2013-08-30 Forbes - 10 Reasons Bitcoin Is The MySpace Of Money And What Might Sa

[Kluge]

Put people in imaginary boxes, exaggerate and attack things that aren't there. It's a classic approach.

From my point of view, the author's comments reveal the most:

"The fact that dollars lose value makes you spend or invest them. That is what drives economic activity"

I think a lot of Bitcoin enthusiasts got ahead of this old way of thinking. If depreciating dollars would drive activity, our economy would be booming for the last 30 years non-stop.

Good luck holding on to your dollars (and shaky ideas), Sir!

(Not going to read any article with "MySpace of money" in the title, but...) If the USD stopped inflating, the US would be completely fucked. Can you even imagine the implications of houses without that strong upward pressure on nominal value, and loans actually costing money? The housing market would tank from all the new underwater housing loans, setting off an economic shitstorm. The global economy would falter and possible enter a global depression for a decade or more. USG default would be unavoidable if the USD quickly moved from being inflationary to deflationary. We'd lose all that effective revenue from devaluing our national debt, so it'd probably be necessary to cut off the vast majority of welfare, and while it might be nice that the price of bread isn't increasing a few % each year, they won't be buying any bread with no job, decreasing equity in their house, and no welfare.

The USD isn't popular just because it's legal tender. Huge USD loans are practically free, often value-generating for consumers and businesses. A BTC-denom mortgage might sound cool, but it'd be a flat-out stupid choice by the lendee, and that's why I doubt BTC will ever successfully kick a fiat currency out of any country without an ideological uprising. Parents Against Inflationary Numismatics?

ETA: liberatarians love to talk about inflation and the national debt separately, but tend not to connect the two. Our national debt is right around $17t. In FY2012, we paid ~$360b on that. If we achieve 5% annual inflation, that $17t debt devalues by $850b. The USG would effectively generate $490b by having issued a shit-load of debt while inflating the currency and still maintaining confidence in that currency and the USG. The USG debt GENERATES REVENUE, and we make other countries pay for it. That's the most awesome Jew-fu out there.

Your whole analysis is flawed since it is based on the assumption that inflation appears to be a net benefit to the economy.

It is not, it is a net cost. (Not the least of which because it increases wealth and income disparities.) You cannot print your way to prosperity .... dyodd.

It's not proven that it's a net cost for society, AFAIK. There are plenty of costs, and plenty of benefits, though government reaps most of them (so you probably need to come from a position where the current USG is mostly beneficial to society to believe that inflation isn't a bad thing). We're a nation of debt, so I'm inclined to believe inflation is very possibly a net gain for the US, especially for the middle class. The jobless poor are probably getting screwed (Welfare is the government's apology), the 10 cranky old men refusing to take on debt are probably getting screwed, but everyone else is very possibly coming out ahead, given foreigners buy our national and corporate bonds. For the world as a whole? Definitely a net loss - but if we reversed course now, it'd be an incredible loss for reasons I briefly went over (which is all theory, too, but with reasonable foundation, I think) -- very long-term (next generation), it could turn into a net gain.

I'm more interested in rambling about what an incredible system it is (even if detrimental, possibly evil, or at the very least, manipulative), and people should have the whole picture on inflation before believing it's bad based only on it being a hidden tax. It's really an awesome set of ideas which're working together, in the same way ICBMs are awesome.

Following the OP author's lead, then - inflation is the ICBM of economics.  

[marcus_of_augustus]

So on that logic, hyperinflation must be a massive net benefit for the economy?

[Zaih]

This is possibly one of the stupidest and worst thought out articles I've ever seen on Forbes. Props to them for raising the bar on idiocy.

[Kluge]

So on that logic, hyperinflation must be a massive net benefit for the economy?

You'll have to quote where you're getting that idea. Hyperinflation is no good since it would erode confidence in the USG's ability to keep things under control. Treasury bonds are still considered by too many as guaranteed safe. If confidence in t bonds drops, this awesome cycle can't continue. It's a delicate balancing act which makes everything work as intended.

[marcus_of_augustus]

So on that logic, hyperinflation must be a massive net benefit for the economy?

You'll have to quote where you're getting that idea. Hyperinflation is no good since it would erode confidence in the USG's ability to keep things under control. Treasury bonds are still considered by too many as guaranteed safe. If confidence in t bonds drops, this awesome cycle can't continue. It's a delicate balancing act which makes everything work as intended.

