation will become more valuable due to increased demand for the (temporarily) limited supply?  Profit?
 

...As far as the value of coins not in circulation being determined by the coins that are, that's not obvious & also false, currency trading != circulation.  If i sold bob 5 bitcoins for 5 dollars, and he sold them to me for 5 dollars, there's no circulation, no matter how many times we rinse & repeat.

Apologies.  Obviously not obvious to you.  Not false, just incomplete.  I was not referring to the currency market.  I was talking about what one can buy with bitcoin.  The currency market is a means (made possible by liquidity provided by speculators) of getting bitcoins from those who don't need them to those who do without having something to trade for them.  And whilst the speculating might have a big impact on what can be bought and sold with them the bottom line is demand for the purposes of purchasing or sending money electronically.

But if I've got 50,000 bitcoins and I'm not doing anything I have no say in what people choose to pay for those that are on the market.  Of course the absence of my 50,000 will have an indirect influence.  That was my argument against the point in the OP - that having the vast majority 'hoarded' and out of circulation is not a problem for Bitcoin because for however little is left, the active buyers and sellers (who are using it) along with the speculators (providing liquidity) mean demand can meet supply at a price that will enable it to be used for whatever purpose they wish it.

I disagree with you on the role of speculators.  Speculation, stripped of all the negative associations, leaves us with this (slightly abbreviated) wikip definition: "Speculation is the practice of engaging in risky financial transactions in an attempt to profit from short or medium term fluctuations in the market value"  If Bitcoin is indeed a currency, bringing liquidity to Bitcoin is less meaningful than bringing coals to Newcastle  Shouldn't it be the other way around (Bitcoin brings liquidity to ...)?  I know, not yet.  The value of Bitcoin, today, is purely a *speculative* value -- speculators are *guessing* how much a BTC will be worth in the future, and betting dollars (and pounds) on their predictions. (do British keyboards have a pound symbol?)  They, and not the few merchants on SR & the other web-based businesses set BTC price today.  That's why the price dances around so wildly rel. dollar pound euro fiat.  Not because merchants selling their goods for bitcoins are tapping into their own supply, but because the merchants have nothing to do with the price.

[crumbs]

Let me start by fessing up to my schoolboy error regarding 'money sitting in the bank'.  You are correct of course that it is 'it is invested -- it circulates' and the fractional reserve thing may actually mean it is more harmful in giving the banks an excuse to create more debt than if it were sitting under the mattress.  'Money sitting under the mattress' would actually have been closer to what I had intended.

...
"*I am not the gold-bug here, i don't like gold-bugs, i welcome the gold Buicks."
If i failed to make it clear that the gold Buick is a standin for Bitcoin, i'm spelling it out now.

What makes you think I didn't get the Buicks metaphor?

...forgive the eye-raping boldface, but i never said that Bitcoin is bad.  I do not think Bitcoin is bad.  Please, re-read the few lines at the very end of my previous post, starting with "Side note:" to get a fair summation of my views on Bitcoin.  Forgive me for not joining the din of children who, along with inventing sex, drugz, rat racing & muzak also invented the concept of monyz.

As for Bitcoin being 'bad' unfortunately I could not remember everything you'd written in this thread so I had to go back and look.  Correct you never said bitcoin is 'bad' but your love of being dismissive about certain aspects of it (along with your preference to talk down at anybody who doesn't see things your way) makes it actually quite difficult to ascertain what your position is.

Now you're simply being unfair.  I get attacked, i react in kind.  To my defense, while my attackers see fit to speculate on my mother's skills at fellatio & my wanton need of butsecs, in cases like that i respond with a demure "eww?"
As far as my position, i do not see why making it clear is essential or even relevant to objective discussion.  If a statement is structurally flawed, who cares if i like or hate the conclusion it attempts to reach?

Had you left out the inflammatory 'counterfeit' out of your first argument the underlying point, which I think I summarized reasonably well, is interesting and I largely agree - that adding another medium of exchange contributes to price inflation for the original currency.

Common ground

How is Bitcoin different from printing money?

It is different because it is not under central bank control.  And its effect on dollar price inflation is dependent more on total dollar value of bitcoin circulating tin the US more than directly on bitcoin's currency inflation (through mining).

I think you're taking things out of context -- i never suggested that mining is equivalent to printing money.  I also don't understand how you can talk about "Bitcoin inflation."  As i understand the word, it attempts to measure a currency's buying power.  If a pound buys 1% less today than it did a week ago, we're talking about a 1% weekly inflation.  Now, applying that to BTC

What new "stuff to buy with it" did it bring?

Not very much.  But neither does Paypal.  Yet it contributes to the economy by providing a means of payment some people find useful to enable or ease their purchases.

You don't think that Paypal is a currency, do you?  Paypal issues no coin & doesn't even issue credit.  Think of Paypal as the bike messenger who delivers your money & charges for it.  It's not a currency.  No more than a bike messenger is.  Comparing Paypal to Bitcoin is ... I'm beginning to understand just how explicit i must make myself here

And Bitcoin, by being that much more efficient, has the potential to contribute more, oiling the wheels of commerce.

Bitcoin is not more efficient than Paypal, no matter how many people say it and no matter how often.  First, what do you mean by "efficient"?  Fast?  Paypal's much faster than waiting for three confirms, almost spontaneous.  Easy to use?   Takes less energy?  No.  What do people mean when they say "efficient"?  The only things i can think of are "lower fee/no chargeback/"pseudonymity"."  Not quite the set my much-maligned mom would choose.

What happens to the dollar you bought the bitcoin with?  Does it get destroyed?  Or does the guy who sold you the bitcoin still have it to spend?  

The latter.  If it was a dollar doing nothing it is now a dollar doing something because the likelihood is the person who sold the bitcoin knows better than to put it under the mattress whilst watching its value get inflated to oblivion.

This fails just like your "not circulating in a bank" argument.  You know the dollar is losing value just like the guy whose bitcoin you bought.  If not for bitcoins being around, you'd buy something *practical* with it, help out the dollar economy

...And spending the money on Bitcoin is anything but "circulating it."  [belittling of those who disagree]

But hang on a minute, surely you just implied the dollar that bought the bitcoin is still in circulation so how is it not circulating it to spend it on bitcoin?  I'm confused!

Without digging back through all of my posts, i can guess it was an argument in alternative. :)Y

[more belittling of those who disagree]...  Do we agree that Bitcoin, if it has value, drains that value directly from the currencies which already exist?  

For someone who protests he does not claim bitcoins are bad you do love those terms with negative connotations.  'Drains value' is just another way of expressing what we agreed, that another currency (or more of the same) in the same economy creates price inflation in the original currency.

I'm sorry, but in that case COUNTERFEIT MONEY *also* "creates a price inflation in the original economy."  No more, no less.  You chose to hide things behind euphemisms, and i do not.  Agree to disagree.

Is that bitcoin 'draining value' or is it people choosing they prefer at least some of their money not in dollars, the consequence of which is the dollar's worth less?

I thought we came to an agreement at the top of this post -- Bitcoin devalues existent currencies by its market cap valuation.  I quote: "I largely agree - that adding another medium of exchange contributes to price inflation for the original currency."  Yes?  In that case, i don't have to do anything for Bitcoin to devalue my dollars. Just like my dollars would buy less if the same amount of counterfeit money was added to the dollar economy -- don't care how it's done, the result's the same:  My dollar buys less. If you choose to disagree at this point, explain why.

Ironically your 'drains value' comment was in response to AliceWonder pointing this out to you.

Not seeing the irony.

Your comment about shutting down the money presses for a few minutes is either shortsighted or outright disingenuous.  If you think that Bitcoin is destined to forever remain no more significant than a scavenging pilot fish to the dollar shark, than your "how much harm can it do?" argument has some validity.  As would allowing counterfeiting -- how much harm could a few million $20 notes do?  Just shutting down the money presses for a few minutes would more than make up for the measly amount.   Does that sum up your point?

Easy with the 'disingenuous' accusation.  Unless you cease with these petty put downs I'm not going to bother to reply.  Have a little respect.

If by 'shortsighted' you mean I was not assuming bitcoin to have become of a significant market cap in relation to the 'big boys' currencies then maybe.  I will indulge your preferred comparison by saying the effect of allowing counterfeiting (providing they will never be detected) and reducing currency inflation by the same amount would have the same effect globally (and would only make a difference to who gets the initial gain)*.  Likewise for Bitcoin.

