Ron Paul vs. Paul Krugman

[nedbert9]

I agree that it's a ridiculous situation, I'm just saying that the incredibly abstract concept of 'fairness' is like the sound of a tree falling in a forest. If nobody's there to hear it, i.e.: people are uneducated about what's going on, then they can't feel a sense of injustice. Come to think of it, it sort-of explains why there are so many ignorant people out there!

A class based society survives on ignorance and complacency of the bottom rungs.  People on the low end becoming enlightened would cause chaos.

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[cunicula]

I see bitcoins biggest appeal as a transaction facilitator, to replace or complement paypal, western union etc, but not a store of wealth that will replace fiat currency. Or gold for that matter.

Anyway, thats another topic, just wanted to refute the idea that "supporters of bitcoin" could not possibly share Krugmans idea's.  Economically Im much closer to Krugman than Ron Paul.

Agree with this. This is much more realistic and reasonable.

[cunicula]

Idiot

[P4man]

But the price has been pretty steady around $5 for months. That means the inflation rate is a pretty healthy 3% roughly, just like the US dollar. What are you complaining about?

Im not complaining, am I?  I said "eventual lack of inflation" and  "long term" problem.

[lonelyminer (Peter Šurda)]

Anyway, thats another topic, just wanted to refute the idea that "supporters of bitcoin" could not possibly share Krugmans idea's.

I humbly disagree. Keynesians and their more modern derivatives (e.g. New Keynesians) do not fancy the idea of people having a choice of their own money. In their economic theories, money is forced upon the populace whether they want it or not. Their aggregate-based economic models require an assumption of a monopoly money.

[cbeast]

I love this.  Krugman obliterates this dunce.

So wait.  You agree with Krugman's theories of economics, but support bitcoin?  Seems to me it should be one or the other.

+1

Bitcoin is the anti-Krugman.

I love how Krugman hates Bitcoin, but there's nothing he can do to stop it.

I can't wait for the likes of him to destroy the USD so the world will suddenly wake up and realize the value of ( and point of ) BTC...

I like Krugman, but he's inconsistent. He knows no more than any other economist that has failed to prevent the global economic crisis. I think he will be one of the first major economists to reverse his opinion about Bitcoin.

[P4man]

I humbly disagree. Keynesians and their more modern derivatives (e.g. New Keynesians) do not fancy the idea of people having a choice of their own money.

If by money you mean legal tender, I dont fancy that idea either. If anything can be legal tender, someone may want to pay off his debt to you by paying in metric tons of pidgin shit and you would have to accept it as debt settlement if he delivers enough of it.

Of course there other ways to see bitcoin than legal tender. I see it as barter, and Im not aware of Keynesians having problems with barter.

[caveden]

If by money you mean legal tender, I dont fancy that idea either. If anything can be legal tender, someone may want to pay off his debt to you by paying in metric tons of pidgin shit and you would have to accept it as debt settlement if he delivers enough of it.

Sometimes it seems authoritarian people just don't want to think for a few seconds...
How about specifying the means of payment in the contract? Didn't cross your mind?

[P4man]

Sometimes it seems authoritarian people just don't want to think for a few seconds...
How about specifying the means of payment in the contract? Didn't cross your mind?

Sure, whats the problem with that? What prevents you today from making a contract that you will trade, say, a computer for bitcoins, gold or pidgin shit? If you want to call pidgin shit money because of that, be my guest. Then we already have competing currencies.

[caveden]

Sure, whats the problem with that? What prevents you today from making a contract that you will trade, say, a computer for bitcoins, gold or pidgin shit? If you want to call pidgin shit money because of that, be my guest. Then we already have competing currencies.

No, we don't. If in the debt contract it is written that only bitcoins are accepted as payment, that clause is legally void: the debtor may still pay with legal tender if so he wishes.
And US legal tender laws are less authoritarian than many others, if that's the only thing they force. In many countries, if you're selling anything, it must be against the official currency. In Brazil for instance, not only you cannot refuse the official currency if you're selling something, but you're also forced to provide change to the buyer if he throws a large denomination bill at you. Not to mention all banking rules.

[P4man]

Instead of making a fool out of yourself, reread what I wrote. If the word legal tender confuses you, look it up.

I stand corrected on the spelling though. English is my third language.

[P4man]

No, we don't. If in the debt contract it is written that only bitcoins are accepted as payment, that clause is legally void: the debtor may still pay with legal tender if so he wishes.

