Author Topic: Is it too late [bitcoin]?  (Read 100735 times)

maizeman

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Re: Is it too late [bitcoin]?
« Reply #200 on: December 05, 2017, 03:55:31 PM »
Actually it looks like productivity per unit of labor growth is actually declining significantly in the last couple of decades.

Don't mistake a decreasing rate of productivity growth for negative productivity growth.

Of course. If anything what we're seeing is a reverse to more "normal" levels of productivity growth. I was making the point that the last couple of decades haven't been anything extraordinary in terms of productivity growth. (ILikeDividends was saying that the last several decades were extraordinary.)

Quote
Yes actually. We went from a gold backed currency which meant an essentially fixed supply of currency prior to the great depression, to a non-backed currency which let central banks increase or decrease the money supply after world war II.

That was kind of the point I was making.

Wait so you agree it's not informative to compare the relationship between monetary policy and economic growth between pre-greater depression and post-greater depression datasets? If so, yes we're in agreement. But then what was the original point you were making with the link to the minneapolis fed study? (Which does makes comparisons combining those two datasets).

waltworks

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Re: Is it too late [bitcoin]?
« Reply #201 on: December 05, 2017, 04:06:05 PM »
Comparing a ~90% agrarian economy with a ~1% agrarian one probably doesn't make much sense.

-W

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #202 on: December 05, 2017, 04:12:37 PM »
Wait so you agree it's not informative to compare the relationship between monetary policy and economic growth between pre-greater depression and post-greater depression datasets? If so, yes we're in agreement. But then what was the original point you were making with the link to the minneapolis fed study? (Which does makes comparisons combining those two datasets).

The original question (as posed by BattlaP) was to provide examples of deflationary currencies (of which a gold-backed USD would apply) which support the idea that economic growth and stability can occur when compared to a currency that is inflated in response to the economy. This historical review does just that. It should also be noted that during the gold standard, the supply of the US dollar was not fixed, it was merely tied to the supply of gold.

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #203 on: December 05, 2017, 04:15:45 PM »
Actually it looks like productivity per unit of labor growth is actually declining significantly in the last couple of decades.

Don't mistake a decreasing rate of productivity growth for negative productivity growth.

Of course. If anything what we're seeing is a reverse to more "normal" levels of productivity growth. I was making the point that the last couple of decades haven't been anything extraordinary in terms of productivity growth. (ILikeDividends was saying that the last several decades were extraordinary.)

I stand corrected.  So, to the point of my question, if I extend the time-frame of productivity growth back to 1947, roughly equivalent to talltexan's timeframe, would you then consider that productivity growth sufficiently extraordinary, as compared to talltexan's reference?

In other words, is a deflationary spiral, à la the Great Depression, a likely risk for the same reasons? Or is that specific scenario now mitigated by the transition from gold to a fiat currency?

And for extra credit, any thoughts about why the fed has been so apparently ineffective at nudging inflation up?  Perhaps the answer is that we are in unprecedented times with no historical guide, until we normalize again and reverse all or most of the QE that was done since 2008?

I recall then chairman Bernanke promising, on TV, that QE would not result in inflation.  It appears he was correct.  Could it be that we are now stuck in an alternate economic universe, unable to inflate meaningfully, until that QE is unwound?

I can barely wrap my head around these questions. If QE defrosted the locked up credit markets, it seems quite reasonable to suggest that reversing QE would have the opposite effect.
« Last Edit: December 05, 2017, 04:38:09 PM by ILikeDividends »

maizeman

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Re: Is it too late [bitcoin]?
« Reply #204 on: December 05, 2017, 04:37:33 PM »
Oh absolutely. The 1950s and 1960s were a time of extraordinary economic growth in the USA. But because the money supply wasn't tied to the amount of gold sitting in bank vaults, the currency supply could be expanded with the economy, so you didn't see deflation as the size of the economy (and hence the total number of transactions that had to happen every day) increased.

If you trust the fed to behave intelligently, then yes, the risk of a deflationary spiral like what we saw in the great depression is much lower when the size of the money supply is arbitrary (fiat) rather than approximately fixed (gold backed).

