Global Financial Crisis scenarios

[blumangroup]

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

The only way I could see bitcoin being a store of value is if people simply decided that it would be.  As you pointed out, you can't use bitcoin for anything but payments, whereas real estate is quite useful--people will always want real estate.  If people simply decided that bitcoin would be a store of value (and it would appear that they have for right now given the price), they can also simply decide that it won't be anymore (which is something that concerns me about bitcoin, but that's another topic).

Bitcoin needs to have price stability for it to have a store of value. It has nothing to do if people decide that it does or not.

[1714765375]

1714765375

[1714765375]

1714765375

[1714765375]

1714765375

[Erdogan]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it.  

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Well houses are used as a store of value, and thus acquires a higher value than its use value. If good money is available, that money will be used as a store of value. Then you don't have to realize half your house to pay for your kids college, that involves moving to a house of half the size, which is costly and maybe not what you want. So at any time you will have a right-sized house, and your savings in good money.

A house is not an investment, it is more like a durable consumer good that takes many years to consume.

The idea that a house is an investment, comes from the fact that it rises in the bubble build-up phase, combined with low interest loans which are the effect of government credit creation.

So it will be solved (if all goes well) in the way that the money value of houses will be sucked into bitcoins instead, leaving the houses with only the use value. I don't have a timeframe, other calamities may happen first.

[98problems]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it. 

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

The real estate bubble was caused the CRA that forced banks to lend to people who are mot qualified for the loans in order to serve enough of the communities

[twiifm]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it.  

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Well houses are used as a store of value, and thus acquires a higher value than its use value. If good money is available, that money will be used as a store of value. Then you don't have to realize half your house to pay for your kids college, that involves moving to a house of half the size, which is costly and maybe not what you want. So at any time you will have a right-sized house, and your savings in good money.

A house is not an investment, it is more like a durable consumer good that takes many years to consume.

The idea that a house is an investment, comes from the fact that it rises in the bubble build-up phase, combined with low interest loans which are the effect of government credit creation.

So it will be solved (if all goes well) in the way that the money value of houses will be sucked into bitcoins instead, leaving the houses with only the use value. I don't have a timeframe, other calamities may happen first.

Real estate is an investment if you collect rent on it.   However,  the mortgage is a liability but equity is an asset

[Erdogan]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it. 

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function,  except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

[Erdogan]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it.  

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Well houses are used as a store of value, and thus acquires a higher value than its use value. If good money is available, that money will be used as a store of value. Then you don't have to realize half your house to pay for your kids college, that involves moving to a house of half the size, which is costly and maybe not what you want. So at any time you will have a right-sized house, and your savings in good money.

A house is not an investment, it is more like a durable consumer good that takes many years to consume.

The idea that a house is an investment, comes from the fact that it rises in the bubble build-up phase, combined with low interest loans which are the effect of government credit creation.

So it will be solved (if all goes well) in the way that the money value of houses will be sucked into bitcoins instead, leaving the houses with only the use value. I don't have a timeframe, other calamities may happen first.

Real estate is an investment if you collect rent on it.   However,  the mortgage is a liability but equity is an asset

Correct. It is an investment (it is capital) if someone owns it and rents it out for profit.

But if you own the house and use it yourself, it is a (durable) consumer good that is consumed in roughly 50 years. It lasts longer of course if you keep it well (for a cost) and modernize it (for a cost), but the original expence is consumed in about 50 years. Therefore, a consumer good.

The raw land value, is of course kept indefinately. Housing economy is rather complicated, there must be at least 5-6 other factors determining the profit of a house as investment, and the cost of a house as a durable good.

[CoinsCoinsEverywhere]

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Well houses are used as a store of value, and thus acquires a higher value than its use value. If good money is available, that money will be used as a store of value. Then you don't have to realize half your house to pay for your kids college, that involves moving to a house of half the size, which is costly and maybe not what you want. So at any time you will have a right-sized house, and your savings in good money.

A house is not an investment, it is more like a durable consumer good that takes many years to consume.

The idea that a house is an investment, comes from the fact that it rises in the bubble build-up phase, combined with low interest loans which are the effect of government credit creation.

So it will be solved (if all goes well) in the way that the money value of houses will be sucked into bitcoins instead, leaving the houses with only the use value. I don't have a timeframe, other calamities may happen first.

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function,  except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

I'm a little confused here.  You say that bitcoin and fiat have no value for direct use, with which I agree.  You then say that fiat does not work as a store of value.  But then you imply that bitcoin can be a store of value that will suck in all of the extra stored value of the housing market.  Why wouldn't bitcoin and fiat be the same in this regard?  Yes, bitcoin has limited supply, but why does that mean that it should be considered a safe store of value (it would have to be considered even safer than real estate to suck in its stored value)?  Or are you thinking of a future in which bitcoin basically becomes the reserve currency of the world, or at least the dominant currency of a particular country or region?