The wording is bit unclear -- do you agree that allowing Bitcoin is identical to allowing counterfeiting, or do you not?  Language like "I will indulge your..." & "reducing inflation by the same amount" is... Since you took offence at "disingenuous," i'm having to hunt for words.  Are you saying that the Central Bank should make identical allowances for Bitcoin & counterfeiters?  To "stop printing money so we could try our hand at it"?

If currency inflation is the central bank's primary means of controlling price inflation then the sum of commerce traded by other means of exchange will form part of the central bank's assessment of how much new money to create, whether directly or indirectly.  If bitcoin becomes big enough it will have an influence.  If it becomes bigger still it may become equivalent to QE in which case they would want to stop printing themselves.  If it becomes bigger still they may find they need somehow to deflate USD (apparently in the UK they were originally talking of tightening money supply by selling the assets they've been 'buying' through QE - not that I really understand these central bank mechanisms).  But the 'advantage' they do have over bitcoin is that they do have the means of controlling supply thus reducing or eliminating the impact.

It sounds like you are suggesting just that -- "stop printing money to make up for the money printed by counterfeiters and Bitcoin."  Do you find the phrase "are you serious?!" offensive?  If so, i apologizeapologise, but i'm at a loss here.

...
As far as "not having it both ways," "arguing in the alternative" is valid, accepted in law, and common as dirt. see here: http://en.wikipedia.org/wiki/Argument_in_the_alternative
So yeah, it surely can't be both, but just as surely will be *either.*
 

Thanks for the reference.  So you're saying if one does not come to be then the other will (or that the first will be true then the second)?  In the latter case for as long as people remain 'deluded' that bitcoin has value it will be bad for the economy (but not 'bad' in and of itself of course) and that when the world wakes up one morning and remembers the rulebook says it shouldn't have any value and it is suddenly worth nothing that those holding it will make a great loss (not that that bitcoin is 'bad' of course)!

A reach for sarcasm?  I'll assume that sort of thing is beneath you, that you are being sincere, and are holding yourself to the same strict etiquette which you hold me to.  So:
No, Bitcoin is not bad, but *it is bad for the dollar economy,* as you yourself agree and aren't too bothered by.  The suckers holding fiat may be a bit peeved, though.  And oh, almost forgot!  The gobment might not be indifferent, either.  I understand they get a bit touchy where *others* try to print monyz.  Anyhowz, i'm just not seeing the FED stopping their presses just for me.  Call me a pessimist
Catsen are not bad, i love 'em to pieces, but they're bad to mouses  I hope we're clear on that, and don't need to bring it up again.

...
Please, re-read the few lines at the very end of my previous post, starting with "Side note:" to get a fair summation of my views on Bitcoin.  Forgive me for not joining the din of children who, along with inventing sex, drugz, rat racing & muzak also invented the concept of monyz.

On a 'fair summation of your views' am I right that you believe Bitcoin to be essentially worthless and certainly <i>not</i> a currency (because it has neither the backing of something intrinsic nor by decree of a nation state), that it is pointless as a means of electronic money transfer because we already can take the money to the bank and let them transfer it for us, you believe it is doomed because the powers that be won't let it thrive, you believe all who see a positive future to bitcoin as a disruptive technology are mugs (being played by the 'older kids') and are a bunch of screeming kids that the mature elite including you and Satoshi are fed up of?

No.  
I believe that pretending that the enemy is weak & stupid guarantees tears & fail in the future.
I believe that a currency best known to the uninitiated for SR & gambling should either stay below radar & cut down on the revolutionary lingo, or expect tears & fail in the future.
I believe that the most vocal here don't consider Bitcoin fiat because they don't even bother to learn what fiat *is*.
I believe that hugboxes & echo chambers are incubators for fail, not win.
I believe that if you see potential allies as enemies, and act accordingly, the odds of winning over the mainstream are zero.
I believe you want me to say that Bitcoin is bad, but it's not -- bitcoin is brilliant, miners are cool, hardware geeks are cool, devs are cool, the speculators are cool.  It's the clueless, humorless, bitter ideologues i could do without.    
To quote my friend: "Show me some product, motherf!@#"

Yet you 'welcome buicks' and do not think bitcoin is 'bad'?

Excuse me for not 'getting' what you think of bitcoin!

It's OK, i'm a patient guy.  If this is your gravest sin, i'd say forget about it.  The last week was a total waste for me -- i got out at 106, but *didn't get that rally,* & i'm still out

* I'm not talking about 'allowing' or 'disallowing', 'right' or wrong', just about the practical impact.

[hate_the_face]

When the only thing backing up your currency is the belief that it can become stronger than the USD in mainstream society with no form of legal protection for your funds while simultaneously the majority of holders are buying and selling solely to make more USD, that is not quite a paradox but awfully naive.

[thoughtfan]

As far as my position, i do not see why making it clear is essential or even relevant to objective discussion.  If a statement is structurally flawed, who cares if i like or hate the conclusion it attempts to reach?

I agree it is not essential.  But if in the process of being (or at least coming across as) contrarian you are making it very difficult for others to ascertain your position then you have no place complaining if people get it wrong.  Where a statement is structurally flawed then bring it on because the idea is one of us may be able to persuade the other to change his position and we both stand a chance of learning something!

How is Bitcoin different from printing money?

It is different because it is not under central bank control.  And its effect on dollar price inflation is dependent more on total dollar value of bitcoin circulating tin the US more than directly on bitcoin's currency inflation (through mining).

I think you're taking things out of context -- i never suggested that mining is equivalent to printing money.  

Not at all.  I know you didn't.  I was putting it in because leaving it out is an omission if we're talking about buying power.  The essential context of the argument you initially put forward, unless I'm mistaken is the bit we agree on - that bitcoin has an effect on dollar inflation.  I was just being more specific in saying that it is the usd value of the bticoin in circulation in the us economy that determines its impact (more than mining).

I also don't understand how you can talk about "Bitcoin inflation."  As i understand the word, it attempts to measure a currency's buying power.  If a pound buys 1% less today than it did a week ago, we're talking about a 1% weekly inflation.  Now, applying that to BTC

Inflation and deflation have more than one meaning and I (try to) always make clear which I mean.  thefiniteidea contributed a post on this which is deservedly stickied at the top of the Economy subforum.  I highly recommend it.  Bitcoin is currently inflating (in money supply terms) approximately as fast proportionally as the USD with its QE.  25 bitcoins every 10 mins relative to the bitcoins in existence is high.  For bitcoin to be price-deflationary requires demand more than outweigh the new bitcoins coming into circulation.  I hope that makes it clear.

You don't think that Paypal is a currency, do you?  Paypal issues no coin & doesn't even issue credit.  Think of Paypal as the bike messenger who delivers your money & charges for it.  It's not a currency.  No more than a bike messenger is.  Comparing Paypal to Bitcoin is ... I'm beginning to understand just how explicit i must make myself here

Conflating Bitcoin the currency with bitcoin as a payment mechanism is... I'm beginning to understand just how explicit I must make myself here!!

What new "stuff to buy with it" did it bring?

It didn't.  Currencies don't.  That's not what they are for.  As a currency it brings no additional goods or services to the marketplace.

However as a payment mechanism it does.

[Bitcoin] contributes to the economy by providing a means of payment some people find useful to enable or ease their purchases.

...

And Bitcoin, by being that much more efficient, has the potential to contribute more, oiling the wheels of commerce.

Bitcoin is not more efficient than Paypal, no matter how many people say it and no matter how often.  First, what do you mean by "efficient"?  Fast?  Paypal's much faster than waiting for three confirms, almost spontaneous.  Easy to use?   Takes less energy?  No.  What do people mean when they say "efficient"?  The only things i can think of are "lower fee/no chargeback/"pseudonymity"."  Not quite the set my much-maligned mom would choose.

I won't get bogged down into why I believe it to be more efficient as a payment processor and it's not an argument that needs to be won or lost here for the point to be made that some people find it preferable.  If it is providing a service some find preferable for which they need to pay less then bitcoin is adding to the services available.  So as a payment processor or as a means of transmitting money trans-globally (v. Western Union, wiring money etc) it brings something new to the table.  If you think existing services are better nobody's stopping you using them.  But just because you don't see value in what is new doesn't mean others don't.  If others do and use it then it is making a difference.

...And spending the money on Bitcoin is anything but "circulating it."  [belittling of those who disagree]

But hang on a minute, surely you just implied the dollar that bought the bitcoin is still in circulation so how is it not circulating it to spend it on bitcoin?  I'm confused!