Now the counter argument, which is also valid, is that the risk of an inflationary spiral is much greater when the size of the money supply is arbitrary rather than approximately fixed.

Edit about the extra credit question: I think the problem is that we're living in a time where there is a surplus of capital looking for high return (but safe) investments and a shortage of good investments (which gets back to that decrease in productivity growth). You see this in how much cash most major companies are holding on to today, and also how much funding is available to startups like Uber and AirBnB which might ultimately make loads of money, but might also go bankrupt, but are already valued in the double digit billions.

If there's no good place to invest money to earn a strong return, giving more money to the rich (the people who were holding the assets which were purchased by the Fed as part of QE) doesn't simulate inflation because they don't invest the money, they sit on it. So the money supply goes up, but the velocity of money goes down, and prices stay the same.
« Last Edit: December 05, 2017, 04:43:03 PM by maizeman »

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #205 on: December 05, 2017, 04:48:16 PM »
Oh absolutely. The 1950s and 1960s were a time of extraordinary economic growth in the USA.
I think that economic growth in the USA (as opposed to productivity growth) for that period was unique, and very materially influenced by the devastation of much of the world's manufacturing and labor capacity resulting from WWII.  The US went largely unscathed in both regards.

If I recall correctly, the US "only" lost about a quarter million men in WWII.  Yes, that's a huge and tragic number, but nothing compared to all of WWII's casualties around the world. The majority of the US service men and women came back to join a still intact economy.

Also resulting from WWII, the job opportunities for women broadened way out to include just about any job a man could do; increasing the effective size of the labor pool.

Those factors left the USA with a competitive advantage that would take a few decades for the rest of the world to catch up to.
« Last Edit: December 05, 2017, 04:59:12 PM by ILikeDividends »

waltworks

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Re: Is it too late [bitcoin]?
« Reply #206 on: December 05, 2017, 04:53:47 PM »
To follow up on Maizeman's point, though - you can have a money supply that is fixed but slowly increasing (current US dollars, or gold, for example), fixed but slowly decreasing (Bitcoin will eventually act this way), or anything else.

In other words, you can not trust politicians to do the right thing with the money supply, but that's a separate question from whether or not inflation/deflation are good or bad. My personal feeling is that bitcoin's design probably dooms it as a currency because of the deflation problem, but it might be able to be a sort of virtual gold (setting aside for now the other issue, which is that bitcoin is just being bought/hoarded, not actually used much).

-W

maizeman

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Re: Is it too late [bitcoin]?
« Reply #207 on: December 05, 2017, 04:58:21 PM »
That's certainly true, but don't discount the effects of near universal electrification, which was largely completed in the 1940s. After the war it was suddenly possible to design and build and sell all sorts of new labor saving machines from refrigerators to vacuum cleaners to electric typewriters and have them be usable basically anywhere in the USA. At the same time the interstate highway system was vastly lowering barriers to commerce, and a half dozen other major step changes in the technology and infrastructure that powered our economy kicked in around the same time.

I tend to put more weight on these factors and less on the reduced destruction of WWII in the USA relative to the rest of the world, because you see the same dramatic economic growth in places like China when the same technological and infrastructure factors kick in (for them in the '90s and '00s), but *shrug.*

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #208 on: December 05, 2017, 05:01:55 PM »
That's certainly true, but don't discount the effects of near universal electrification, which was largely completed in the 1940s. After the war it was suddenly possible to design and build and sell all sorts of new labor saving machines from refrigerators to vacuum cleaners to electric typewriters and have them be usable basically anywhere in the USA. At the same time the interstate highway system was vastly lowering barriers to commerce, and a half dozen other major step changes in the technology and infrastructure that powered our economy kicked in around the same time.

I tend to put more weight on these factors and less on the reduced destruction of WWII in the USA relative to the rest of the world, because you see the same dramatic economic growth in places like China when the same technological and infrastructure factors kick in (for them in the '90s and '00s), but *shrug.*
All valid points.  It's been a pleasure exchanging thoughts with you. Apologies to everyone else for the off-topic digression.

