Gold collapsing. Bitcoin UP.

[Peter R]

Article linked from ZH. What does bitcoin mean for Austrian Money Theory? Some of the comments are worth reading. Some aren't.

"Bitcoin may yet fail, in which case Mises’ theorem will remain as a powerful argument in favor of the gold standard. If it ends up succeeding, however, an alternate explanation will have to be found."

http://www.zerohedge.com/news/2014-08-22/what-does-bitcoin-mean-austrian-money-theory

If bitcoin succeeds, does it necessarily mean that the Mises' Regression Theory is false?  

People will only accept a medium of exchange if they observe that it has value, and can actually be exchanged for things. The only way to observe that is by looking at whether it was so used in a preceding time period. Thus, this chain of observations can be followed back until the first instance in which a particular type of money was used as a medium of exchange, and in order for those first adopters to accept it, it must have had value independent of its use as a medium of exchange, or in other words, be a commodity. Paper money, especially that with no commodity backing, is only adopted when governments force it upon people.

 

Does not an unforgeable global ledger and a method writing information to that ledger via digital signatures have value independent of its use as a medium of exchange?  Does this "save" the regression theory?  Or is it better to sweep it away in favour of the "money is memory" point of view?

I thought this was a useful perspective:

I really like language as an analogy for money. Whereas a typical language like English is a protocol for communicating all kinds of information, money is a protocol for communicating credible information about value given but not yet received. If you go through familiar properties of good money (i.e, scarcity, fungibility, divisibility, portability, etc.) with that analogy in mind, you'll see that there are really only two requirements. First, the protocol must ensure that it facilitates the transmission of credible messages. And second, the protocol should facilitate the efficient transmission of those messages. Gold satisfies the first requirement, but not the second -- at least from the perspective of a modern, global economy. Digital fiat does a pretty good job at satisfying the second requirement, but not the first. The constant creation of new fiat out of thin air is equivalent to the constant creation of false messages that undermine the integrity and usefulness of the system. Bitcoin is exciting because it's the first money that may be able to simultaneously satisfy both requirements. Another obvious parallel between money and language is the importance of network effects. The more people that speak a language, the more useful it is. The more people that use a particular form of money, the more useful and valuable it is.

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[Melbustus]

...  
Or is it better to sweep it away in favour of the "money is memory" point of view?
...

Yes.

I thought we got over the Regression TheoremTheory in 2010/2011?

Funny this came up right now... I've been re-reading Kocherlakota's "Money is Memory" (pdf) tonight.

[Cortex7]

If bitcoin succeeds, does it necessarily mean that the Mises' Regression Theory is false?  

Hi,

I think Mises' theory is no longer complete.

Mise wrote the theory in 1912 and he died in 1973.

But in his defense: I don't think he could have possibly imagined an unforgeable virtual token that has controlled and finite issuance.

Just imagine being told to engineer a solution for that in 1973, let alone 1912.

IMHO: Bitcoin is closer in most dimensions to gold than fiat, as we all know fiat is just fancily printed paper, the issuance of which takes a chaotic and inevitably corrupt path.

"Paper money, especially that with no commodity backing, is only adopted when governments force it upon people."

Were Mise still alive then I think he would hold some Bitcoins for sure, alongside his gold of course.

[cypherdoc]

Article linked from ZH. What does bitcoin mean for Austrian Money Theory? Some of the comments are worth reading. Some aren't.

"Bitcoin may yet fail, in which case Mises’ theorem will remain as a powerful argument in favor of the gold standard. If it ends up succeeding, however, an alternate explanation will have to be found."

http://www.zerohedge.com/news/2014-08-22/what-does-bitcoin-mean-austrian-money-theory

look at the comments.

wow, what a change for the better.