Without digging back through all of my posts, i can guess it was an argument in alternative.

Well if you can't be bothered to defend your position on this and would prefer to assume you were right and I wrong then I'm certainly not going to do that work for you.

[more belittling of those who disagree]...  Do we agree that Bitcoin, if it has value, drains that value directly from the currencies which already exist?  

For someone who protests he does not claim bitcoins are bad you do love those terms with negative connotations.  'Drains value' is just another way of expressing what we agreed, that another currency (or more of the same) in the same economy creates price inflation in the original currency.

I'm sorry, but in that case COUNTERFEIT MONEY *also* "creates a price inflation in the original economy."  No more, no less.  You chose to hide things behind euphemisms, and i do not.  Agree to disagree.

I would agree that progress on this point, your having had a good few people attempting to explain this to you, is looking pretty unlikely by now.  We do appear to agree that we agree that the underlying effect on a dollar economy of having more currencies in circulation is dollar price inflation.  What I and others have been trying to get through to you is that terms like 'counterfeit' and 'drains value' are adding unnecessarily inflammatory value judgments to the process and it would appear from the consequence, did not contribute to you getting the actual valid point across.  I'm not saying you shouldn't do this but don't start tearing your hair out if people focus not on your valid point but on the ridiculousness of the way in which you presented it.

'hiding behind euphemisms'?  Gimme a break!!

If by 'shortsighted' you mean I was not assuming bitcoin to have become of a significant market cap in relation to the 'big boys' currencies then maybe.  I will indulge your preferred comparison by saying the effect of allowing counterfeiting (providing they will never be detected) and reducing currency inflation by the same amount would have the same effect globally (and would only make a difference to who gets the initial gain)*.  Likewise for Bitcoin.

The wording is bit unclear -- do you agree that allowing Bitcoin is identical to allowing counterfeiting, or do you not?  Language like "I will indulge your..." & "reducing inflation by the same amount" is... Since you took offence at "disingenuous," i'm having to hunt for words.  Are you saying that the Central Bank should make identical allowances for Bitcoin & counterfeiters?  To "stop printing money so we could try our hand at it"?

Who said anything about what a Central Bank 'should or shouldn't' do?  The purpose of the footnote was to take out of this the moral/ethical/legal implications for clarity.  In the practical sense if a counterfeited note is the same as a genuine note then of course the effect (other than the benefit to the first recipient) is the same.  And given, as I'll say for the umpteenth time, we are agreed (and we are agreed that we are agreed) that adding a new currency and printing more money have the same effect then what's the difference between your position and mine?

It would appear to be something to do with the moral/ethical/legal because there is nothing else.  In which case there is in my view no similarity at all - hence this being the first thing you got pulled up on by whoever it was back in the day!

Apparently the things I believe bitcoin brings to the table you don't - yet you appear to believe it brings something otherwise you wouldn't claim to like it.  So whatever that is, in the process of using bitcoin is your purpose to defraud someone from whom you are buying something by passing something off as something it isn't?  No?  Well... I give up!

If currency inflation is the central bank's primary means of controlling price inflation then the sum of commerce traded by other means of exchange will form part of the central bank's assessment of how much new money to create, whether directly or indirectly.  If bitcoin becomes big enough it will have an influence.  If it becomes bigger still it may become equivalent to QE in which case they would want to stop printing themselves.  If it becomes bigger still they may find they need somehow to deflate USD (apparently in the UK they were originally talking of tightening money supply by selling the assets they've been 'buying' through QE - not that I really understand these central bank mechanisms).  But the 'advantage' they do have over bitcoin is that they do have the means of controlling supply thus reducing or eliminating the impact.

It sounds like you are suggesting just that -- "stop printing money to make up for the money printed by counterfeiters and Bitcoin."  Do you find the phrase "are you serious?!" offensive?  If so, i apologizeapologise, but i'm at a loss here.

No (not finding offensive).  I am ceasing to be surprised at what you are failing to understand.

I'm not saying what they should or shouldn't do.  I'm saying the sum of all inflationary pressures and deflationary pressures (including Bitcoin should it ever be more than a blip) add up to what is going on at any given moment.  And that is what central banks respond to.  I'm not suggesting the US gov't look at Bitcoin and decide 'oh, that's OK, we can just print less' to make up for it'. Just that they have the means to counter anything they consider to be an 'ill effect' in that respect.

Bitcoin does not have that 'luxury' so for bitcoin users in a bitcoin economy where altcoinx suddenly became big would suffer - but we all take that risk (amongst all the others) in buying bitcoins.  We know (and most of us appear to like) that Bitcoin has no central-bank 'rescue' mechanism.

...
As far as "not having it both ways," "arguing in the alternative" is valid, accepted in law, and common as dirt. see here: http://en.wikipedia.org/wiki/Argument_in_the_alternative
So yeah, it surely can't be both, but just as surely will be *either.*
 

Thanks for the reference.  So you're saying if one does not come to be then the other will (or that the first will be true then the second)?  In the latter case for as long as people remain 'deluded' that bitcoin has value it will be bad for the economy (but not 'bad' in and of itself of course) and that when the world wakes up one morning and remembers the rulebook says it shouldn't have any value and it is suddenly worth nothing that those holding it will make a great loss (not that that bitcoin is 'bad' of course)!

A reach for sarcasm?  I'll assume that sort of thing is beneath you, that you are being sincere, and are holding yourself to the same strict etiquette which you hold me to.

Just to be clear the thanks was not sarcasm - neither is the one that heads the other post.  I get frustrated, I have a dig, yes, but I try not to cross the line - and if I learn something then thanks is in order.

So:
No, Bitcoin is not bad, but *it is bad for the dollar economy,* as you yourself agree and aren't too bothered by.  The suckers holding fiat may be a bit peeved, though.  And oh, almost forgot!  The gobment might not be indifferent, either.  I understand they get a bit touchy where *others* try to print monyz.  Anyhowz, i'm just not seeing the FED stopping their presses just for me.  Call me a pessimist
Catsen are not bad, i love 'em to pieces, but they're bad to mouses  I hope we're clear on that, and don't need to bring it up again.

This time you appear to be conflating what you or I think and what is of concern to a government.  But I think after all this I may be catching a glimpse of your intention in your first post..... Let me try:

Are you saying from a government's perspective, although there is a lack of intent to defraud and there is no attempt to counterfeit federal notes they might see it in the same light and decide as a consequence to clamp down on bitcoin?

I can not deny somebody might look at it this way but if they did their legal advisors might suggest trying to make the comparison to counterfeiting isn't going to get them anywhere.  The FED might respond tho this somebody by saying 'good point, we'll keep an eye on it' and of course we don't want this taken out of our control so do what you can to put a stop to it or to minimise it's impact - but whatever you do don't try and sell this comparison with counterfeiting to the public because other than from our very narrow perspective it makes no sense whatsoever'!

On a 'fair summation of your views' am I right that you believe Bitcoin to be essentially worthless and certainly <i>not</i> a currency (because it has neither the backing of something intrinsic nor by decree of a nation state), that it is pointless as a means of electronic money transfer because we already can take the money to the bank and let them transfer it for us, you believe it is doomed because the powers that be won't let it thrive, you believe all who see a positive future to bitcoin as a disruptive technology are mugs (being played by the 'older kids') and are a bunch of screeming kids that the mature elite including you and Satoshi are fed up of?

No.  
I believe that pretending that the enemy is weak & stupid guarantees tears & fail in the future.
I believe that a currency best known to the uninitiated for SR & gambling should either stay below radar & cut down on the revolutionary lingo, or expect tears & fail in the future.
I believe that the most vocal here don't consider Bitcoin fiat because they don't even bother to learn what fiat *is*.
I believe that hugboxes & echo chambers are incubators for fail, not win.
I believe that if you see potential allies as enemies, and act accordingly, the odds of winning over the mainstream are zero.
I believe you want me to say that Bitcoin is bad, but it's not -- bitcoin is brilliant, miners are cool, hardware geeks are cool, devs are cool, the speculators are cool.  It's the clueless, humorless, bitter ideologues i could do without.    
To quote my friend: "Show me some product, motherf!@#"

I've quoted this as one because finally you've given us an idea of where you stand.  And seeing as I'm here I may as well respond to them one by one too

I believe that pretending that the enemy is weak & stupid guarantees tears & fail in the future.

Agreed.  But I also believe assuming they are a lot more competent and coordinated than they are and cowering accordingly is equally mistaken.