Im not a lawyer, that may or may not be true, its the first time I hear it. You are essentially saying barter contracts are null and void? that would surprise me. What I can see is if only one part of the barter is or can be executed, that the resulting debt could be settled with legal tender; that is, well, the whole point of legal tender. If we agree to trade a laptop for gold and your laptop gets stolen after you got my gold, you will owe me the gold, or absent that, legal tender to compensate the breach of contract.

But that  wont prevent two parties from bartering if they so wish, and its not something Ive heard Keynesian rage against.

[westkybitcoins]

No, we don't. If in the debt contract it is written that only bitcoins are accepted as payment, that clause is legally void: the debtor may still pay with legal tender if so he wishes.

Im not a lawyer, that may or may not be true, its the first time I hear it. You are essentially saying barter contracts are null and void? that would surprise me. What I can see is if only one part of the barter is or can be executed, that the resulting debt could be settled with legal tender; that is, well, the whole point of legal tender. If we agree to trade a laptop for gold and your laptop gets stolen after you got my gold, you will owe me the gold, or absent that, legal tender to compensate the breach of contract.

But that  wont prevent two parties from bartering if they so wish, and its not something Ive heard Keynesian rage against.

That's how legal tender works. If someone delivers on their half of a contract, the other party can legally get away with paying in or with exchanging legal tender instead, even if the contract specified an exchange in gold, bitcoin, chocolate chips, or even another nation's currency.

The problem this leads to is that it effectively eliminates those types of non-legal-tender-accepting contracts from the market. People can sign on the dotted line saying they'll pay in gold, or that they'll barter toothpaste for the product, but they can be fully intending from the start to ignore that and pay you in paper. And legally there would be nothing the seller could do about it. That's the problem with specifying a method of payment in the contract. It's unenforceable, and typically meaningless. Even though the occasional participant will honor it, there's no (legal) obligation to do so, and over time fewer will.

And Krugman, and economists with similar beliefs (Keynesians,) believe in legal tender. In fact, they assume it, and much of their theories revolve around the presumption that the government will force a specific monetary system onto the people, especially through forcing people to accept that government money even if it's not in their contracts. They don't rage against barter because (1) their theories already presume an environment in which barter will realistically be unenforceable, and (2) they don't actually want to come out and plainly say that they dislike barter, and want it to be unenforceable because they know how something so intrusive will sound.

[lonelyminer (Peter Šurda)]

If by money you mean legal tender, I dont fancy that idea either. If anything can be legal tender, someone may want to pay off his debt to you by paying in metric tons of pidgin shit and you would have to accept it as debt settlement if he delivers enough of it.

Of course there other ways to see bitcoin than legal tender. I see it as barter, and Im not aware of Keynesians having problems with barter.

My point was slightly different. While it is true that we have legal tender laws, that's not what I was talking about. I was talking about propping up spending through money injections. This only has this effect to the extent that you can mislead people into thinking that the purchasing power is higher than it really is. If the misdirection didn't work, people would switch to other liquid assets. Even if we disregard legal tender laws, there is still the network effect which increases the threshold for the transaction cost difference required for the switch. If there was no network effect and no legal tender laws, people would switch to a more stable money as soon as they got the impression that there's something fishy going on with the printing press. That is why, if the inflation starts going more rampant, states increase the penalties for using other money. The network effect is in those cases too weak to compensate for the dramatic increase of transaction costs involved in using a currency with a rapidly decreasing purchasing power. The network effect normally compensates against a mild inflation even without excessive legal restrictions, which allows the people connected to the printing press to reap the benefits.

It's a type of externality: if money already exists and the producers of money can produce new money below their market price, they reap the difference. Once people lose confidence in the stability of value, the demand shrinks and with it also the price.

I was also attempting to explain that economic models using aggregates such as GDP only work if there is single money. There is no "Bitcoin country". And if you use Bitcoin as infrastructure for fiat money payments (such as Bit-Pay is offering), the whole concept of the quantity theory of money loses meaning.

[lonelyminer (Peter Šurda)]

That's how legal tender works. If someone delivers on their half of a contract, the other party can legally get away with paying in or with exchanging legal tender instead, even if the contract specified an exchange in gold, bitcoin, chocolate chips, or even another nation's currency.

Well, nowadays this is more an exception than the rule. My research shows that there are precedents where courts upheld the currency specified in the contract even though it was foreign money (I don't have the link but there was at least one case in the UK). Last year, there were unhappy Hungarians who took out mortgages in Swiss Francs before the Forint depreciated. They lobbied to the state and the state allowed them to redenominate the contracts, but this was not automatic and required executive action.

