Why are economists so afraid of Bitcoin?

[johnyj]

Economics has never been a science, it is always related to politics, giving up the power of printing money endlessly is the biggest political failure 

[Misesian]

Having an economics degree sadly does not mean you understand economics.

[Jason]

Having an economics degree sadly does not mean you understand economics.

And having a doctorate in physics does not mean you understand physics...  A bit over a hundred years ago, an awful lot of mainstream physicists rejected Einstein's Theory of Relativity too (see http://en.wikipedia.org/wiki/Criticism_of_the_theory_of_relativity for details).  Their reasons were numerous yet we all know he was vindicated within a handful of decades.  The analogy isn't perfect as Bitcoin isn't a new economic theory, but it definitely threatens to expose the theories of Keynes as fundamentally flawed which apparently makes a lot of closed-minded economists uncomfortable.

[Carlton Banks]

Classic example of the kind of blind-sided thinking that the academic world cultivates.

If we had less emphasis on specialisation strictly within a single field of study, at least some economists would end up doing a little computer science or programming. As things are in academia today, too many end up drilling down into too narrow a field of focus. An economist that knows their monetarism well, and also their systems design, would be capable of recognising the potential in the Satoshi cryptocurrency model.

It's bizarre to think that this forum is infested with people that know just enough computer science and/or just enough economics that we can see what the so many so-called experts in finance and economics cannot.

[minerva]

Here's my economic opinion.

Why the claim that copycat currencies are a threat to Bitcoin is a nonargument.

The value of a currency is the value of goods or currency that are demanded for the currency minus the transaction costs of that currency. These transaction costs tend to be so small that they may as well be ignored for established currencies.

Take for instance, paper money. Anyone can actually design and print paper money. Ignoring instances where people attempt to copy money, unique paper currencies not issued by a government are valueless for one reason: people are less likely to accept them, and it is more difficult to transmit them across vast geographic distances (no banks, no cheque clearinghouse). Both increase transaction costs, if one accepts the paper money, in order to purchase intermediate goods or pay for labor, one can either pay for it in paper money (which wouldn't be accepted), or exchange it for government money (which would be accepted).

You might note that there is a tautology there, value is linked to what you can exchange a currency for minus the transaction costs. If you can't exchange a currency for anything, then the transaction costs are high, and those high transaction costs will discourage people from accepting it because the currency has low value. The reverse will also be true. This is what gives the American dollar it's high value.

Now lets compare ACoin to BCoin. ACoin is accepted at as many places as American Express. BCoin is a new currency. ACoin can be exchanged for hard currency. You have to exchange BCoin for ACoin to get to government money. Which would you use?

[Erdogan]

Here's my economic opinion.

Why the claim that copycat currencies are a threat to Bitcoin is a nonargument.

The value of a currency is the value of goods or currency that are demanded for the currency minus the transaction costs of that currency. These transaction costs tend to be so small that they may as well be ignored for established currencies.

Take for instance, paper money. Anyone can actually design and print paper money. Ignoring instances where people attempt to copy money, unique paper currencies not issued by a government are valueless for one reason: people are less likely to accept them, and it is more difficult to transmit them across vast geographic distances (no banks, no cheque clearinghouse). Both increase transaction costs, if one accepts the paper money, in order to purchase intermediate goods or pay for labor, one can either pay for it in paper money (which wouldn't be accepted), or exchange it for government money (which would be accepted).

You might note that there is a tautology there, value is linked to what you can exchange a currency for minus the transaction costs. If you can't exchange a currency for anything, then the transaction costs are high, and those high transaction costs will discourage people from accepting it because the currency has low value. The reverse will also be true. This is what gives the American dollar it's high value.

Now lets compare ACoin to BCoin. ACoin is accepted at as many places as American Express. BCoin is a new currency. ACoin can be exchanged for hard currency. You have to exchange BCoin for ACoin to get to government money. Which would you use?

I agree. And - if an altcoin should have good and different qualities, so that is just as useful as bitcoin, that altcoin should only reduce the value of bitcoin by half, at the endgame. Which is nothing to cry about.

[Operatr]

I would say "economists" are not so much afraid as either ignorant, or know full well bitcoin technology will oust them as the clueless money magicians they are. Paul Krugman is a prime example of a corporate mouthpiece who apparently doesn't understand basic mathematics or economics.

They warn of Bitcoin but not of their own flawed, corrupted currency system that is edging on an unprecedented financial catastrophe.