I believe that a currency best known to the uninitiated for SR & gambling should either stay below radar & cut down on the revolutionary lingo, or expect tears & fail in the future.

Bitcoin don't care!  Bitcoin itself has no volition to decide to 'stay under the radar' or not.  To the extent that it does or does not is down to the sum of all its users' behaviours.  You think you can control that?   You can't so you may as well let it go.  Even if everyone 'behaved themselves' according to your standard, Amir Taqi alone saying Bitcoin is great because of 3d printing of guns and bringing down central banks and commercial banks would be what the press picks up on.  Don't lose any sleep over it fella'. Give it up.

I believe that the most vocal here don't consider Bitcoin fiat because they don't even bother to learn what fiat *is*.

It might help if you accepted that just like inflation and deflation, people don't always mean the same things by the words they use.  Feel free to believe there is one 'correct' way to use a word but it is a useful tool to ascertain what the writer meant by what they were saying and to respond accordingly than to be derogatory in response to their 'incorrect' (in your opinion) use of a word.  Fiat to an economist is to do with a currency not backed by a commodity such as gold.  From that perspective bitcoin is fiat although technically the word means what most bitcoiners assume i.e. government decree.  Feel free to go tell any economists that turn up here (as many do) that their use of the word is wrong.  Good luck with getting them to change what they teach and all the text books so they use it how you want them to before discussing anything further!

I believe that hugboxes & echo chambers are incubators for fail, not win.

Agreed - at least on a personal level.  I am aware of the risk of having my prejudices reinforced by hanging out where people are of a similar opinion.  That's why I tend to engage more with those with whom I disagree rather than those with whom I do.

I believe that if you see potential allies as enemies, and act accordingly, the odds of winning over the mainstream are zero.

Bitcoin don't care.  The protocol has no enemies.  The ideas some of us may have for its future might.  But the enemy depends on the ideas - and we don't all have the same ideas.  I have an idea where I stand and what the potential stumbling blocks are for my ideas of its future but again, I wouldn't lose sleep on what others think and how they respond.

I believe you want me to say that Bitcoin is bad, but it's not -- bitcoin is brilliant, miners are cool, hardware geeks are cool, devs are cool, the speculators are cool.

No, I don't want you to 'say' anything.  I've just been trying to get to the bottom of what you've been trying to say.  But from my perspective you've been struggling to make yourself clear on the specific point about the 'counterfeiting' you were trying to get across and on the bigger picture.

It's the clueless, humorless, bitter ideologues i could do without.    

Agreed, though whether ideologues or those always trying to paint bitcoin in a negative light it's all the same to me.  I'm afraid if you want to avoid them you'll have to stay away from the forums - but then you'd lose out on opportunities like this one just was wouldn't you?

[thoughtfan]

it's a Rube Goldbergian obfuscation

There we go, one thing straight out of a hat that I could learn from. Thank you

But now that I understand what it means let me try and explain what I meant and why it is not.

My point is the save or spend thing is a false dichotomy.  Of course nobody can both save and spend the same bitcoin but we have the option of acquiring to save then acquiring some more to spend where we are spending bitcoin instead of spending the equivalent in pounds.

I may be reading you wrong, but that's not a solution, it's a Rube Goldbergian obfuscation.  If Bitcoin is a better store of value than fiat, the sound thing to do is convert all of your fiat into bitcoins *as soon as you can* & hold the coins.  Each time you use bitcoins in a transaction, having to repurchase them later with fiat, you lose.  Assuming that Bitcoin value continuously rises relative fiat (the very thing which would make it a better store of value than fiat), the bitcoins you "rebuy" will cost you more fiat than the ones you sold.  Think of it in terms of selling a coin on Gox during a rally, and having to buy it back, oh, 5 minutes later

I had decided to step out of the macro economy context to answer an argument you hadn't put - which was probably not the wisest thing to do - but seeing as it was misunderstood anyway...

Let's say I convert to bitcoins for whatever reasons (I was tempted to put why but it would only give you something else besides the point to get picky about) with view to holding long term.  Then I go about my daily life - which among other things involves getting paid in fiat and buying things.  Some of my pay may go towards adding my bitcoin holding but I may also decide (for whatever reasons) to buy some things with bitcoin.  Either for convenience's sake I add the fiat for the bitcoin I want to spend (which I would have spent in fiat anyway) to the same transaction or as and when I want to spend bitcoin I convert then spend immediately.

Now if I use my spending bitcoins as a credit card equivalent (i.e. as you suggest, spend some of my saved bitcoins then replace them) then yes, assuming bitcoin value is on the way up (note I'm not making that assumption, just for the sake of argument keeping the same conditions as those you described) I will have lost out.  However if we assume I want to pay up front I convert to bitcoin first so assuming the saving through buying in bitcoin is equivalent to the cost of transfer (again just keeping your implicit assumption the same) then whatever the upward-movement gain that happens in the meantime is a bonus.

Either way what I'm saying is there is no need for us normal folk with some interest in bitcoin, as individuals, to be in a dilemma about whether one 'should' save or spend bitcoins.

I don't see anybody here pretending there is no risk associated with bitcoin but for the sake of argument let's talk about the odd extremist (in risk terms) who immediately converts all her fiat to bitcoin as soon as she receives it and finds a way of using bitcoin for everything.  First, she's unlikely to be the kind of person who is going to worry about the save or spend 'dilemma' from the personal perspective any more than someone living their live exclusively in pounds or dollars.  Here the consideration is the argument against deflation put forward by Krugman and his ilk that a price deflationary currency discourages spending.  The argument goes that the consequence is more saving and less spending which is a bad thing in the eyes of those who think lots of money being spent today is the answer to all economic woes.  Their conclusion appears to be that an economy using this currency (exclusively?) will fail and therefore such a currency is a bad thing.  I tend to disagree but this is an experiment.  In due course if bitcoin hangs around long enough we may get to find out.

In the bigger picture I was pointing out that it has zero effect on availability of bitcoins to use for spending because whatever's left can be divided into however many units and their value will reflect demand for those available.

In other words, to save the dollar, Americans should simply put most of their money under their mattresses, and what remains in circulation will become more valuable due to increased demand for the (temporarily) limited supply?  Profit?
 

It's not what I was saying but it wouldn't work anyway because as I point out later the USD has a mechanism to control the money supply at whim so enough people putting money under the bed would be an excuse for the FED to print more money.  Everybody loses.  And even if the fed decided to let 'the people' determine the money supply in this manner by not responding and people put 90% of their dollars under the bed (let's forget M2 & M3 for now) it still wouldn't work unless the fed also started splitting the cent in order to enable more accurate prices and spend on lower value items.  Bitcoin has neither of these problems.

...As far as the value of coins not in circulation being determined by the coins that are, that's not obvious & also false, currency trading != circulation.  If i sold bob 5 bitcoins for 5 dollars, and he sold them to me for 5 dollars, there's no circulation, no matter how many times we rinse & repeat.

Apologies.  Obviously not obvious to you.  Not false, just incomplete.  I was not referring to the currency market.  I was talking about what one can buy with bitcoin.  The currency market is a means (made possible by liquidity provided by speculators) of getting bitcoins from those who don't need them to those who do without having something to trade for them.  And whilst the speculating might have a big impact on what can be bought and sold with them the bottom line is demand for the purposes of purchasing or sending money electronically.

But if I've got 50,000 bitcoins and I'm not doing anything I have no say in what people choose to pay for those that are on the market.  Of course the absence of my 50,000 will have an indirect influence.  That was my argument against the point in the OP - that having the vast majority 'hoarded' and out of circulation is not a problem for Bitcoin because for however little is left, the active buyers and sellers (who are using it) along with the speculators (providing liquidity) mean demand can meet supply at a price that will enable it to be used for whatever purpose they wish it.

I disagree with you on the role of speculators.  Speculation, stripped of all the negative associations, leaves us with this (slightly abbreviated) wikip definition: "Speculation is the practice of engaging in risky financial transactions in an attempt to profit from short or medium term fluctuations in the market value"  If Bitcoin is indeed a currency, bringing liquidity to Bitcoin is less meaningful than bringing coals to Newcastle  Shouldn't it be the other way around (Bitcoin brings liquidity to ...)?  I know, not yet.  The value of Bitcoin, today, is purely a *speculative* value -- speculators are *guessing* how much a BTC will be worth in the future, and betting dollars (and pounds) on their predictions. (do British keyboards have a pound symbol?)  They, and not the few merchants on SR & the other web-based businesses set BTC price today.  That's why the price dances around so wildly rel. dollar pound euro fiat.  Not because merchants selling their goods for bitcoins are tapping into their own supply, but because the merchants have nothing to do with the price.