As I said in the post just above this, it looks like the restrictions on the use of foreign moneys are inversely proportional to the desire of the people of a country. If the financial system and value are stable, and hence everyone is happy using it, there are less restrictions. As it begins to fail, more and more restrictions are imposed, until you have a situation like Zimbabwe where the use of other currencies was punishable by death. The USA introduced restrictions on the holdings of gold during the recession in the 1930s.

[westkybitcoins]

That's how legal tender works. If someone delivers on their half of a contract, the other party can legally get away with paying in or with exchanging legal tender instead, even if the contract specified an exchange in gold, bitcoin, chocolate chips, or even another nation's currency.

Well, nowadays this is more an exception than the rule. My research shows that there are precedents where courts upheld the currency specified in the contract even though it was foreign money (I don't have the link but there was at least one case in the UK). Last year, there were unhappy Hungarians who took out mortgages in Swiss Francs before the Forint depreciated. They lobbied to the state and the state allowed them to redenominate the contracts, but this was not automatic and required executive action.

As I said in the post just above this, it looks like the restrictions on the use of foreign moneys are inversely proportional to the desire of the people of a country. If the financial system and value are stable, and hence everyone is happy using it, there are less restrictions. As it begins to fail, more and more restrictions are imposed, until you have a situation like Zimbabwe where the use of other currencies was punishable by death. The USA introduced restrictions on the holdings of gold during the recession in the 1930s.

I presume you meant that NOT being able to force legal tender onto someone is the exception? I'm pretty sure that despite the few cases to the contrary, it's routine in most countries that acceptance of the nation's money is legally mandatory to some degree or another.

Still, the exceptions are somewhat interesting. Clearly the ideal is for the populace to demand monetary freedom.

[lonelyminer (Peter Šurda)]

I presume you meant that NOT being able to force legal tender onto someone is the exception?

No, I would say that in most "normal" countries typically you do not need to accept the "national" currency if you don't want to (there are some exceptions which have separate regulations, e.g. banks). First of all, if it was enforceable, there would by definition be no foreign trade, as in those cases at least one of the parties needs to use a different currency than their national one. Furthermore, if someone started enforcing it, all foreign investment would cease (e.g. the Swiss weren't very happy about the Hungarian "trick" performed on them from my previous example).

Typically the harsh restrictions are associated with closed economies, e.g. Cuba.

[bitfreak!]

if you support bitcoin now (and not just in 30 or whatever years), clearly you are in favor of inflation and printing of money.

Gold is still being mined from the ground. If you support gold now, clearly you are in favor of inflation.

[westkybitcoins]

I presume you meant that NOT being able to force legal tender onto someone is the exception?

No, I would say that in most "normal" countries typically you do not need to accept the "national" currency if you don't want to (there are some exceptions which have separate regulations, e.g. banks). First of all, if it was enforceable, there would by definition be no foreign trade, as in those cases at least one of the parties needs to use a different currency than their national one. Furthermore, if someone started enforcing it, all foreign investment would cease (e.g. the Swiss weren't very happy about the Hungarian "trick" performed on them from my previous example).

Typically the harsh restrictions are associated with closed economies, e.g. Cuba.

Ah. Well, I see where you're coming from, but please keep in mind I'm just presenting how legal tender works. By definition, if a nation has legal tender laws, those laws to some degree or another mandate acceptance of the national money.

Even in the case of international trade, if a business is exporting goods in exchange for foreign currency, and the other company violates their contract by refusing to send the foreign currency but instead offers local currency, generally speaking that local currency will have to be accepted (although I would imagine in most cases the exporting business would be pleased, not upset at the development.) The fact that foreign businesses don't typically do this has more to do with the convenience for them (since they have their own legal tender money) rather than with their lack of ability to do so due to legal tender laws.

Legal tender laws and the requirement that taxes be paid only in the national currency are the two key ways a government ensures that there will be widespread circulation of their money in the national economy. This is something Keynesians take as a given, and most seem as if they would be very much against actual abolition of legal tender law (when they actually want to speak directly to the question.) From what I can see, Keynesians are against monetary freedom.

[lonelyminer (Peter Šurda)]

It is true that taxation is typically associated with legal tender, but that's not the only "hard" restriction. You're also required to conduct your accounting in legal tender, which influences the amount of tax owed.