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Author Topic: I have a Chance to Talk to Jim Rickards Tomorrow  (Read 3727 times)
Clark
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February 01, 2012, 07:30:54 PM
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He's the author of Currency Wars, and he's coming to my class tomorrow. He advocates a return to the gold standard.

What would be the best way to pitch Bitcoin to him?

My line of thinking is that we have uncertainty in the rate of growth of the gold supply, but we have much greater certainty in the quantity of Bitcoin being produced. The issue of transport is also solved - simply send (a series of) transactions over the network to transfer a large Bitcoin holding.

One very strong argument against Bitcoin is the public transaction ledger: corporations / governments / individuals would not be able to conduct secret transactions.


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February 01, 2012, 07:33:37 PM
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One very strong argument against Bitcoin is the public transaction ledger: corporations / governments / individuals would not be able to conduct secret transactions.
Funny, I've always thought of that as a plus, not a minus.

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February 01, 2012, 07:42:31 PM
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I'd run with the simple fact that gold can't be shoved down a wire and spent online, and that any gold-backed electronic commerce comes with all sorts of risk from the centralization necessary to operate it.

"Online commerce is here to stay, and we need digital cash. Would you prefer it be golden fiat, yet another promise-to-pay that can fail like it has before, or to be an actual digital commodity, limited in amount and with a free-market exchange rate, that's almost frictionless in it's utility, and that is always paid-in-full?"

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February 01, 2012, 07:42:49 PM
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One very strong argument against Bitcoin is the public transaction ledger: corporations / governments / individuals would not be able to conduct secret transactions.
Funny, I've always thought of that as a plus, not a minus.

My understanding is that while the transactions themselves are public, the identity of whose is carrying them out isn't. It can be deduced with some degree of effort, but it can also be hidden by taking the appropriate steps if so desired.
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February 01, 2012, 07:59:53 PM
 #5

I would not argue against a gold standard to Jim.  Besides, I don't think he's in favor of a gold standard per-se.  Gold standards don't really work…they inevitably break down because the temptation to counterfeit is too strong.  But gold is a very good barometer for the health of a currency and a government should pay attention to the exchange rate of its currency with gold.  I think Jim argues that the US needs to defend the value of the dollar by targeting a rate of exchange with gold for a period of time in order to restore confidence in the value of the dollar.  It's possible they are already doing that, but simply not overtly stating it (in other words, the FED might have a target of say $5000/oz that they are seeking in order to sufficiently devalue the dollar and yet do it in a managed way over an extended period of time).  

It seems to me that a significant devaluation of the dollar is the least bad outcome for resolving the over extended debt situation that we have...if it can be managed without degenerating into a hyper-inflation.  The alternative is lots of insolvencies and chaos.  It's the nature of fiat currencies that they don't deal well with debt contraction.  But people need an effective vehicle to move out of various kinds of debt backed instruments for that to work well.  Unfortunately it isn't that easy for people to transition into gold (and I'm talking physical, not a paper substitute, which is just another form of debt), so it doesn't function as smoothly as you would like for the purpose of people shifting out of debt backed instruments like the dollar.  That's where bitcoin can come in.  There have been some prominent articles about using gold in various ways to facilitate this shift and avoid complete chaos and breakdown (one recent article proposed the government introduce gold backed bonds).  Bitcoin would be a far better instrument for this purpose if only it were more widely known and used.

I would suggest you read this article before talking to him: http://www.libertariannews.org/2011/06/21/against-the-gold-standard/

It is by far the best article I've seen written that explains the problems with a gold standard and why bitcoin (and its free floating exchange rates) are the perfect digital complement to gold.  I'd recommend you find some abbreviated way of expressing the view of this article to Jim Rickards.


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February 01, 2012, 09:07:04 PM
 #6

My understanding is that while the transactions themselves are public, the identity of whose is carrying them out isn't. It can be deduced with some degree of effort, but it can also be hidden by taking the appropriate steps if so desired.