You accuse me of conflating arguments but blimey, just read that again ^ and see all the separate points you tried to mush together into that paragraph!

So let's take the untangling exercise:

Motivation of speculators != role of speculation for a currency. Nobody said speculators nobly, benevolently and altruistically go into the market in order to make bitcoins available for those who need them for anything other than speculation.  Speculators do what speculators do for their own reasons.  One consequence to the extent that they do is that there is a liquid market for those needing to buy or sell bitcoins.  Another consequence can be big fluctuations in price but the can also have the opposite effect of taking out spikes and troughs that big changes in underlying supply or demand would otherwise cause.  I'm not trying to say it is perfect.  Just that it is what it is.  I'm talking about day traders here.  Although there are no clear boundaries for the sake of argument (and that they don't really provide liquidity other than at the time of purchase) I'm not including long-term speculators/savers/hoarders.  For the purposes of my argument they are those holding bitcoin out of circulation - and the whole point of our debate here is based on the question of whether this is a problem for bitcoin.

In order to see whether my argument floats or not we need to conceptually keep things simple and to do that we need to 'clean up' things that are not in reality as straightforward and clear cut to get to the principles of what works or doesn't and why.  Saying 'your argument doesn't work because in reality things are a lot more messy (and terrible because of nasty speculators and hoarders)' doesn't help!

Let me try make it even simpler and assume everybody using bitcoin to spend or send have enough connections that they can all do it without need to convert back and forth to fiat.  What determines what they can buy with it or sell for it?  Supply and demand of the active.  Every time more is being saved/hoarded than is being mined the amount left for sending and spending is less.  But because of bitcoin's divisibility this is not a problem.  Price of goods and services adjust according to the scarcity of the commodity/currency used to purchase them so no matter how little bitcoin is available to spend (even if the global bitcoin economy is running on a small fraction of a bitcoin) it is enough.  My point is there is no practical 'save or spend' dilemma for bitcoin either.

The only thing in principle adding a market between bitcoin and other currencies does is to make it possible for people not to need to be in a closed bitcoin economy in order to use bitcoin (and enables people to be able to spend their bitcoins on stuff that can't currently be bought - or bought as conveniently - with bitcoin.  As a bonus, it also enables us not to need to look at the buying power of bitcoins in terms of a bag of groceries or cars but that we can put a $ price to it at any given moment.

[thoughtfan]

When the only thing backing up your currency is the belief that it can become stronger than the USD in mainstream society with no form of legal protection for your funds while simultaneously the majority of holders are buying and selling solely to make more USD, that is not quite a paradox but awfully naive.

I own bitcoins therefore have a part in 'backing up' the currency.  Whilst I acknowledge the possibility (however remote) that it could become stronger than the USD this does not in any way have a part to play in my decision to own bitcoin, nor in my possibly mistaken belief that it is likely to have a more significant role to play than it does today.

So the premise that 'the only thing backing up the currency is [belief x]' has been proven to be a false one given that I don't back up the currency due to 'belief x'.  This renders the remainder of your point irrelevant.

[crumbs]

As far as my position, i do not see why making it clear is essential or even relevant to objective discussion.  If a statement is structurally flawed, who cares if i like or hate the conclusion it attempts to reach?

I agree it is not essential.  But if in the process of being (or at least coming across as) contrarian you are making it very difficult for others to ascertain your position then you have no place complaining if people get it wrong.  Where a statement is structurally flawed then bring it on because the idea is one of us may be able to persuade the other to change his position and we both stand a chance of learning something!

This is getting silly. I never discussed "my position on Bitcoin," and that's why it is so hard to ascertain.  While outlining the basics of driving nails, i may point out that a ball peen hammer is not the best tool for the job, using an iPhone to do it is relatively silly, and even a framing hammer can whack your thumb real good if you're not careful.  If i failed to mention *how i feel* about nails, iPhones, ball peen & framing hammers -- the knowledge you so badly crave -- i'm sorry.  Topic for another day
 

How is Bitcoin different from printing money?

It is different because it is not under central bank control.  And its effect on dollar price inflation is dependent more on total dollar value of bitcoin circulating tin the US more than directly on bitcoin's currency inflation (through mining).

I think you're taking things out of context -- i never suggested that mining is equivalent to printing money.  

Not at all.  I know you didn't.  I was putting it in because leaving it out is an omission if we're talking about buying power.  The essential context of the argument you initially put forward, unless I'm mistaken is the bit we agree on - that bitcoin has an effect on dollar inflation.

No.  We agreed that Bitcoin has a very specific effect on dollar inflation -- *it contributes to it.*  "Has an effect on" is exactly the kind of language to avoid when said effect is very specific & always negative

I was just being more specific in saying that it is the usd value of the bticoin in circulation in the us economy that determines its impact (more than mining).

Sure.  I agree.

I also don't understand how you can talk about "Bitcoin inflation."  As i understand the word, it attempts to measure a currency's buying power.  If a pound buys 1% less today than it did a week ago, we're talking about a 1% weekly inflation.  Now, applying that to BTC

Inflation and deflation have more than one meaning and I (try to) always make clear which I mean.  thefiniteidea contributed a post on this which is deservedly stickied at the top of the Economy subforum.  I highly recommend it.  Bitcoin is currently inflating (in money supply terms) approximately as fast proportionally as the USD with its QE.  25 bitcoins every 10 mins relative to the bitcoins in existence is high.  For bitcoin to be price-deflationary requires demand more than outweigh the new bitcoins coming into circulation.  I hope that makes it clear.

So the total number of bitcoins is increasing, their number is inflating, while Bitcoin's price bouncing on the charts makes it price-inflationary in the morning & price-deflationary in the afternoon?  That part is perfectly clear.

You don't think that Paypal is a currency, do you?  Paypal issues no coin & doesn't even issue credit.  Think of Paypal as the bike messenger who delivers your money & charges for it.  It's not a currency.  No more than a bike messenger is.  Comparing Paypal to Bitcoin is ... I'm beginning to understand just how explicit i must make myself here

Conflating Bitcoin the currency with bitcoin as a payment mechanism is... I'm beginning to understand just how explicit I must make myself here!!

What new "stuff to buy with it" did it bring?

It didn't.  Currencies don't.  That's not what they are for.  As a currency it brings no additional goods or services to the marketplace.

That's because Bitcoin is revolutionary in more ways than you give it credit for

Before The Age of Bitcoin, currencies were issued with underlying economies & power structures already in place -- they didn't *have* to provide anything.  Here's a handy analogy, to show how the process is laid out in time:

First the amusement parks were built, and *then* the tickets were printed.
These tickets were printed by the folks who built the amusement parks, so the folks who got tickets had rides they could use them on.

Bitcoin didn't bother with building.  The tickets were printed *first.*  The rides, Bitcoin's reasoning went, are already in place!  Let the free market decide whose tickets are better -- the carnies or ours! 

The tickets sold by the carnies are old-fashioned, Bitcoin reasoned, & the carnies print more tickets every day (that's your definition of inflation -- FED printing money).  Bitcoin tickets are slick and after a fixed number is printed, no more could be made -- inflation solved! Profit! 
What could possibly go wrong?
[The Bitcoin Saga.  To be continued]

However as a payment mechanism it does.

[Bitcoin] contributes to the economy by providing a means of payment some people find useful to enable or ease their purchases.

...

And Bitcoin, by being that much more efficient, has the potential to contribute more, oiling the wheels of commerce.

Bitcoin is not more efficient than Paypal, no matter how many people say it and no matter how often.  First, what do you mean by "efficient"?  Fast?  Paypal's much faster than waiting for three confirms, almost spontaneous.  Easy to use?   Takes less energy?  No.  What do people mean when they say "efficient"?  The only things i can think of are "lower fee/no chargeback/"pseudonymity"."  Not quite the set my much-maligned mom would choose.

I won't get bogged down into why I believe it to be more efficient as a payment processor and it's not an argument that needs to be won or lost here for the point to be made that some people find it preferable.  If it is providing a service some find preferable for which they need to pay less then bitcoin is adding to the services available.  So as a payment processor or as a means of transmitting money trans-globally (v. Western Union, wiring money etc) it brings something new to the table.  If you think existing services are better nobody's stopping you using them.  But just because you don't see value in what is new doesn't mean others don't.  If others do and use it then it is making a difference.