Edit to add: I've bold-texted a very synergistic point in your post with some of the positive effects of WWII.  Many of those innovations you mentioned freed up women to pursue careers, other than "housewife," which arguably wouldn't have been open to them were it not for WWII pulling them into male-dominated occupations, e.g., building war planes, producing munitions, tanks, etc.

Not intended as an argument, just to emphasize that WWII, as well as all of your other points, had self reinforcing synergistic effects that boosted economic growth during that specific period, and beyond.

That specific result had a permanent effect.  But it first exerted its influence on economic growth in the USA during the immediate decades following the war.  The devastation around the rest of the world provided the customer base needed to absorb those women into the American workforce beyond the need to replace the male casualties of the war, without the social disruption that might have occurred if they had simply competed to displace their male counterparts in the workforce.
« Last Edit: December 05, 2017, 06:57:29 PM by ILikeDividends »

maizeman

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Re: Is it too late [bitcoin]?
« Reply #209 on: December 05, 2017, 05:08:27 PM »
To follow up on Maizeman's point, though - you can have a money supply that is fixed but slowly increasing (current US dollars, or gold, for example), fixed but slowly decreasing (Bitcoin will eventually act this way), or anything else.

In other words, you can not trust politicians to do the right thing with the money supply, but that's a separate question from whether or not inflation/deflation are good or bad. My personal feeling is that bitcoin's design probably dooms it as a currency because of the deflation problem, but it might be able to be a sort of virtual gold (setting aside for now the other issue, which is that bitcoin is just being bought/hoarded, not actually used much).

-W

This gets back to the debate we've had a couple of times about which is the most important characteristic of a currency: facilitating transactions, acting as a store of value, or acting as a unit of account (salary contracts or mortgages denominated in bitcoin would be really REALLY bad ideas). So while I don't agree with you that bitcoin's design dooms it as a currency, I agree with most of the rest of your post, and the part I disagree with says more about how we each define what it means to be a currency than about differences in our predictions for the future of bitcoin.

It's worth mentioning that bitcoin's design with a fixed maximum number of coins ever produced isn't universal among cryptocurrencies. For example, ethereum's roadmap calls for a fixed number of new currency units to be added to the money supply every year in perpetuity. However, this still represents a smaller percent of the total money supply each year, so the growth of the supply of ether will approach, but never reach 0%/year.

I don't know that there is any reason you couldn't design a cryptocurrency which did have a fixed annual percent growth in the money supply each year (which could check of the box of a "money supply that is fixed but slowly increasing") and for all I know there is already an altcoin out there which does just that.

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #210 on: December 05, 2017, 05:14:45 PM »
It isn't out of the question for the Fed to introduce its own cryptocurrency that has all the characteristics needed for both utility and regulation. The Fed is not the only central bank kicking this idea around, but that's not likely coming any time soon.

Federal Reserve May Introduce A Cryptocurrency In The Future
https://www.investopedia.com/news/federal-reserve-may-introduce-cryptocurrency-future/

It would be interesting to see what effect, if any, such a move would have on the speculative bubble in bitcoin.  Assuming that bubble doesn't pop before then, that as.

« Last Edit: December 05, 2017, 05:20:48 PM by ILikeDividends »

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #211 on: December 05, 2017, 05:26:02 PM »
In other words, you can not trust politicians to do the right thing with the money supply, but that's a separate question from whether or not inflation/deflation are good or bad. My personal feeling is that bitcoin's design probably dooms it as a currency because of the deflation problem, but it might be able to be a sort of virtual gold (setting aside for now the other issue, which is that bitcoin is just being bought/hoarded, not actually used much).

Isn't that somewhat of a paradoxical proposition though? If bitcoin's adoption rate were ever to reach a point where its deflationary monetary policy would have a noticable impact on the economy (for better or for worse), then wouldn't that mean that bitcoin had succeeded in becoming adopted as a currency which would invalidate your claim that bitcoin was doomed to succeed?

In my opinion there are a lot more reasons why bitcoin could possibly fail and its deflationary monetary policy isn't one of them. In fact, I think its monetary policy is one of its biggest reasons why people are adopting at this point at all. Given the fact that most people have lived under the influences of inflationary economic cycles, I think there is a longing among many to inject a deflationary monetary policy into our world economy.