[nothing2seeHere]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it.  

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Well houses are used as a store of value, and thus acquires a higher value than its use value. If good money is available, that money will be used as a store of value. Then you don't have to realize half your house to pay for your kids college, that involves moving to a house of half the size, which is costly and maybe not what you want. So at any time you will have a right-sized house, and your savings in good money.

A house is not an investment, it is more like a durable consumer good that takes many years to consume.

The idea that a house is an investment, comes from the fact that it rises in the bubble build-up phase, combined with low interest loans which are the effect of government credit creation.

So it will be solved (if all goes well) in the way that the money value of houses will be sucked into bitcoins instead, leaving the houses with only the use value. I don't have a timeframe, other calamities may happen first.

Real estate is an investment if you collect rent on it.   However,  the mortgage is a liability but equity is an asset

The price of the house can potentially increase in value as well. However it is very difficult and time consuming to extract what value the hose does have.

[twiifm]

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Well houses are used as a store of value, and thus acquires a higher value than its use value. If good money is available, that money will be used as a store of value. Then you don't have to realize half your house to pay for your kids college, that involves moving to a house of half the size, which is costly and maybe not what you want. So at any time you will have a right-sized house, and your savings in good money.

A house is not an investment, it is more like a durable consumer good that takes many years to consume.

The idea that a house is an investment, comes from the fact that it rises in the bubble build-up phase, combined with low interest loans which are the effect of government credit creation.

So it will be solved (if all goes well) in the way that the money value of houses will be sucked into bitcoins instead, leaving the houses with only the use value. I don't have a timeframe, other calamities may happen first.

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function,  except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

I'm a little confused here.  You say that bitcoin and fiat have no value for direct use, with which I agree.  You then say that fiat does not work as a store of value.  But then you imply that bitcoin can be a store of value that will suck in all of the extra stored value of the housing market.  Why wouldn't bitcoin and fiat be the same in this regard?  Yes, bitcoin has limited supply, but why does that mean that it should be considered a safe store of value (it would have to be considered even safer than real estate to suck in its stored value)?  Or are you thinking of a future in which bitcoin basically becomes the reserve currency of the world, or at least the dominant currency of a particular country or region?

The problem here is he isn't using financial/ accounting language.

It simple, if you buy a house w a mortgage the asset - liability = equity or asset = liability + equity.   If you buy bitcoin w cash its just an asset.

The asset price is the market price.  There's no reason to say houses are money (good or bad).  It makes everything confusing.  The money part is the mortgage not the house.

Sorry my prior explanation was incorrect.  I should have said:  When you have the mortgage, what you owe is considered a liability.  Depending on the asset price you can have negative or positive equity.

I don't see why bitcoin should affect housing price.  Its not related at all

[tee-rex]

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function,  except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

Plague here means continual trouble which you can't get rid of. You say that houses take on a store of value function of money since "current money is not good for that", but this leads to housing bubbles, correct? So if Bitcoin is good as a store of value, this will also bring about now Bitcoin bubbles.

Besides that, being a good store of value doesn't make a good means of exchange, and vice versa.

[Erdogan]

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Well houses are used as a store of value, and thus acquires a higher value than its use value. If good money is available, that money will be used as a store of value. Then you don't have to realize half your house to pay for your kids college, that involves moving to a house of half the size, which is costly and maybe not what you want. So at any time you will have a right-sized house, and your savings in good money.

A house is not an investment, it is more like a durable consumer good that takes many years to consume.

The idea that a house is an investment, comes from the fact that it rises in the bubble build-up phase, combined with low interest loans which are the effect of government credit creation.

So it will be solved (if all goes well) in the way that the money value of houses will be sucked into bitcoins instead, leaving the houses with only the use value. I don't have a timeframe, other calamities may happen first.

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function,  except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

I'm a little confused here.  You say that bitcoin and fiat have no value for direct use, with which I agree.  You then say that fiat does not work as a store of value.  But then you imply that bitcoin can be a store of value that will suck in all of the extra stored value of the housing market.  Why wouldn't bitcoin and fiat be the same in this regard?  Yes, bitcoin has limited supply, but why does that mean that it should be considered a safe store of value (it would have to be considered even safer than real estate to suck in its stored value)?  Or are you thinking of a future in which bitcoin basically becomes the reserve currency of the world, or at least the dominant currency of a particular country or region?

