Private Money!

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D.A. Ridgely
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Private Money!

Post by D.A. Ridgely » 20 May 2011, 16:34

a.k.a. Bitcoins.

Discuss.

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JasonL
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Re: Private Money!

Post by JasonL » 20 May 2011, 16:38

Quirky and fun, but fundamentally incapable of sufficient confidence to survive a shock - i.e. "flight to safety" will not mean "load up on bitcoins" in any realistic future.

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Kolohe
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Re: Private Money!

Post by Kolohe » 20 May 2011, 20:18

I am extremely bearish on any and all private money because network effects enjoyed by sovereign money put alternative currencies at such a terrible disadvantage. To be clear, prosecutions of the Liberty dollar people are unconscionable - and sort of surprising, because the way that these things can get legally tricky is via taxes, which of course, must be paid in sovereign money.
when you wake up as the queen of the n=1 kingdom and mount your steed non sequiturius, do you look out upon all you survey and think “damn, it feels good to be a green idea sleeping furiously?" - dhex

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Lost_In_Translation
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Re: Private Money!

Post by Lost_In_Translation » 20 May 2011, 23:53

I don't see evidence of their army, navy or air force. Thus, I fail to see the protection their currency offers.

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Warren
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Re: Private Money!

Post by Warren » 21 May 2011, 11:47

I love it. I'm more skeptical of security than viability. Walmart will never accept them, but I think there's a big enough market to sustain it. I'm going to buy some.
Women with strollers are legitimately the worst people, and should, like motorcyclists, not be considered people for liability and criminal purposes. - lunchstealer

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Warren
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Re: Private Money!

Post by Warren » 04 Jun 2011, 13:47

HMPH!
On the day this was posted, BitCoins surged in price to over $4 US/BC. I wanted to purchase $1K worth. But it took so much time to move my money, first into Dwolla (I wish them success, as $0.25/transaction beats PayPal's 3% like an enlisted man in a military scandal) then onto the Mt Gox exchange, that by then they were trading at $8.50 so I only bought a couple hundred dollars worth. I sold 15BC @ $17 and will sell some more if it gets to $25. Then I'll only have a handful of BC left and will have only made a few hundred bucks.
If I had known about this a week earlier, I could have made a killing. Well at least a wounding.

I wonder how much The Silk Road is pushing up the price of BCs.
Women with strollers are legitimately the worst people, and should, like motorcyclists, not be considered people for liability and criminal purposes. - lunchstealer

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Shem
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Re: Private Money!

Post by Shem » 05 Jun 2011, 06:58

This post explains why I'm skeptical, to say the least. I don't necessarily think it's a scam, but it is utopian and ill-considered, and that can be worse.
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Warren
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Re: Private Money!

Post by Warren » 05 Jun 2011, 09:49

Shem wrote:This post explains why I'm skeptical, to say the least. I don't necessarily think it's a scam, but it is utopian and ill-considered, and that can be worse.
The author of that post is an idiot. The creators of BitCoin are very smart people that understand economics, unlike the author. Here are his objections:
Severe Problem Number 1: Seeding Initial Wealth
This is not a bug it's a feature. Of course it's an advantage to early adapters. SO? That's the point. Every new network pays early adapters as an incentive to join the network. The fact that it's passed out lottery style is more respectable than printing money and purchasing "some other asset"
Severe Problem Number 2: Built in Deflation
The Deflation bogyman is a Keynesian myth. The US experienced deflation through most of the 19th century (except around the civil war). Transistors have been in deflation (even measured against the inflating USD) for over six decades. They keep getting cheaper and we keep buying more of them. This is true of all tech. If you buy a phone today, a year from now there will be a cheaper phone with more features on the market. Furthermore, if deflation were a problem, it'd be a self correcting one.
Severe Problem Number 3: Lack of Convertibility
This is probably the stupidest point. The author acknowledges that BitCoin is convertible into a variety of other currencies already, he just worries that it might not be in the future. He says BitCoin can't be a "store of value" (wait, I thought it was deflationary!), because no one is investing for the long term in them. But as BitCoin gains users and becomes more accepted that's exactly what will happen.
Severe Problem Number 4: When Something Goes Wrong, It Will Die
This is the one thing that makes me skeptical. BitCoin was created to be robust, but I don't know enough to understand why I should have faith in it. I do know that all attempts at foiling music piracy have themselves been foiled very quickly. If BitCoin does become more established, that will create more inventive for forgery. Of course forgery of paper money hasn't destroyed it.
Women with strollers are legitimately the worst people, and should, like motorcyclists, not be considered people for liability and criminal purposes. - lunchstealer

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Mo
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Re: Private Money!

Post by Mo » 05 Jun 2011, 12:53

Warren wrote:
Severe Problem Number 2: Built in Deflation
The Deflation bogyman is a Keynesian myth. The US experienced deflation through most of the 19th century (except around the civil war). Transistors have been in deflation (even measured against the inflating USD) for over six decades. They keep getting cheaper and we keep buying more of them. This is true of all tech. If you buy a phone today, a year from now there will be a cheaper phone with more features on the market. Furthermore, if deflation were a problem, it'd be a self correcting one.
Transistors are a currency now? I think you're interpreting the phrase "buy stuff with you phone" the wrong way. And you're right that an economy can do fine in a environment of controlled, steady deflation. However, it's an unstable situation and you can end up with a deflationary spiral like you did at the end of the 19th century.
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D.A. Ridgely
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Re: Private Money!