I think the main point that I was trying to convey was that economies are extremely complex and there are an immense number of factors at play that lead to deflationary or inflationary economic cycles. I don't think anyone can make a claim that a deflationary currency (like bitcoin) will lead to the deflationary spiral that many purport considering we historically haven't really seen that to be the case.

Bitcoin's monetary policy is just one monetary policy in a sea of crypto-currencies all of which have varying degrees of inflationary and deflationary policies. We don't know if long term its monetary policy will be best for whatever economic conditions that arrive at our doorsteps. The idea behind a decentralized currency such as that isn't to lock us into a monetary policy forever, but to allow the greater economic community decide that policy for itself with a transparency that is unparalleled in comparison to fiat currencies today.

talltexan

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Re: Is it too late [bitcoin]?
« Reply #212 on: December 06, 2017, 07:23:47 AM »
This discussion really took off without me...you guys are doing a great job thinking through the issues. Some important books on the topic:

Capital in the Twenty-First Century by Thomas Picketty (early on this book discusses the importance of the Gold Standard in holding down inflation in Europe and US during the 1800's).

The Rise and Fall of American Growth by Robert J. Gordon (you can watch his Ted Talk here: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwivoqXIyvXXAhUq0oMKHauUAl4QtwIIJzAA&url=https%3A%2F%2Fwww.ted.com%2Ftalks%2Frobert_gordon_the_death_of_innovation_the_end_of_growth&usg=AOvVaw0C8-meuYA4-z1aQJPHcHMu

A Culture of Growth by Joel Mokyr. (he usually takes the opposing side to Dr. Gordon, insisting that dynamic growth in today's economy is still possible)




maizeman

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Re: Is it too late [bitcoin]?
« Reply #213 on: December 06, 2017, 08:18:29 AM »
That's certainly true, but don't discount the effects of near universal electrification, which was largely completed in the 1940s. After the war it was suddenly possible to design and build and sell all sorts of new labor saving machines from refrigerators to vacuum cleaners to electric typewriters and have them be usable basically anywhere in the USA. At the same time the interstate highway system was vastly lowering barriers to commerce, and a half dozen other major step changes in the technology and infrastructure that powered our economy kicked in around the same time.

I tend to put more weight on these factors and less on the reduced destruction of WWII in the USA relative to the rest of the world, because you see the same dramatic economic growth in places like China when the same technological and infrastructure factors kick in (for them in the '90s and '00s), but *shrug.*
All valid points.  It's been a pleasure exchanging thoughts with you. Apologies to everyone else for the off-topic digression.

Edit to add: I've bold-texted a very synergistic point in your post with some of the positive effects of WWII.  Many of those innovations you mentioned freed up women to pursue careers, other than "housewife," which arguably wouldn't have been open to them were it not for WWII pulling them into male-dominated occupations, e.g., building war planes, producing munitions, tanks, etc.

Not intended as an argument, just to emphasize that WWII, as well as all of your other points, had self reinforcing synergistic effects that boosted economic growth during that specific period, and beyond.

That specific result had a permanent effect.  But it first exerted its influence on economic growth in the USA during the immediate decades following the war.  The devastation around the rest of the world provided the customer base needed to absorb those women into the American workforce beyond the need to replace the male casualties of the war, without the social disruption that might have occurred if they had simply competed to displace their male counterparts in the workforce.

Wow, I missed your edit, just spotted it when talltexan bumped the thread. (With my apologies as well for going so far off topic.)

It certainly hadn't occurred to me how the lack of devastation in the USA relative to the rest of the industrialized world could have played into the USA being able to absorb large numbers of women into the (paid) labor force without significant economic disruption (since all that extra labor could be put to work building things for export around the world). But now that you bring it up it certainly seems plausible that this did play a significant role. And because every discussion of labor force participation needs a good graph showing changes in the participation rates for men and women from post-world war II to today: https://aneconomicsense.files.wordpress.com/2016/10/labor-force-participation-rate-ages-25-to-54-all-male-female-jan-1948-to-sept-2016.png (Long story short, the participation of working age women in the paid labor force grew from 35% to 75% in the four decades following world war II, that's a really big change.)