The difference between fiat and bitcoin is precisely that fiat is unlimited, and bitcoin is limited in supply. Since fiat is unlimited in supply, it can not be used as a store of value. Each  time the supply is doubled, the stored value is halved (well, after the new fiat is dispersed). This is the main difference that bitcoin makes. It is in effect now, no need to wait until all others use bitcoins, if they ever will.

[Erdogan]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it.  

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Well houses are used as a store of value, and thus acquires a higher value than its use value. If good money is available, that money will be used as a store of value. Then you don't have to realize half your house to pay for your kids college, that involves moving to a house of half the size, which is costly and maybe not what you want. So at any time you will have a right-sized house, and your savings in good money.

A house is not an investment, it is more like a durable consumer good that takes many years to consume.

The idea that a house is an investment, comes from the fact that it rises in the bubble build-up phase, combined with low interest loans which are the effect of government credit creation.

So it will be solved (if all goes well) in the way that the money value of houses will be sucked into bitcoins instead, leaving the houses with only the use value. I don't have a timeframe, other calamities may happen first.

Real estate is an investment if you collect rent on it.   However,  the mortgage is a liability but equity is an asset

The price of the house can potentially increase in value as well. However it is very difficult and time consuming to extract what value the hose does have.

In a bubble inflation phase, houses work just like "deflationary money", a money type where general prices, expressed in that type of money decreases. Ex: A car can be had for 100 milli-houses, next year maybe 90 milli-houses.

Since houses have bad money characteristics, the money value can go to better money types, and money value of houses can disappear.

Bitcoin can be a bubble that never deflates, because there is no better money where the value can go.

[tee-rex]

I'm a little confused here.  You say that bitcoin and fiat have no value for direct use, with which I agree.  You then say that fiat does not work as a store of value.  But then you imply that bitcoin can be a store of value that will suck in all of the extra stored value of the housing market.  Why wouldn't bitcoin and fiat be the same in this regard?  Yes, bitcoin has limited supply, but why does that mean that it should be considered a safe store of value (it would have to be considered even safer than real estate to suck in its stored value)?  Or are you thinking of a future in which bitcoin basically becomes the reserve currency of the world, or at least the dominant currency of a particular country or region?

The difference between fiat and bitcoin is precisely that fiat is unlimited, and bitcoin is limited in supply. Since fiat is unlimited in supply, it can not be used as a store of value. Each  time the supply is doubled, the stored value is halved (well, after the new fiat is dispersed). This is the main difference that bitcoin makes. It is in effect now, no need to wait until all others use bitcoins, if they ever will.

You are not telling the whole truth here. Your point that each time the money supply increases, the value of money decreases is only valid if all other things stay the same. If the money supply stays on par with the economy growth, there will be no decrease in the purchasing power of money. So fiat supply limitlessness is not enough per se to make it different from Bitcoin as a store of value.

[Erdogan]

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Well houses are used as a store of value, and thus acquires a higher value than its use value. If good money is available, that money will be used as a store of value. Then you don't have to realize half your house to pay for your kids college, that involves moving to a house of half the size, which is costly and maybe not what you want. So at any time you will have a right-sized house, and your savings in good money.

A house is not an investment, it is more like a durable consumer good that takes many years to consume.

The idea that a house is an investment, comes from the fact that it rises in the bubble build-up phase, combined with low interest loans which are the effect of government credit creation.

So it will be solved (if all goes well) in the way that the money value of houses will be sucked into bitcoins instead, leaving the houses with only the use value. I don't have a timeframe, other calamities may happen first.

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function,  except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

I'm a little confused here.  You say that bitcoin and fiat have no value for direct use, with which I agree.  You then say that fiat does not work as a store of value.  But then you imply that bitcoin can be a store of value that will suck in all of the extra stored value of the housing market.  Why wouldn't bitcoin and fiat be the same in this regard?  Yes, bitcoin has limited supply, but why does that mean that it should be considered a safe store of value (it would have to be considered even safer than real estate to suck in its stored value)?  Or are you thinking of a future in which bitcoin basically becomes the reserve currency of the world, or at least the dominant currency of a particular country or region?

The problem here is he isn't using financial/ accounting language.

It simple, if you buy a house w a mortgage the asset - liability = equity or asset = liability + equity.   If you buy bitcoin w cash its just an asset.

The asset price is the market price.  There's no reason to say houses are money (good or bad).  It makes everything confusing.  The money part is the mortgage not the house.

Sorry my prior explanation was incorrect.  I should have said:  When you have the mortgage, what you owe is considered a liability.  Depending on the asset price you can have negative or positive equity.