This is neither the time or the place to get into this but your assertion that inflation is somehow "good" for the economy is entirely unsupported, as much as you try to put the onus back onto someone who says otherwise to prove the negative ...

... i.e. if inflation is a net benefit to the economy, then on a simple linear trend hyperinflation would be awesome (clearly it isn't) so you must then be arguing that the inflation=good functionality is not simply linear but some other functionality that has local maxima and minima with an optimal "goldilocks" value for inflation that is necessary for the economic goodness of inflation to reveal itself ...

... now the onus is on you to prove/show that "inflation goodness" function is not linear and indeed has a local optima that provides just the right amount inflation to produce net benefit to the economy ... go for it, (suggest over in the "Economy" section).

Inflation is wiping out the middle classes, as it always does.

[Piper67]

Someone posted a reply to this article on reddit. I thought it was quite well written, so here it is: http://peaceandmarkets.com/2013/09/01/so-people-still-dont-understand-bitcoin/

[MonkeyBear68]

The author of the article (Steve Faktor) is simply trying to promote the traditional banking systems and credit card companies. The following is from his website:

"Steve Faktor is IdeaFaktory‘s founder and CEO. He is an entrepreneur, futurist and digital commerce expert.  Steve is the former head of the American Express Chairman’s Innovation Fund and senior strategy and innovation executive Citi, MasterCard and Andersen."

The text above highlighted in red was on his profile on the Forbes website on Friday. It now does not seem to be present on Forbes; I wonder why. He is trying to protect his traditional bankster friends by spreading dis-information.

He tries to act witty and attempts to use some clever analogies to try and convince readers of his points. In reality a lot of his arguments were straw man. Many brilliant people are putting enormous talent and effort into Bitcoin. It is a distributed open source system, so it will evolve as it needs to.

[NewLiberty]

Thanks for that reveal, it explains much.  The folks on the outside working to talk down Bitcoin have their work cut out for them, it is almost pitiable.   

[BitPappa]

This article stuck in my craw too. Not sure if you all read the responses, there were some good ones, such as the one below.

Response from Erik Voorhees:
"Steve – let me say, your writing is excellent. Let me also say, you’re wrong about Bitcoin. I’ll address each of your 10 numbered arguments.

1 – It’s completely legal. And outlawing it will be as effective as outlawing filesharing.

2 – You can’t cut off money transfers into/out of Bitcoin. Any two people can exchange directly with each other.

3 – Volatility gets lower over time. It’s far more stable today then last year, or the year prior. Markets stabilize. Give it time.

4 – Feature, not a bug. You’re suggesting Bitcoin would fail because it will only appreciate in value? Think that through a little more.

5 – It is a fallacy that a growing population requires a growing money supply. Inflation is a scam, not a feature of quality money.

6 – You’re right, most people don’t care about Bitcoin today. They also didn’t care about the Internet before they started using it and now, can’t live without it.

7 – It’s complex because it’s new. Entrepreneurs are making Bitcoin easier. Again, give it time.

8 – Benefits to merchants are superior to any other payment system, loyalty program, or other gimmicks. Bitcoin means an instant “money good” transaction from anyone, anywhere, with near-zero fee. As point 7 is addressed, you’ll see merchants come to Bitcoin in droves.

9 – The Internet is also online only. Are you suggesting the Internet will fail because of this “bug”? Nobody is suggesting Bitcoin works well in a caveman society, but it works amazingly in a society with power and internet.

10 – So an open-source software project is “sketchy”, but a currency created out of thin air, with no limit, by a select group of central bankers and politicians is just dandy?

Bitcoin is not the MySpace of money. It’s the Internet of money. Money now moves freely, instantly, anywhere. Good luck stopping that. But again, I like your writing, Steve "

[xxjs]

The good Voorhees talks like a priest. Well done.

[saif313]

The good Voorhees talks like a priest. Well done.

cheers

[NewLiberty]

It is fairly clear that the dollar is failing as a currency, but it isn't happening rapidly.  Not yet.  When it does, as every fiat currency ever created has, it won't go down alone.  Many others would go with it.  This is the central banking process in action.
To understand the mechanism by which they are propped up and supported it is good to study the Basel accords.  These are the central bank meetings where the many central banks gather and determine the framework for interoperability.

Increasingly the central banks are becoming interdependent upon each other.  This is by design as they are all in the same confidence game together.  When any of them fail, it reduces the confidence in all the others.

Until this time, the current stakeholders are going to talk down alternatives until they have bought in as much as they want.  Then they will talk it up.  When I see articles like this, it suggests buying.