Post by D.A. Ridgely » 05 Jun 2011, 13:13

It's one thing to say there's no problem when the price of a commodity or product or such decreases slowly over time as a result of an improvement in productivity, quite another to say there's no problem when prices generally fall over a short period of time. Only the latter is dangerous deflation.

In the case of BitCoin, it represents too small a fraction of the available types of money one can hold or spend. Thus, if it and it alone is deflationary as it remains stable and other currencies are inflated, more power to it. If it were the prevailing currency in a society, however, deflation would pose the same problem it poses with national currencies: the perception that money will be significantly more valuable in the near future leads to hoarding of currency, hence a swift contraction in the money supply leading to a downturn in the business cycle and a sluggish if not stagnant economy.

Money (including precious metals) is useful only insofar as the general public believes it to be a store of value as well as a convenient method of exchange. When the public believes its value is either appreciating or depreciating rapidly it ceases to function well as money regardless of how well it may serve as an investment for those capable of hoarding it.

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Shem
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Re: Private Money!

Post by Shem » 05 Jun 2011, 18:58

Was going to write a huge rebuttal, but I don't feel like it, so instead I'll make this offer: Warren, I bet you a case of your favorite beer that Bitcoin will experience an economic collapse within 5 years. To make it fair, we'll call it a wash if the collapse happens due to government intervention. So, if it's still plugging away on 6/5/16, you win. If it's gone the way of Dutch tulips, I win. If the government legislates it out of existence, nobody wins. In the case of ambiguity, our lovely moderatrix or her designee (designee subject to approval by both parties) makes a judgment. What say you?
"VOTE SHEMOCRACY! You will only have to do it once!" -Loyalty Officer Aresen

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Warren
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Re: Private Money!

Post by Warren » 05 Jun 2011, 21:34

Hey, Babalugats! We got a bet here.
Women with strollers are legitimately the worst people, and should, like motorcyclists, not be considered people for liability and criminal purposes. - lunchstealer

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JasonL
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Re: Private Money!

Post by JasonL » 07 Jun 2011, 17:03

+1 DAR on deflation being decline in general prices and that being problematic for a currency, which is not a transisitor, well, because it has to serve as currency.

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Stevo Darkly
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Re: Private Money!

Post by Stevo Darkly » 07 Jun 2011, 19:11

NO NO NO NO! We already did an "electricity/electronics puns" thread. If you start another one I'm sure it will meet with great resistance.
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the innominate one
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Re: Private Money!

Post by the innominate one » 07 Jun 2011, 19:21

I just don't have the capacitance to withstand being batteried with any more puns.
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Hugh Akston
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Re: Private Money!

Post by Hugh Akston » 07 Jun 2011, 22:30

No, Stevo's right, we already did electrical puns, so wire we doing them again?
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the innominate one
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Re: Private Money!

Post by the innominate one » 07 Jun 2011, 22:44

To gauge the current potential for galvanizing grylliadeans into action?
"Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies." -E Benn

"No shit, Sherlock." -JsubD

"now is the time to go fuck yourself until you die." -dhex

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Stevo Darkly
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Re: Private Money!

Post by Stevo Darkly » 07 Jun 2011, 23:03

It's happening again.

ohmg.
"I don't know if you can call it a stereotype when I was in a room full of people actually doing it." -- Keith S.

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JasonL
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Re: Private Money!

Post by JasonL » 08 Jun 2011, 10:09

Straight up - I didn't actually intend any pun with the transistor / currency thing. Just for the record.

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Stevo Darkly
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Re: Private Money!

Post by Stevo Darkly » 08 Jun 2011, 13:28

JasonL wrote:Straight up - I didn't actually intend any pun with the transistor / currency thing. Just for the record.
You can't insulate yourself from the consequences of your actions.
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Shem
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Re: Private Money!

Post by Shem » 08 Jun 2011, 15:05

It's a little hard to quietly avoid the pun threads when every single thread becomes one.
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Warren
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Re: Private Money!

Post by Warren » 09 Jun 2011, 11:25

JasonL wrote:Straight up - I didn't actually intend any pun with the transistor / currency thing. Just for the record.
Of course transistors aren't currency. The point is that people still buy them even though they are declining (drastically) in price. I stand by my "Deflation is a Keynsian boogeyman". Deflation is not to be feared.
Women with strollers are legitimately the worst people, and should, like motorcyclists, not be considered people for liability and criminal purposes. - lunchstealer

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JasonL
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Re: Private Money!

Post by JasonL » 09 Jun 2011, 12:02

So, do you not believe in the velocity part of the equation of exchange, or do you not believe that deflation affects velocity?

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Warren
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Re: Private Money!

Post by Warren » 09 Jun 2011, 12:31

JasonL wrote:So, do you not believe in the velocity part of the equation of exchange, or do you not believe that deflation affects velocity?
Neither, or more the latter. I believe that inflation is destructive and that policies designed to increase V result in inflation. Deflation may result in a temporary loss of V, but no permanent damage to the economy.
Women with strollers are legitimately the worst people, and should, like motorcyclists, not be considered people for liability and criminal purposes. - lunchstealer

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dbcooper
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Re: Private Money!

Post by dbcooper » 15 Jun 2011, 12:53

Slip inside a sleeping bag.

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