[cypherdoc]

Does not an unforgeable global ledger and a method writing information to that ledger via digital signatures have value independent of its use as a medium of exchange?  Does this "save" the regression theory?  Or is it better to sweep it away in favour of the "money is memory" point of view?

not in Bitcoin's case.

the only reason the ledger is unforgeable is b/c of the embedded monetary units that incentive mining via the POW leading to the blockchain.  they're inextricably linked.

edit: maybe i'm not reading your intentions with that quite right.  but i still think the blockchain may only ever be applicable to Bitcoin as money.

[zeetubes]

Transnistria to Introduce Plastic Circulation Coins

I'd never heard of trasnsnistria.

http://news.coinupdate.com/transnistria-to-introduce-plastic-circulation-coins-4441/

[zeetubes]

U.S. Mint platinum coins bypassed in rush for gold
Platinum sales at the U.S. Mint have all but collapsed as investors continue to favour gold and silver.

So even in the physical world, perhaps there isn't much room for more than one alt coin.

http://www.mineweb.com/mineweb/content/en/mineweb-gold-news?oid=250839&sn=Detail

[zeetubes]

The world's largest diggers.

That's what I would call some serious POW.

http://www.mining.com/infographic-the-worlds-largest-diggers-79393/

[Zarathustra]

Debt is the one and only real money. Everything else is a (more or less liquid) commodity. (Gold, Gold 2.0, Copper, Grain, Houses etc.)
http://en.wikipedia.org/wiki/Debt:_The_First_5000_Years

[ssmc2]

Debt is the one and only real money. Everything else is a (more or less liquid) commodity. (Gold, Gold 2.0, Copper, Grain, Houses etc.)
http://en.wikipedia.org/wiki/Debt:_The_First_5000_Years

I'm sure the leaders of the good ole US of A wish they could declare a jubilee for themselves 

[cypherdoc]

oh noes, turning down again:

[cypherdoc]

NSA and GCHQ agents 'leak Tor bugs', alleges developer

http://www.bbc.com/news/technology-28886462

this is great.  whether true or not, this info will serve as a great psyop.  corruption and abuse likes to hide in the shadows. not only that, but it leads to extreme paranoia.  as JR said somewhere above, eventually the spying that drains billions of free dollars from taxpayers and Fed printing will turn towards internal surveillance.  and then the whole place goes dark and NSA workers will be walking around with headlamps:

http://www.govtech.com/federal/New-NSA-Data-Center-Too-Big-Not-to-Explode.html

[kerafym]

oh noes, turning down again:

Short LTC/BTC is probably one of the best trading strategy so far this year.

And I expect the strategy to work till year end.

[cypherdoc]

Debt is the one and only real money. Everything else is a (more or less liquid) commodity. (Gold, Gold 2.0, Copper, Grain, Houses etc.)
http://en.wikipedia.org/wiki/Debt:_The_First_5000_Years

molecular, is this the same book you recommended a coupla months ago?

this explains why financial crises only occur when debt defaults start to domino, like we had in 2008 with the subprime crisis spreading throughout the system and the elites doing whatever it took, and still takes, to try and mitigate around the edges.  those edges being, not surprisingly, the bailouts to the financial industry elites primarily and for the most part not to homeowners.  what always sticks in my mind is the move from mark to market to mark to model which still is in effect for the most part.  for the elites it's perfectly fine to mark to market "on the way up" but never on the way down.  when the going gets tough, just change the rules.

we keep coming close to a catalyst for another domino effect with the likes of Greece, Spain, and Argentina but we haven't quite gotten there.  the next crisis will come from sovereign defaults as all the risk and toxic debt has been dumped onto gvts and their CB's.  yes, they will print to save themselves, no doubt, which is why Bitcoin will ultimately succeed.  or as stated above, we'll do a debt jubilee.  wheeeee!!!!

no wonder why we hear the criticism that Bitcoin "goes too far" as an often vague complaint from skeptics.  the mathematical enforcement of debt obligations cannot be allowed to be enforced, let alone explored, for everyone.  most of us just "aren't essential enough".

edit:  this is why the UST market is the key.  when interest rates start going up, massive change will be afoot.