[Lethn]

It's simple really, it's a living example of something that goes against all their commonly held beliefs and prejudices, just like with religious people, they'll attack anyone or anything that goes against that belief system until they've either destroyed it or made people believe it's not worth their time. Economics nowadays is often a religion rather than a science or form of mathematics, to the people in charge now it doesn't matter if they are trillions in negative numbers and are committing blatant fraud against other countries by printing their currency out of thin air as long as they and their people believe in it it's okay.

[thaaanos]

This generation is all about accusing the previous for the economic mess they created, true, true but in the lulaby of peace they have forgotten that the 2 previous generation main concern was: Peace
All decisions made in political and economic level had that principle in mind. So why do economists hate deflationary currencies? because it leads to conflict inside and between countries. Look at the Feudal age in europe, those economies were perfect from economic perspective, no inflation, full employment
But... Feud has a double meaning doesnt it?

[MoonShadow]

This generation is all about accusing the previous for the economic mess they created, true, true but in the lulaby of peace they have forgotten that the 2 previous generation main concern was: Peace
All decisions made in political and economic level had that principle in mind. So why do economists hate deflationary currencies? because it leads to conflict inside and between countries. Look at the Feudal age in europe, those economies were perfect from economic perspective, no inflation, full employment
But... Feud has a double meaning doesnt it?

Do you live in the same world that I live in?  I am of one of the two older generations that you speak of, and your statement couldn't be further from the truth.  Do you draw a paycheck from a government contractor, by any chance?

[Misesian]

This generation is all about accusing the previous for the economic mess they created, true, true but in the lulaby of peace they have forgotten that the 2 previous generation main concern was: Peace
All decisions made in political and economic level had that principle in mind. So why do economists hate deflationary currencies? because it leads to conflict inside and between countries. Look at the Feudal age in europe, those economies were perfect from economic perspective, no inflation, full employment
But... Feud has a double meaning doesnt it?

Deflationary currencies make it harder for governments to start wars.

[Wusolini]

For centuries bankers tries to 'enslave' mankind using fiat currency as tool ( they can manipulate it towards their own aim )
suddenly something new and revolutionary appears and now they facing the threat of loosing control of the lever.

Naturally, I would be scared as well, and woud be fighting agains at all costs to sustain domination




 

[thaaanos]

This generation is all about accusing the previous for the economic mess they created, true, true but in the lulaby of peace they have forgotten that the 2 previous generation main concern was: Peace
All decisions made in political and economic level had that principle in mind. So why do economists hate deflationary currencies? because it leads to conflict inside and between countries. Look at the Feudal age in europe, those economies were perfect from economic perspective, no inflation, full employment
But... Feud has a double meaning doesnt it?

Deflationary currencies make it harder for governments to start wars.

Feudal Europe was such a peacefull time...

For centuries bankers tries to 'enslave' mankind using fiat currency as tool ( they can manipulate it towards their own aim )
suddenly something new and revolutionary appears and now they facing the threat of loosing control of the lever.

Naturally, I would be scared as well, and woud be fighting agains at all costs to sustain domination

So all  naysayers are Bankers? or on the payroll? mind we are not against the idea of cryptocurrency, but on the choice of parameters.

[Kungfucheez]

For centuries bankers tries to 'enslave' mankind using fiat currency as tool ( they can manipulate it towards their own aim )
suddenly something new and revolutionary appears and now they facing the threat of loosing control of the lever.

Naturally, I would be scared as well, and woud be fighting agains at all costs to sustain domination




 

"Naturally, I would be scared as well, and woud be fighting agains at all costs to sustain domination"

Then how can you blame them, if infact by your own implication, you would do the same thing?

[thaaanos]

This generation is all about accusing the previous for the economic mess they created, true, true but in the lulaby of peace they have forgotten that the 2 previous generation main concern was: Peace
All decisions made in political and economic level had that principle in mind. So why do economists hate deflationary currencies? because it leads to conflict inside and between countries. Look at the Feudal age in europe, those economies were perfect from economic perspective, no inflation, full employment
But... Feud has a double meaning doesnt it?

Do you live in the same world that I live in?  I am of one of the two older generations that you speak of, and your statement couldn't be further from the truth.  Do you draw a paycheck from a government contractor, by any chance?

Were you born before 1940? yes: I shutup it's up to you to defend your generation.
Why I am a teacher at a Greek Elementary school, does that count as goverment contractor?