I don't see why bitcoin should affect housing price.  Its not related at all

Houses is a very complicated investment (or durable good) where lots of different aspects of the situation has been taken into account. I speek only of the added value that is the effect of people using houses to secure their savings, or expand their savings if they think house prices will go up after inflation adjustment.

[Erdogan]

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function,  except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

Plague here means continual trouble which you can't get rid of. You say that houses take on a store of value function of money since "current money is not good for that", but this leads to housing bubbles, correct? So if Bitcoin is good as a store of value, this will also bring about now Bitcoin bubbles.

Besides that, being a good store of value doesn't make a good means of exchange, and vice versa.

The store of value function leads to bubbles for houses when houses are used for money.

Bitcoin can be considered a bubble for the same reason. The exchange value part of the good is the bubbly part. The bitcoin bubble may never deflate because it is the best money.

Bitcoin solves the problem with housing bubbles. There is never a tooth-paste bubble - because nobody uses toothpaste as a store of value.



When a country's fiat money become exceptionally bad, other things will be used as money. In an article from the mainstream source wsj, you will find this:

"With inflation at 60% a year, among the highest in the world, Venezuelans protect their earnings by buying cars, among other big-ticket items."

You also see the rise in prices in this statement from a taxi driver. Note that the price rise is in dollars, that means that the car increased in real terms:

"I can't find anything. Prices are climbing daily," said Jesus Ramirez, a taxi driver who has spent a year trying to replace the 2008 Renault he purchased new for $7,441. He sold the car for over $30,000 five years later.

http://online.wsj.com/articles/in-venezuela-old-cars-become-investment-vehicles-1405972426?mod=yahoo_hs

[Erdogan]

I'm a little confused here.  You say that bitcoin and fiat have no value for direct use, with which I agree.  You then say that fiat does not work as a store of value.  But then you imply that bitcoin can be a store of value that will suck in all of the extra stored value of the housing market.  Why wouldn't bitcoin and fiat be the same in this regard?  Yes, bitcoin has limited supply, but why does that mean that it should be considered a safe store of value (it would have to be considered even safer than real estate to suck in its stored value)?  Or are you thinking of a future in which bitcoin basically becomes the reserve currency of the world, or at least the dominant currency of a particular country or region?

The difference between fiat and bitcoin is precisely that fiat is unlimited, and bitcoin is limited in supply. Since fiat is unlimited in supply, it can not be used as a store of value. Each  time the supply is doubled, the stored value is halved (well, after the new fiat is dispersed). This is the main difference that bitcoin makes. It is in effect now, no need to wait until all others use bitcoins, if they ever will.

You are not telling the whole truth here. Your point that each time the money supply increases, the value of money decreases is only valid if all other things stay the same. If the money supply stays on par with the economy growth, there will be no decrease in the purchasing power of money. So fiat supply limitlessness is not enough per se to make it different from Bitcoin as a store of value.

The parameters I hold invariable in the consideration, is the number of people and their holding preferences (the saving rate is 0, or the amount saved does not change).

I do not consider economy growth as input to the money value function. Some do, but that is based on flaky statistics, which are trusted even when they fail. I consider the growth thing as an allegedly plausible way to get out of the current mess.

The value of the money is the supply (people willing to part with their money), and the demand to hold (people offering things for money because they want to hold more money, e.g save money).

[tee-rex]

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function,  except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

Plague here means continual trouble which you can't get rid of. You say that houses take on a store of value function of money since "current money is not good for that", but this leads to housing bubbles, correct? So if Bitcoin is good as a store of value, this will also bring about now Bitcoin bubbles.

Besides that, being a good store of value doesn't make a good means of exchange, and vice versa.

The store of value function leads to bubbles for houses when houses are used for money.

Bitcoin can be considered a bubble for the same reason. The exchange value part of the good is the bubbly part. The bitcoin bubble may never deflate because it is the best money.

Bitcoin solves the problem with housing bubbles. There is never a tooth-paste bubble - because nobody uses toothpaste as a store of value.

I wouldn't say that Bitcoin will solve the problem with housing bubbles, just because there is no direct use value behind it. The house prices can't fall down and reach null for evident reasons (people need homes to live in). Though this doesn't in the least mean that some decrepit houses in dangerous places would be worth anything.

Also, I'm not sure about a tooth-paste bubble, but there had already been a tulips mania (you know what I mean).

[Erdogan]

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function,  except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

Plague here means continual trouble which you can't get rid of. You say that houses take on a store of value function of money since "current money is not good for that", but this leads to housing bubbles, correct? So if Bitcoin is good as a store of value, this will also bring about now Bitcoin bubbles.