[Melbustus]

...
we keep coming close to a catalyst for another domino effect with the likes of Greece, Spain, and Argentina but we haven't quite gotten there.  the next crisis will come from sovereign defaults as all the risk and toxic debt has been dumped onto gvts and their CB's.  yes, they will print to save themselves, no doubt, which is why Bitcoin will ultimately succeed.  or as stated above, we'll do a debt jubilee.  wheeeee!!!!
...

I still come back to Japan. While I never (and still don't) fully understood Kyle Bass's argument that JGB rates *must* rise (can't BoJ just keep buying *all* the bonds?), it's clear some massive dislocation has to happen. I think it'll be a 5x devaluation of the Yen. That's incredible in currency markets, especially a top-5 economy like Japan. What will the fallout be from that? It's probably quite mathematically-literally chaotic.

Note: Bass seems to have weakened on his JGB-rates-are-the-canary thesis, instead moving more toward the above; ie, the Yen will massively devalue instead/first: https://www.youtube.com/watch?v=VBPZ58dzjfE&feature=youtu.be

[cypherdoc]

Debt is the one and only real money. Everything else is a (more or less liquid) commodity. (Gold, Gold 2.0, Copper, Grain, Houses etc.)
http://en.wikipedia.org/wiki/Debt:_The_First_5000_Years

I'm sure the leaders of the good ole US of A wish they could declare a jubilee for themselves  

we've done it twice before, 1933 and 1971, and we'll most likely do it again.

under threat of gun point, of course.

[justusranvier]

http://www.ibtimes.com/microsoft-admits-keeping-92-billion-offshore-avoid-paying-29-billion-us-taxes-1665938

Microsoft Corp. is currently sitting on almost $29.6 billion it would owe in U.S. taxes if it repatriated the $92.9 billion of earnings it is keeping offshore, according to disclosures in the company’s most recent annual filings with the Securities and Exchange Commission. The amount of money that Microsoft is keeping offshore represents a significant spike from prior years, and the levies the company would owe amount to almost the entire two-year operating budget of the company’s home state of Washington.

The company says it has "not provided deferred U.S. income taxes" because it says the earnings were generated from its "non-U.S. subsidiaries” and then "reinvested outside the U.S.” Tax experts, however, say that details of the filing suggest the company is using tax shelters to dodge the taxes it owes as a company domiciled in the United States.

Wait until Microsoft and its investors discover Bitcoin.

The US investors of Microsoft would love to be investors in the non-U.S subsidiaries, but there's no way for them to bring their dividends home without moving them through the banking system, and there's no way for them to secretly own shares of a foreign corporation because all those foreign corporations need bank accounts and therefore need to comply with US laws in order to keep them.

A Bitcoin-native company requires no bank account. It doesn't even really require a physical nexus at all.

All it takes is one legal jurisdiction, somewhere in the world, that's friendly toward Bitcoin-native corporations and then then giant sucking sound you'll hear will be all the foreign subsidiaries moving there.

[justusranvier]

But first we better get to work on better privacy techniques.

Bitcoin isn't any good to anyone in its current state.

[cypherdoc]

A Bitcoin-native company requires no bank account. It doesn't even really require a physical nexus at all.

All it takes is one legal jurisdiction, somewhere in the world, that's friendly toward Bitcoin-native corporations and then then giant sucking sound you'll hear will be all the foreign subsidiaries moving there.

i wish this were really true. 

it seems many/most need banking accts yet are being obstructed by the banks.  i wonder how Blockchain.info does it? 

you're right though; once a Bitcoin safe haven opens up, you should hear that sucking sound.  but at what cost to that jurisdiction's banks?

[cypherdoc]

But first we better get to work on better privacy techniques.

Bitcoin isn't any good to anyone in its current state.

you keep saying this about Bitcoin's anonymity properties.  if true, why haven't you identified the mtgox crooks yet and sold off the info?  you'd make alot doing so...

edit:  not to mention identities of the numerous other thefts in Bitcoin-land.