Well it shouldn't be too hard. Think if you just bought something from a company with BTC, then you can trace your coins through that company's transactions forever. Alternatively, if there was some large, publicly-known transaction -- say a government purchase -- then you will be able to know exactly what the government does with all those coins.

Governments and companies will not like this aspect, and I'm sure that there are block chain analysis companies / tools in the works. Ultimately, companies and governments will have to accept Bitcoin for it to take hold long term.

I would not argue against a gold standard to Jim.  Besides, I don't think he's in favor of a gold standard per-se.

Thanks for the article, Steve.

Rickards seems to be encouraging a gold-backed currency for use in international trade, such that countries could not unilaterally drop the standard (or if they did, they would lose the ability to conduct trade).

He also advises a significant amount of study before implementing a new standard, calling for one "flexible enough to accommodate modern central banking practices."

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February 01, 2012, 09:22:28 PM
 #7

Jim Richards is favor of the gold standard if the gold is priced according to the market, which is very very high right now.  I heard that from his interviews a couple months back.

Ask him what he thinks of bitcoins, tell him that Jim Willie publicly endorses bitcoins already.  He should definitely know who Jim Willie is.
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February 01, 2012, 09:24:19 PM
 #8

Ask him if he believes the free market to be the toughest and sufficient regulator or if he believes there needs to be a central authority regulating either the market or at the bare minimum the monetary policy and then cry when he picks the later.

Jim Rickards knows what's up, he is an insider and will tell the truth but he is not an Austrian economist who believes in the free market, he would want to go back to a managed gold standard which is just as flawed as what we have today. I want to go forward to a free market of competing currencies where the market picks the money and it's value.

So I believe pitching Bitcoin to him will be kinda pointless.

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February 01, 2012, 09:39:39 PM
 #9

Jim Richards is favor of the gold standard if the gold is priced according to the market, which is very very high right now.  I heard that from his interviews a couple months back.
Right, but that's not really a gold standard, that's basically what we have today.  Although, if he's promoting an international, gold backed currency for use in trade, then he probably does have a traditional gold standard in mind for that (basically, you have a token of some kind that is exchangeable for a certain amount of gold).  As I said before, the temptation to counterfeit is too strong…it would only be a matter of time before that too would break down like all other gold standards before it.

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February 01, 2012, 10:16:31 PM
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Ask him why a war with Iran is so important that an otherwise respected analyst would damage his credibility by downplaying the fallout to the possibility of some minor equipment loss on the part of the US.

I believe I know the answer, but it would be interesting to know what comes out of that particular horse's mouth.


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February 01, 2012, 10:54:03 PM
 #11

Well it shouldn't be too hard. Think if you just bought something from a company with BTC, then you can trace your coins through that company's transactions forever. Alternatively, if there was some large, publicly-known transaction -- say a government purchase -- then you will be able to know exactly what the government does with all those coins.
This only makes sense if you assume they use only one address (or very few). But using an address per transaction, as is common, makes tracing very much more difficult. You could not distinguish between internal transactions and external ones without knowing all the addresses held by a company/govt.

If you bought something from a company with X coins, you could watch as the coins were tranferred/split/combined over and over but you would never know after that first address who the owner of subsequent addresses were. They could be regurgitated in the same company's ledgers, or they could hit MtGox and then be passed onto other traders.

The only thing you would probably know is that future coins to that same address would be associated with the company. Using a new address for each transaction makes this kind of useless.

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February 01, 2012, 11:44:54 PM
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I would stress the main advantages of bitcoin compared to gold : Easy and cheap to transfer. The sound money of the new era, where information only takes milliseconds to transfer from any point of the globe.
Just that easy pitch will make him interested, and i'm totally sure he'll understand very fast all the implication of bitcoin.

Not sure he'll understand the open source side, or any technical information, so don't go to far on that. Just saying that the system is still working besides a big incitative to attack it, and that professionals are confident it'll keep working.

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February 01, 2012, 11:58:21 PM
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Jim Richards is favor of the gold standard if the gold is priced according to the market, which is very very high right now.  I heard that from his interviews a couple months back.