JAYSLOL

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Re: Is it too late [bitcoin]?
« Reply #214 on: December 06, 2017, 08:43:02 AM »
I see random people on facebook with no investing experience posting about bitcoin and how to buy "stock" in cryptos. Is this the modern day equivalent of the shoe shine boy?

Yes, just the other day I saw a post on Facebook by a guy I know from high school who has no computer science, financial or investment experience post about how it's not too late to get rich with Bitcoin. 

2Birds1Stone

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Re: Is it too late [bitcoin]?
« Reply #215 on: December 06, 2017, 08:45:42 AM »
This is your last chance to get in under $10k, it's going to $100k in the next 12 months at this pace.


+30% since my post ;)

ketchup

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Re: Is it too late [bitcoin]?
« Reply #216 on: December 06, 2017, 09:03:39 AM »
This is your last chance to get in under $10k, it's going to $100k in the next 12 months at this pace.


+30% since my post ;)
Fair enough.  I realized some mining gains and sold some yesterday morning at the then-all-time-high ($11,600), but kept some of my BTC for fun. :)  It'll be worth a pretty penny in a few years if John McAfee still has a penis.

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #217 on: December 06, 2017, 09:11:54 AM »
Wow, I missed your edit, just spotted it when talltexan bumped the thread. (With my apologies as well for going so far off topic.)

It certainly hadn't occurred to me how the lack of devastation in the USA relative to the rest of the industrialized world could have played into the USA being able to absorb large numbers of women into the (paid) labor force without significant economic disruption (since all that extra labor could be put to work building things for export around the world). But now that you bring it up it certainly seems plausible that this did play a significant role. And because every discussion of labor force participation needs a good graph showing changes in the participation rates for men and women from post-world war II to today: https://aneconomicsense.files.wordpress.com/2016/10/labor-force-participation-rate-ages-25-to-54-all-male-female-jan-1948-to-sept-2016.png (Long story short, the participation of working age women in the paid labor force grew from 35% to 75% in the four decades following world war II, that's a really big change.)

FWIW, I also heard other narratives surrounding the push behind women entering the workforce. The other narrative being that due to the stagnant working-class wages since the 70's, it lead to women needing enter the workforce to help support their families. I'm sure it is a mixture of all of the above.

dougules

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Re: Is it too late [bitcoin]?
« Reply #218 on: December 06, 2017, 10:46:56 AM »
Can you imagine a store labeling the prices on their shelves in bitcoin?

This is a good a good example of deflation.  A loaf of bread went from 3 millibits to 0.2 millibits in a year.  Now people are hoarding cash hoping goods will be cheaper in the future.  That's not a stable currency.

There are a couple of misunderstandings in this post that I'd like to point out.

The first being that Bitcoin at the moment is not deflationary. It is inflationary and at the moment it is experiencing inflation at about 4%. The only reason why its price is going up is because demand in outpacing the rate of that inflation dramatically.

The point at which we'd see prices of goods displayed in bitcoin wouldn't happen until critical mass adoption has taken place for an extended period of time and a large portion of our economy is taking place in bitcoin. At that point demand will have likely stabilized which would mean that the volatility of its price would've dramatically decreased as well.

At that point bitcoin will likely be deflationary in nature due to the much lower rate of inflation (mined bitcoins) and the rate at which bitcoins are permanently lost. This will lead to a stable slowly growing value over time.

There are some misconceptions I feel about deflationary currencies that lead people to think that hording will take place with the currency and result in a massive decrease in consumer spending. However, real world economics has shown us that this is not the case. For example, today people line up outside doors on release day to purchase the new iPhone even though they'd be able to purchase that same phone for half the price one or two years later. While this is not currency economics at play, it is psychological economics that would lead a person to make the decision of whether to hold off a purchase knowing their buying power will be higher (2x) in a year or two for the same product. Also, people have basic needs that need to be met such as food, shelter, and clothing that most certainly would not be put off simply because of the deflationary aspect of the currency being used. If a person earns a salary in a deflationary currency, part of their weekly earnings will always go towards those basic needs before any deflationary effects of the currency are even felt. In other words, consumerism is a much more powerful economic force than deflation is.