Besides that, being a good store of value doesn't make a good means of exchange, and vice versa.

The store of value function leads to bubbles for houses when houses are used for money.

Bitcoin can be considered a bubble for the same reason. The exchange value part of the good is the bubbly part. The bitcoin bubble may never deflate because it is the best money.

Bitcoin solves the problem with housing bubbles. There is never a tooth-paste bubble - because nobody uses toothpaste as a store of value.

I wouldn't say that Bitcoin will solve the problem with housing bubbles, just because there is no direct use value behind it. The house prices can't fall down and reach null for evident reasons (people need homes to live in). Though this doesn't in the least mean that some decrepit houses in dangerous places would be worth anything.

Also, I'm not sure about a tooth-paste bubble, but there had already been a tulips mania (you know what I mean).

Look, if houses fall down to the use value like you describe, and stay there forever, the house bubble problem is solved.

[tee-rex]

I'm a little confused here.  You say that bitcoin and fiat have no value for direct use, with which I agree.  You then say that fiat does not work as a store of value.  But then you imply that bitcoin can be a store of value that will suck in all of the extra stored value of the housing market.  Why wouldn't bitcoin and fiat be the same in this regard?  Yes, bitcoin has limited supply, but why does that mean that it should be considered a safe store of value (it would have to be considered even safer than real estate to suck in its stored value)?  Or are you thinking of a future in which bitcoin basically becomes the reserve currency of the world, or at least the dominant currency of a particular country or region?

The difference between fiat and bitcoin is precisely that fiat is unlimited, and bitcoin is limited in supply. Since fiat is unlimited in supply, it can not be used as a store of value. Each  time the supply is doubled, the stored value is halved (well, after the new fiat is dispersed). This is the main difference that bitcoin makes. It is in effect now, no need to wait until all others use bitcoins, if they ever will.

You are not telling the whole truth here. Your point that each time the money supply increases, the value of money decreases is only valid if all other things stay the same. If the money supply stays on par with the economy growth, there will be no decrease in the purchasing power of money. So fiat supply limitlessness is not enough per se to make it different from Bitcoin as a store of value.

The parameters I hold unvariable in the consideration, is the number of people and their holding preferences (the saving rate is 0, or the amount saved does not change).

I do not consider economy growth as input to the money value function. Some do, but that is based on flaky statistics, which are trusted even when they fail. I consider the growth thing as an allegedly plausible way to get out of the current mess.

This is flat-out wrong. Consider there are twice as many goods and services with the same amount of money in circulation. How are you going to sell all these new articles unless the purchasing power of coin increases (that is prices decrease), provided all other things like velocity of money stay the same?

[Erdogan]

I'm a little confused here.  You say that bitcoin and fiat have no value for direct use, with which I agree.  You then say that fiat does not work as a store of value.  But then you imply that bitcoin can be a store of value that will suck in all of the extra stored value of the housing market.  Why wouldn't bitcoin and fiat be the same in this regard?  Yes, bitcoin has limited supply, but why does that mean that it should be considered a safe store of value (it would have to be considered even safer than real estate to suck in its stored value)?  Or are you thinking of a future in which bitcoin basically becomes the reserve currency of the world, or at least the dominant currency of a particular country or region?

The difference between fiat and bitcoin is precisely that fiat is unlimited, and bitcoin is limited in supply. Since fiat is unlimited in supply, it can not be used as a store of value. Each  time the supply is doubled, the stored value is halved (well, after the new fiat is dispersed). This is the main difference that bitcoin makes. It is in effect now, no need to wait until all others use bitcoins, if they ever will.

You are not telling the whole truth here. Your point that each time the money supply increases, the value of money decreases is only valid if all other things stay the same. If the money supply stays on par with the economy growth, there will be no decrease in the purchasing power of money. So fiat supply limitlessness is not enough per se to make it different from Bitcoin as a store of value.

The parameters I hold unvariable in the consideration, is the number of people and their holding preferences (the saving rate is 0, or the amount saved does not change).

I do not consider economy growth as input to the money value function. Some do, but that is based on flaky statistics, which are trusted even when they fail. I consider the growth thing as an allegedly plausible way to get out of the current mess.

This is flat-out wrong. Consider there are twice as many goods and services with the same amount of money in circulation. How are you going to sell all these new articles unless the purchasing power of coin increases (that is prices decrease), provided all other things like velocity of money stay the same?

I don't care about volume of goods or velocity of money. Goods and services are sold for goods and services, money oils the trade by enabling indirect trade, there is always enough money, and with bitcoin we don't even have to worry about changing between notes and coins of different number of units.