If it is not already obvious, let me point out that there is a difference between a currency and a payment processor. A payment processor moves money, a currency *is* money.  It's beneficial for everyone when the two are not confused.  A handy analogy:

-If Freddy is a bike messenger who peddles your monyz to the supermarket, pays for your order, and keeps the change -- he is a payment processor.
-The money Freddy brings to the supermarket, and the change he pockets -- that's currency.
I'm sure there's a better way to highlight the difference between the two, but this is a start.
 

...And spending the money on Bitcoin is anything but "circulating it."  [belittling of those who disagree]

But hang on a minute, surely you just implied the dollar that bought the bitcoin is still in circulation so how is it not circulating it to spend it on bitcoin?  I'm confused!

Without digging back through all of my posts, i can guess it was an argument in alternative.

Well if you can't be bothered to defend your position on this and would prefer to assume you were right and I wrong then I'm certainly not going to do that work for you.

While this is possibly the longest post evah, i continue to offer punctual replies to each of your point, while you unearth lines from my old posts & ignore inconvenient passages from the new.

[more belittling of those who disagree]...  Do we agree that Bitcoin, if it has value, drains that value directly from the currencies which already exist?  

For someone who protests he does not claim bitcoins are bad you do love those terms with negative connotations.  'Drains value' is just another way of expressing what we agreed, that another currency (or more of the same) in the same economy creates price inflation in the original currency.

I'm sorry, but in that case COUNTERFEIT MONEY *also* "creates a price inflation in the original economy."  No more, no less.  You chose to hide things behind euphemisms, and i do not.  Agree to disagree.

I would agree that progress on this point, your having had a good few people attempting to explain this to you, is looking pretty unlikely by now.  We do appear to agree that we agree that the underlying effect on a dollar economy of having more currencies in circulation is dollar price inflation.  What I and others have been trying to get through to you is that terms like 'counterfeit' and 'drains value' are adding unnecessarily inflammatory value judgments to the process and it would appear from the consequence, did not contribute to you getting the actual valid point across.  I'm not saying you shouldn't do this but don't start tearing your hair out if people focus not on your valid point but on the ridiculousness of the way in which you presented it.

'hiding behind euphemisms'?  Gimme a break!!

No need for concern -- my hair is firmly rooted, my forum persona is exactly what i wish it to be. 
The lark’s on the wing;
The snail’s on the thorn;
God’s in His heaven --
All’s right with the world!

I hope this poetic interlude was instrumental in alleviating your concerns.

If by 'shortsighted' you mean I was not assuming bitcoin to have become of a significant market cap in relation to the 'big boys' currencies then maybe.  I will indulge your preferred comparison by saying the effect of allowing counterfeiting (providing they will never be detected) and reducing currency inflation by the same amount would have the same effect globally (and would only make a difference to who gets the initial gain)*.  Likewise for Bitcoin.

The wording is bit unclear -- do you agree that allowing Bitcoin is identical to allowing counterfeiting, or do you not?  Language like "I will indulge your..." & "reducing inflation by the same amount" is... Since you took offence at "disingenuous," i'm having to hunt for words.  Are you saying that the Central Bank should make identical allowances for Bitcoin & counterfeiters?  To "stop printing money so we could try our hand at it"?

Who said anything about what a Central Bank 'should or shouldn't' do?  The purpose of the footnote was to take out of this the moral/ethical/legal implications for clarity.  In the practical sense if a counterfeited note is the same as a genuine note then of course the effect (other than the benefit to the first recipient) is the same.  And given, as I'll say for the umpteenth time, we are agreed (and we are agreed that we are agreed) that adding a new currency and printing more money have the same effect then what's the difference between your position and mine?

If the direct questions above were missed, allow me to quote:
"The wording is bit unclear -- do you agree that allowing Bitcoin is identical to allowing counterfeiting, or do you not?"
Your answer: (yes/no/haven't thought about it/would rather not say)_____________.

The difference between our positions is plain: It's who gets to be "the first recipient."  If i print the money, making me "the first recipient," i can use that money to buy your house, making you "the second recipient."  By being "the first recipient," i gots me another house.  Firsties! 

It would appear to be something to do with the moral/ethical/legal because there is nothing else.  In which case there is in my view no similarity at all - hence this being the first thing you got pulled up on by whoever it was back in the day!

   Please fill in the blank above

Apparently the things I believe bitcoin brings to the table you don't - yet you appear to believe it brings something otherwise you wouldn't claim to like it.  So whatever that is, in the process of using bitcoin is your purpose to defraud someone from whom you are buying something by passing something off as something it isn't?  No?  Well... I give up!

Now i'm curious about what you think Bitcoin "brings to the table."  Thus far, other than a confusing currency vs. payment processor comparison, you haven't mentioned much.  Feel like sharing?

If currency inflation is the central bank's primary means of controlling price inflation then the sum of commerce traded by other means of exchange will form part of the central bank's assessment of how much new money to create, whether directly or indirectly.  If bitcoin becomes big enough it will have an influence.  If it becomes bigger still it may become equivalent to QE in which case they would want to stop printing themselves.  If it becomes bigger still they may find they need somehow to deflate USD (apparently in the UK they were originally talking of tightening money supply by selling the assets they've been 'buying' through QE - not that I really understand these central bank mechanisms).  But the 'advantage' they do have over bitcoin is that they do have the means of controlling supply thus reducing or eliminating the impact.

It sounds like you are suggesting just that -- "stop printing money to make up for the money printed by counterfeiters and Bitcoin."  Do you find the phrase "are you serious?!" offensive?  If so, i apologizeapologise, but i'm at a loss here.

No (not finding offensive).  I am ceasing to be surprised at what you are failing to understand.

I'm not saying what they should or shouldn't do.  I'm saying the sum of all inflationary pressures and deflationary pressures (including Bitcoin should it ever be more than a blip) add up to what is going on at any given moment.  And that is what central banks respond to.  I'm not suggesting the US gov't look at Bitcoin and decide 'oh, that's OK, we can just print less' to make up for it'. Just that they have the means to counter anything they consider to be an 'ill effect' in that respect.

They sure do have the means.  One of those "means" is the "GTFO my economy!" banhammer.  I'm still a bit unclear about your personal beliefs, though -- when/if Bitcoin gets to be more than "a blip," how do you think the US government will "counter [its] ill effect"? 
Your answer (optional): (__________________/haven't thought about it/would rather not say)

Bitcoin does not have that 'luxury' so for bitcoin users in a bitcoin economy where altcoinx suddenly became big would suffer - but we all take that risk (amongst all the others) in buying bitcoins.  We know (and most of us appear to like) that Bitcoin has no central-bank 'rescue' mechanism.

Relevance?

...
As far as "not having it both ways," "arguing in the alternative" is valid, accepted in law, and common as dirt. see here: http://en.wikipedia.org/wiki/Argument_in_the_alternative
So yeah, it surely can't be both, but just as surely will be *either.*
 

Thanks for the reference.  So you're saying if one does not come to be then the other will (or that the first will be true then the second)?  In the latter case for as long as people remain 'deluded' that bitcoin has value it will be bad for the economy (but not 'bad' in and of itself of course) and that when the world wakes up one morning and remembers the rulebook says it shouldn't have any value and it is suddenly worth nothing that those holding it will make a great loss (not that that bitcoin is 'bad' of course)!

A reach for sarcasm?  I'll assume that sort of thing is beneath you, that you are being sincere, and are holding yourself to the same strict etiquette which you hold me to.

Just to be clear the thanks was not sarcasm - neither is the one that heads the other post.  I get frustrated, I have a dig, yes, but I try not to cross the line - and if I learn something then thanks is in order.

So:
No, Bitcoin is not bad, but *it is bad for the dollar economy,* as you yourself agree and aren't too bothered by.  The suckers holding fiat may be a bit peeved, though.  And oh, almost forgot!  The gobment might not be indifferent, either.  I understand they get a bit touchy where *others* try to print monyz.  Anyhowz, i'm just not seeing the FED stopping their presses just for me.  Call me a pessimist
Catsen are not bad, i love 'em to pieces, but they're bad to mouses  I hope we're clear on that, and don't need to bring it up again.

This time you appear to be conflating what you or I think and what is of concern to a government.  But I think after all this I may be catching a glimpse of your intention in your first post..... Let me try:

Are you saying from a government's perspective, although there is a lack of intent to defraud and there is no attempt to counterfeit federal notes they might see it in the same light and decide as a consequence to clamp down on bitcoin?