What deflation does do is help protect worker wages over time as opposed to our current inflationary system that erodes wages over time. Wages are typically sticky which means that they don't adjust as easily to changes in the economic environment. So if worker wages are inherently tied to a deflationary currency, this will help protect the buying power of the working class regardless of whether or not working class citizens are receiving wage increases that meet the rate of inflation over time (and thus promote a more stable economy).

The idea that hording would take place of the currency under conditions where deflation is at or below 4% I believe to be false though. Today's massive price growth for bitcoin is not due to deflation though. If we reach a point where prices of goods are displayed in bitcoin and salaries are earned in bitcoin, then it will likely be the case that mass adoption has taken place in which case the price volatility will have decreased dramatically due to a stabilized demand. At that point the deflationary effect of bitcoin would simply be due to the rate at which bitcoins are lost and permanently removed from the market supply. In the meantime, as shadow said, volatility can be taken out of the equation for good purchases by continuing to peg the price of goods in a more stable currency such as the USD.

Let's not forget, currencies are not a zero-sum game. Bitcoin can become widely adopted and be an integral part of our world economy while perfectly co-existing with fiat currencies. This is a much more likely scenario contrary to what some on both sides of the virtual coin you're on would claim.

I think this missed the paradigm that is lacking.  From the perspective of the price of goods as priced in bitcoin, it's deflation.  Instead of thinking about the value of bitcoin going up in relation to dollars and goods, think about the value of goods and dollars going way down when you're looking from the perspective of paying in bitcoin.  That's deflation.  Because of that deflation, people actually are hoarding cash that they could otherwise be using to  buy furniture, collectibles, cars, or actual investments like stocks.  Bitcoin is cash.  They're hoping that bitcoin will go up in relation to dollars.  If you look at it from the perspective of bitcoin, though, they're actually hoping they will be able to use their cash (bitcoin) to buy the items they actually want at a cheaper price (when priced in bitcoin) in the future.  This is what you actually see happening right now.

At some point bitcoin may stabilize, but that point is not now.  I don't think all the volatility is helping bitcoin except that it may be worth it as a massive marketing campaign.  We're discussing it right now, so that aspect is working well.   

Bitcoin may have a place in the future, but that won't be until people are buying it to actually use for purchases or at least to store value long-term as you would with gold.  As long as most bitcoin is being exchanged with the idea of making quick money we're in a bubble. 
« Last Edit: December 06, 2017, 10:56:31 AM by dougules »

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #219 on: December 06, 2017, 05:51:08 PM »
This discussion really took off without me...you guys are doing a great job thinking through the issues. Some important books on the topic:

Capital in the Twenty-First Century by Thomas Picketty (early on this book discusses the importance of the Gold Standard in holding down inflation in Europe and US during the 1800's).

The Rise and Fall of American Growth by Robert J. Gordon (you can watch his Ted Talk here: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwivoqXIyvXXAhUq0oMKHauUAl4QtwIIJzAA&url=https%3A%2F%2Fwww.ted.com%2Ftalks%2Frobert_gordon_the_death_of_innovation_the_end_of_growth&usg=AOvVaw0C8-meuYA4-z1aQJPHcHMu

A Culture of Growth by Joel Mokyr. (he usually takes the opposing side to Dr. Gordon, insisting that dynamic growth in today's economy is still possible)
Thanks for posting that.

I watched the Ted Talk from Dr. Gordon.

And I just found an hour and half Youtube video on Joel Mokyr's book.

https://www.youtube.com/watch?v=wNbe7uwbiKE

I haven't watched it yet, but I thought it might save anyone else who cares the time and expense of buying the book.