Ask him what he thinks of bitcoins, tell him that Jim Willie publicly endorses bitcoins already.  He should definitely know who Jim Willie is.

Can you link to that endorsement?
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February 02, 2012, 12:04:38 AM
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If I was going to ask him anything I'd ask him this:

"What would you say if I told you someone invented a digital commodity that behaves much like gold in the real world and people actually believe in it for $6 a pop?"

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February 02, 2012, 06:29:58 AM
 #15

A&M?

I suggest these tables. He should see the key significance.

FiatGoldBitcoinIdeal Unit
Decimal Shift:<>>Gold/Bitcoin
Divisibility:UnlimitedPhysical LimitsUnlimitedFiat/Bitcoin
LT Price Stability:YesNoYesFiat/Bitcoin
Needs Infrastructure:YesNoYesGold
Supply Mgmt:Central BanksProducersParticipantsBitcoin?

Clarification on the decimal and divisibility.

[Item Supply][Fiat Units][Fiat Price][Bitcoins][Bitcoin Price]
1001001.001001.00
1,0001,0001.001000.10
10,000,00010,000,0001.001000.00001

[Item Supply][Bitcoins][Bitcoin Price][Decimal Shift][Resulting Price]
1001001.00N/A1.00
1,0001000.10->x11.00
10,000,0001000.00001->x51.00

  • With fiat, the money supply expands indefinitely as per the issuer.
  • With gold, the money supply expands according to producer capacity and can be divided to about the gram level.
  • With Bitcoin, the money supply can be subdivided indefinitely as market forces demand.

If fiat were to be reversed in its decimal movement, it would preserve purchasing power. However, the problem of management would remain.

Gold's greatest benefit now is that it might be all that's left in the event of infrastructure collapse.

Bitcoin offers price stability and a stable purchasing power all in one, effectively satisfying the Triffin dilemma.
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February 02, 2012, 06:55:08 AM
 #16

A&M?

I suggest these tables. He should see the key significance.

FiatGoldBitcoinIdeal Unit
Decimal Shift:<>>Gold/Bitcoin
Divisibility:UnlimitedPhysical LimitsUnlimitedFiat/Bitcoin
LT Price Stability:YesNoYesFiat/Bitcoin
Needs Infrastructure:YesNoYesGold
Supply Mgmt:Central BanksProducersParticipantsBitcoin?


The infrastructure needed depends on what you require as basic functionality. I can't buy design work from a guy in Hawaii for gold without a hell of a lot of infrastructure. 99.9999% of people are out of my reach in regards to trading using gold without any infrastructure.

Granted in the 0 infrastructure word gold still exists and Bitcoin kind of doesn't anymore. But for anything resembling the real world, Bitcoin infrastructure grows to exactly where you want it nearly instantly "Hey guy, download Bitcoin".

edit: I see you already said most of this.

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February 02, 2012, 07:08:58 AM
 #17

I would present Bitcoin as complementary to gold rather than as a replacement of gold, while focusing on both the similarities between Bitcoin and gold and also how Bitcoin can complement gold for example for long distance small transactions over the Internet. 

Concerned that blockchain bloat will lead to centralization? Storing less than 4 GB of data once required the budget of a superpower and a warehouse full of punched cards. https://upload.wikimedia.org/wikipedia/commons/8/87/IBM_card_storage.NARA.jpg https://en.wikipedia.org/wiki/Punched_card
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February 02, 2012, 08:00:16 AM
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If he likes gold, make sure to mention Coinabul! Smiley

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February 02, 2012, 08:16:38 AM
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Gold's greatest benefit now is that it might be all that's left in the event of infrastructure collapse.

Most people would use cash in such a case unless you talk about a hyperinflation.
Both cash and gold can be forged but cash is much more common.


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February 02, 2012, 06:04:59 PM
 #20

A&M?

Yeah!


  • With Bitcoin, the money supply can be subdivided indefinitely as market forces demand.

What do you mean by this? I know that it can be divided down to 10-8 units, but no further. Are you referring to something different?

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