[MoonShadow]

Why I am a teacher at a Greek Elementary school, does that count as goverment contractor?

I think that it's sad that an elementary school teacher neglects to use proper punctuation online.

And yes, a public school district employee does qualify as a government contractor in my view.  The point being, it's hard to convince anyone of the truth when his/her paycheck depends upon him/her not understanding.  Any attempt to convince you of anything that doesn't fit the official story is futile, but nor should you have any credibility regarding any subject, and especially one that you "teach" to small children.  (with the possible exception of mathmatics)

[MoonShadow]

This generation is all about accusing the previous for the economic mess they created, true, true but in the lulaby of peace they have forgotten that the 2 previous generation main concern was: Peace
All decisions made in political and economic level had that principle in mind. So why do economists hate deflationary currencies? because it leads to conflict inside and between countries. Look at the Feudal age in europe, those economies were perfect from economic perspective, no inflation, full employment
But... Feud has a double meaning doesnt it?

Deflationary currencies make it harder for governments to start wars.

Feudal Europe was such a peacefull time...

I know that you intended that post as ironic, but the true irony is that Feudal Europe actually was relatively peaceful, particularly when compared against the nature of warfare (in Europe and elsewhere) since the industrial revolution.  Even the 100 years war was mostly a cold one; with long spans of calm delimited by short periods of actual conflict.

For that matter, the "Wild West" wasn't so wild either.  Even the Lincoln County War is only considered a war in the context, because only a couple hundred people were involved and only a few dozen casualties resulted.  This is the kind of 'warfare' that was most common during following the collapse of the Roman Empire and prior to the Renaissance, and is the most common form of "tribal" warfare across the buld of early human history.

[kkaspar]

I don't think that economists are afraid, they just can understand the nature of an unregulated market system that deals with goods that are very attractive to speculation. This is heaven for all kinds of crooks who can use all kinds of dirty tricks to gain wealth at the expense of others. With regulated market systems, you are in danger of going to jail for using dirty tricks, that you can use with the crypto market without any consequences whatsoever.
I like the vision of privatized monetary systems, but I think that it is just naive to hope that everything will be fine without any regulations.
Right now we're in a situation where markets can actually present false market data about ongoing trades to stimulate demand. This means that when bitcoin demand drops, and with it drops the profit of major exchanges, then they can just form a pact to show false market data that people are still buying bitcoin. This will raise demand, because people will buy when it seems that others are buying also. This can't even be considered an "grey area" trick, but as an full blow scam. I think that it is naive to think that everyone will just stay nice and honest because of personal moral codes, especially when money is involved.

[thaaanos]

Feudal Europe was such a peacefull time...

I know that you intended that post as ironic, but the true irony is that Feudal Europe actually was relatively peaceful, particularly when compared against the nature of warfare (in Europe and elsewhere) since the industrial revolution.  Even the 100 years war was mostly a cold one; with long spans of calm delimited by short periods of actual conflict.

For that matter, the "Wild West" wasn't so wild either.  Even the Lincoln County War is only considered a war in the context, because only a couple hundred people were involved and only a few dozen casualties resulted.  This is the kind of 'warfare' that was most common during following the collapse of the Roman Empire and prior to the Renaissance, and is the most common form of "tribal" warfare across the buld of early human history.

Are we counting here conflicts or bodies? normalize to account for weaponry efficiency improvement. I am trully interested on the result.

[MoonShadow]

Feudal Europe was such a peacefull time...

I know that you intended that post as ironic, but the true irony is that Feudal Europe actually was relatively peaceful, particularly when compared against the nature of warfare (in Europe and elsewhere) since the industrial revolution.  Even the 100 years war was mostly a cold one; with long spans of calm delimited by short periods of actual conflict.

For that matter, the "Wild West" wasn't so wild either.  Even the Lincoln County War is only considered a war in the context, because only a couple hundred people were involved and only a few dozen casualties resulted.  This is the kind of 'warfare' that was most common during following the collapse of the Roman Empire and prior to the Renaissance, and is the most common form of "tribal" warfare across the buld of early human history.

Are we counting here conflicts or bodies?

Does it matter?  Keep in mind, the 100 years war is generally consider one continuous conflict.

 normalize to account for weaponry efficiency improvement. I am trully interested on the result.

This would require that we agree on a lot of details, and the outcome would be highly subjective to interpretations anyway.  So I don't think this is going to happen.