Close, if you leave out "counterfeiting" and "lack of intent to defraud."
I suspect it won't be anything dramatic -- opening that can of worms is in no one's interest.  I imagine it will be an uneventful string of progressively tighter regulations, definitely Patriot Act something something, possibly a couple of Liberty Reserve-style takedowns, growing piles of boring unfavorable case law accompanied by waning public/investor interest.  But as long as we don't keep the neighbors up at night, keep the hooker traffic down to a minimum & everyone behaves like an adult, everything will be fine.

I can not deny somebody might look at it this way but if they did their legal advisors might suggest trying to make the comparison to counterfeiting isn't going to get them anywhere.  The FED might respond tho this somebody by saying 'good point, we'll keep an eye on it' and of course we don't want this taken out of our control so do what you can to put a stop to it or to minimise it's impact - but whatever you do don't try and sell this comparison with counterfeiting to the public because other than from our very narrow perspective it makes no sense whatsoever'!

  , but salesmanship trumps "sense" every time.

On a 'fair summation of your views' am I right that you believe Bitcoin to be essentially worthless and certainly <i>not</i> a currency (because it has neither the backing of something intrinsic nor by decree of a nation state), that it is pointless as a means of electronic money transfer because we already can take the money to the bank and let them transfer it for us, you believe it is doomed because the powers that be won't let it thrive, you believe all who see a positive future to bitcoin as a disruptive technology are mugs (being played by the 'older kids') and are a bunch of screeming kids that the mature elite including you and Satoshi are fed up of?

No.  
I believe that pretending that the enemy is weak & stupid guarantees tears & fail in the future.
I believe that a currency best known to the uninitiated for SR & gambling should either stay below radar & cut down on the revolutionary lingo, or expect tears & fail in the future.
I believe that the most vocal here don't consider Bitcoin fiat because they don't even bother to learn what fiat *is*.
I believe that hugboxes & echo chambers are incubators for fail, not win.
I believe that if you see potential allies as enemies, and act accordingly, the odds of winning over the mainstream are zero.
I believe you want me to say that Bitcoin is bad, but it's not -- bitcoin is brilliant, miners are cool, hardware geeks are cool, devs are cool, the speculators are cool.  It's the clueless, humorless, bitter ideologues i could do without.    
To quote my friend: "Show me some product, motherf!@#"

I've quoted this as one because finally you've given us an idea of where you stand.  And seeing as I'm here I may as well respond to them one by one too

I believe that pretending that the enemy is weak & stupid guarantees tears & fail in the future.

Agreed.  But I also believe assuming they are a lot more competent and coordinated than they are and cowering accordingly is equally mistaken.

I believe that a currency best known to the uninitiated for SR & gambling should either stay below radar & cut down on the revolutionary lingo, or expect tears & fail in the future.

Bitcoin don't care!  Bitcoin itself has no volition to decide to 'stay under the radar' or not.  To the extent that it does or does not is down to the sum of all its users' behaviours.  You think you can control that?

Blame it on my "can do!" attitude, or my huge bleeding heart.

You can't so you may as well let it go.  Even if everyone 'behaved themselves' according to your standard, Amir Taqi alone saying Bitcoin is great because of 3d printing of guns and bringing down central banks and commercial banks would be what the press picks up on.  Don't lose any sleep over it fella'. Give it up.

   Who? and what? Lines like that remind me just who i'm dealing with, and make me want to bundle you up, make sure your shoelaces are tied, and to put an extra drinkable in your lunchbox.
 

I believe that the most vocal here don't consider Bitcoin fiat because they don't even bother to learn what fiat *is*.

It might help if you accepted that just like inflation and deflation, people don't always mean the same things by the words they use.  Feel free to believe there is one 'correct' way to use a word but it is a useful tool to ascertain what the writer meant by what they were saying and to respond accordingly than to be derogatory in response to their 'incorrect' (in your opinion) use of a word.  Fiat to an economist is to do with a currency not backed by a commodity such as gold.  From that perspective bitcoin is fiat although technically the word means what most bitcoiners assume i.e. government decree.  Feel free to go tell any economists that turn up here (as many do) that their use of the word is wrong.  Good luck with getting them to change what they teach and all the text books so they use it how you want them to before discussing anything further!

It's nothing i'm very invested in. Outside of this forum, i only use the word when referring to an italian carmaker or when i need a silly-sounding word.  I guess i'm not as committed to educating as i should be.

I believe that hugboxes & echo chambers are incubators for fail, not win.

Agreed - at least on a personal level.  I am aware of the risk of having my prejudices reinforced by hanging out where people are of a similar opinion.  That's why I tend to engage more with those with whom I disagree rather than those with whom I do.

I believe that if you see potential allies as enemies, and act accordingly, the odds of winning over the mainstream are zero.

Bitcoin don't care.  The protocol has no enemies.  The ideas some of us may have for its future might.  But the enemy depends on the ideas - and we don't all have the same ideas.  I have an idea where I stand and what the potential stumbling blocks are for my ideas of its future but again, I wouldn't lose sleep on what others think and how they respond.

I, and most who have skin in the game, do care.

I believe you want me to say that Bitcoin is bad, but it's not -- bitcoin is brilliant, miners are cool, hardware geeks are cool, devs are cool, the speculators are cool.

No, I don't want you to 'say' anything.  I've just been trying to get to the bottom of what you've been trying to say.  But from my perspective you've been struggling to make yourself clear on the specific point about the 'counterfeiting' you were trying to get across and on the bigger picture.

It's the clueless, humorless, bitter ideologues i could do without.    

Agreed, though whether ideologues or those always trying to paint bitcoin in a negative light it's all the same to me.  I'm afraid if you want to avoid them you'll have to stay away from the forums - but then you'd lose out on opportunities like this one just was wouldn't you?

When you're right, you're right

[thoughtfan]

...

Thanks for again going to the trouble of replying so comprehensively.  However, although we appear to be attempting to respond to one another's posts and at least at first glance appear to be speaking the same language it is also becoming obvious to me that our understanding of words or our use thereof is so different that we may as well be speaking different languages.  Although there are certain points I think we are coming to agreement on for each of those we have a fresh dozen stuff about which either we are not in agreement or we each believes the other is failing to understand.

For example on the issue of bitcoin as a currency and bitcoin as a payment processor you appeared to me to be confusing the two.  So in my reply I separate them out to distinguish between the two.  Your response to that is to write in bold letters that there is a difference between a currency and a payment processor.  But that's what I just told you! Can you see why I think this is a time consuming and frustrating way of going nowhere?

This is an interesting and unusual situation for me.  I usually have better success but to me it looks like there is something in the way we are communicating that just aint working.  So rather than us both feeling like we're banging our heads against a brick wall I suggest we just drop it.  If it helps you to say the fault is all mine or that I'm running away from a losing argument then feel free to do so but I'm out! Best, tf

[crumbs]

it's a Rube Goldbergian obfuscation

There we go, one thing straight out of a hat that I could learn from. Thank you

But now that I understand what it means let me try and explain what I meant and why it is not.

My point is the save or spend thing is a false dichotomy.  Of course nobody can both save and spend the same bitcoin but we have the option of acquiring to save then acquiring some more to spend where we are spending bitcoin instead of spending the equivalent in pounds.

I may be reading you wrong, but that's not a solution, it's a Rube Goldbergian obfuscation.  If Bitcoin is a better store of value than fiat, the sound thing to do is convert all of your fiat into bitcoins *as soon as you can* & hold the coins.  Each time you use bitcoins in a transaction, having to repurchase them later with fiat, you lose.  Assuming that Bitcoin value continuously rises relative fiat (the very thing which would make it a better store of value than fiat), the bitcoins you "rebuy" will cost you more fiat than the ones you sold.  Think of it in terms of selling a coin on Gox during a rally, and having to buy it back, oh, 5 minutes later

I had decided to step out of the macro economy context to answer an argument you hadn't put - which was probably not the wisest thing to do - but seeing as it was misunderstood anyway...

Let's say I convert to bitcoins for whatever reasons (I was tempted to put why but it would only give you something else besides the point to get picky about) with view to holding long term.  Then I go about my daily life - which among other things involves getting paid in fiat and buying things.  Some of my pay may go towards adding my bitcoin holding but I may also decide (for whatever reasons) to buy some things with bitcoin.  Either for convenience's sake I add the fiat for the bitcoin I want to spend (which I would have spent in fiat anyway) to the same transaction or as and when I want to spend bitcoin I convert then spend immediately.

Now if I use my spending bitcoins as a credit card equivalent (i.e. as you suggest, spend some of my saved bitcoins then replace them) then yes, assuming bitcoin value is on the way up (note I'm not making that assumption, just for the sake of argument keeping the same conditions as those you described) I will have lost out.  However if we assume I want to pay up front I convert to bitcoin first so assuming the saving through buying in bitcoin is equivalent to the cost of transfer (again just keeping your implicit assumption the same) then whatever the upward-movement gain that happens in the meantime is a bonus.

Either way what I'm saying is there is no need for us normal folk with some interest in bitcoin, as individuals, to be in a dilemma about whether one 'should' save or spend bitcoins.

I don't see anybody here pretending there is no risk associated with bitcoin but for the sake of argument let's talk about the odd extremist (in risk terms) who immediately converts all her fiat to bitcoin as soon as she receives it and finds a way of using bitcoin for everything.  First, she's unlikely to be the kind of person who is going to worry about the save or spend 'dilemma' from the personal perspective any more than someone living their live exclusively in pounds or dollars.  Here the consideration is the argument against deflation put forward by Krugman and his ilk that a price deflationary currency discourages spending.  The argument goes that the consequence is more saving and less spending which is a bad thing in the eyes of those who think lots of money being spent today is the answer to all economic woes.  Their conclusion appears to be that an economy using this currency (exclusively?) will fail and therefore such a currency is a bad thing.  I tend to disagree but this is an experiment.  In due course if bitcoin hangs around long enough we may get to find out.

In the bigger picture I was pointing out that it has zero effect on availability of bitcoins to use for spending because whatever's left can be divided into however many units and their value will reflect demand for those available.

In other words, to save the dollar, Americans should simply put most of their money under their mattresses, and what remains in circulation will become more valuable due to increased demand for the (temporarily) limited supply?  Profit?
 

It's not what I was saying but it wouldn't work anyway because as I point out later the USD has a mechanism to control the money supply at whim so enough people putting money under the bed would be an excuse for the FED to print more money.  Everybody loses.  And even if the fed decided to let 'the people' determine the money supply in this manner by not responding and people put 90% of their dollars under the bed (let's forget M2 & M3 for now) it still wouldn't work unless the fed also started splitting the cent in order to enable more accurate prices and spend on lower value items.  Bitcoin has neither of these problems.

So you're suggesting that my trick, though it would flop with the dollar, should work with Bitcoin?  The only thing that stands in the way of success with the dollar is FED's printing & coin divisibility?

...As far as the value of coins not in circulation being determined by the coins that are, that's not obvious & also false, currency trading != circulation.  If i sold bob 5 bitcoins for 5 dollars, and he sold them to me for 5 dollars, there's no circulation, no matter how many times we rinse & repeat.

Apologies.  Obviously not obvious to you.  Not false, just incomplete.  I was not referring to the currency market.  I was talking about what one can buy with bitcoin.  The currency market is a means (made possible by liquidity provided by speculators) of getting bitcoins from those who don't need them to those who do without having something to trade for them.  And whilst the speculating might have a big impact on what can be bought and sold with them the bottom line is demand for the purposes of purchasing or sending money electronically.

But if I've got 50,000 bitcoins and I'm not doing anything I have no say in what people choose to pay for those that are on the market.  Of course the absence of my 50,000 will have an indirect influence.  That was my argument against the point in the OP - that having the vast majority 'hoarded' and out of circulation is not a problem for Bitcoin because for however little is left, the active buyers and sellers (who are using it) along with the speculators (providing liquidity) mean demand can meet supply at a price that will enable it to be used for whatever purpose they wish it.

I disagree with you on the role of speculators.  Speculation, stripped of all the negative associations, leaves us with this (slightly abbreviated) wikip definition: "Speculation is the practice of engaging in risky financial transactions in an attempt to profit from short or medium term fluctuations in the market value"  If Bitcoin is indeed a currency, bringing liquidity to Bitcoin is less meaningful than bringing coals to Newcastle  Shouldn't it be the other way around (Bitcoin brings liquidity to ...)?  I know, not yet.  The value of Bitcoin, today, is purely a *speculative* value -- speculators are *guessing* how much a BTC will be worth in the future, and betting dollars (and pounds) on their predictions. (do British keyboards have a pound symbol?)  They, and not the few merchants on SR & the other web-based businesses set BTC price today.  That's why the price dances around so wildly rel. dollar pound euro fiat.  Not because merchants selling their goods for bitcoins are tapping into their own supply, but because the merchants have nothing to do with the price.

You accuse me of conflating arguments but blimey, just read that again ^ and see all the separate points you tried to mush together into that paragraph!

So let's take the untangling exercise:

Motivation of speculators != role of speculation for a currency. Nobody said speculators nobly, benevolently and altruistically go into the market in order to make bitcoins available for those who need them for anything other than speculation.  Speculators do what speculators do for their own reasons.  One consequence to the extent that they do is that there is a liquid market for those needing to buy or sell bitcoins.  Another consequence can be big fluctuations in price but the can also have the opposite effect of taking out spikes and troughs that big changes in underlying supply or demand would otherwise cause.  I'm not trying to say it is perfect.  Just that it is what it is.  I'm talking about day traders here.  Although there are no clear boundaries for the sake of argument (and that they don't really provide liquidity other than at the time of purchase) I'm not including long-term speculators/savers/hoarders.  For the purposes of my argument they are those holding bitcoin out of circulation - and the whole point of our debate here is based on the question of whether this is a problem for bitcoin.

In order to see whether my argument floats or not we need to conceptually keep things simple and to do that we need to 'clean up' things that are not in reality as straightforward and clear cut to get to the principles of what works or doesn't and why.  Saying 'your argument doesn't work because in reality things are a lot more messy (and terrible because of nasty speculators and hoarders)' doesn't help!

I'm seeing you argue against things i have never said, or at least didn't intend to.  I never mentioned the motivations of speculators, good or bad.  I never tried to equate those motivations with the speculator's role in the market.  I didn't venture to assess their role in damping or contributing to price swings, and i hope i didn't play the "it's complicated" card -- i sure didn't mean to.  If i did, please point out where so i could avoid doing it in the future.

My point was trivial:  It is the speculators who set the price of Bitcoin, the merchants play an insignificant, almost irrelevant role.  The price of Bitcoin is not so much "discovered" as "speculated," "predicted & guessed."  You're right, the speculator's motives are irrelevant, but their trade has little to do with "sensing" consumer demand, it's *the demand of other traders they're interested in.*  Their own demand, demand for Bitcoin by Bitcoin traders.  It's a thing beautiful in its purity -- an entity with value today determined *almost exclusively* by belief in its estimated value in the future. The merchants & their customers (and i'm simply guessing, since SR is yet to publish a quarterly) could simply be factored out.

Let me try make it even simpler and assume everybody using bitcoin to spend or send have enough connections that they can all do it without need to convert back and forth to fiat.  What determines what they can buy with it or sell for it?  Supply and demand of the active.

I think i agree with you, as long as you allow that *the traders* have their hands on most of the active coins, and not the folks buying cupcakes, ASICs and drugs. The merchants & their buyers are purely followers, using bitcoin as more of a token than a currency -- this becomes painfully obvious when the prices change hourly to remain pegged to the dollar.

Every time more is being saved/hoarded than is being mined the amount left for sending and spending is less.  But because of bitcoin's divisibility this is not a problem.  Price of goods and services adjust according to the scarcity of the commodity/currency used to purchase them so no matter how little bitcoin is available to spend (even if the global bitcoin economy is running on a small fraction of a bitcoin) it is enough.

The problem here is that the price, as i've mentioned above, does not adjust to the number of available bitcoins.  Bitcoin economy is largely dollar-denominated: It remains pegged to the dollar, regardless.  That's not a coincidence.

My point is there is no practical 'save or spend' dilemma for bitcoin either.

The only thing in principle adding a market between bitcoin and other currencies does is to make it possible for people not to need to be in a closed bitcoin economy in order to use bitcoin (and enables people to be able to spend their bitcoins on stuff that can't currently be bought - or bought as conveniently - with bitcoin.  As a bonus, it also enables us not to need to look at the buying power of bitcoins in terms of a bag of groceries or cars but that we can put a $ price to it at any given moment.

What good is the dollar -- inflated at breakneck speed & manipulated by (?), as a measure of a true currency's worth?