Edit to add: and here's a 1:45 lecture from Thomas Piketty on his book:

https://www.youtube.com/watch?v=RRI6JuxTyrQ
« Last Edit: December 06, 2017, 06:00:41 PM by ILikeDividends »

maizeman

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Re: Is it too late [bitcoin]?
« Reply #220 on: December 06, 2017, 06:25:54 PM »
I just watched the Robert Jordan Ted Talk video, I'd highly recommend it to anyone else following this thread, thanks for posting it TallTexan.

It really explains why people who'd lived through the changes created by technological progress between 1910 and 1960 really found it plausible we'd have flying cars and be visiting other planets by the year 2010.

mjr

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Re: Is it too late [bitcoin]?
« Reply #221 on: December 06, 2017, 06:57:36 PM »
I just watched the Robert Jordan Ted Talk video

Maizeman a Wheel of Time reader :-) ?

maizeman

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Re: Is it too late [bitcoin]?
« Reply #222 on: December 06, 2017, 08:02:47 PM »
I just watched the Robert Jordan Ted Talk video

Maizeman a Wheel of Time reader :-) ?

Oh that's why he uses a middle initial. I knew I recognized the name from somewhere. ;-)

waltworks

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Re: Is it too late [bitcoin]?
« Reply #223 on: December 06, 2017, 08:07:04 PM »
You know it's a bubble when dead fantasy authors start showing up on TED talks about crypto!

Hmm. Jordan "died" just before bitcoin was introduced...

-W

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #224 on: December 07, 2017, 06:48:08 AM »
So much for these unhackable cryptos...

http://money.cnn.com/2017/12/07/technology/nicehash-bitcoin-theft-hacking/index.html

And, since by its nature the bitcoins can't be recovered -- they are not subject to government seizure, remember -- nicehash can kiss them goodbye.

In theory the bitcoin protocol itself might be "nearly unhackable" (whatever that means), but in practice it's only a matter of time before a breach could hit you, too....

To those thinking of buying a bitcoin or other crypto, you're money is gone when you buy.  Whether you can cash out later and get any money back is a completely different story.  Just ask all those poor folks who lost their private keys or kept their bitcoins at a hacked exchange.  There is no legal remedy or regulation to resolve these problems, nor is there a large organization with good customer service to "make things right." 

Here is your only remedy if you suffer a problem with bitcoin: Go sh*t in your hat.

For someone who dislikes crypto-currencies so much, you certainly hang around these parts frequently spreading FUD like no one's business.

ketchup

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Re: Is it too late [bitcoin]?
« Reply #225 on: December 07, 2017, 07:39:29 AM »
And that's why you learn what the hell you're doing before you do anything with crypto.  Not your own private keys, not your Bitcoin.  Nicehash pays out when you hit 0.01BTC accumulated with them if you use a non-Nicehash wallet (like clearly from this, everyone should).  I had about $12 (I think) worth with them that wasn't paid out to my real wallet yet.  I'll live.

waltworks

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Re: Is it too late [bitcoin]?
« Reply #226 on: December 07, 2017, 08:42:00 AM »
For people looking to enter in the space, watch all of Andrea's videos.  He has a way with explaining everything so newbies can understand.  Take your time and don't rush in.  Buy a portion of bitcoin that you're comfortable with.  This is not going away. Don't let everyone here tell you it's a scam ponzi.

To be fair, it can be an unsustainable bubble very easily without being a scam (there are certainly scams associated with lots of cryptos, but the concept itself isn't a scam) or a ponzi scheme (in which the money coming in from later investors is used to pay the early investors and create the illusion of great returns).

I don't think anyone here would claim that bitcoin is either of those things. We are just saying that when random investing naifs are talking something up on Facebook (no matter what it is!) you should probably run the other way.

-W

maizeman

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Re: Is it too late [bitcoin]?
« Reply #227 on: December 07, 2017, 09:05:34 AM »
Now up $4400 in about 36 hours.

As Walt said, you can be very optimistic about the long term potential of cryptocurrencies, and still be worried that the current price trajectory of bitcoin is in a bubble that is going to result in a lot of people who are completely new to crypto buying during the rapid upswing getting burned by losses in a crash, damaging the reputation of cryptocurrencies as a whole, and causing harm to the general public's interest in the adoption of cryptocurrencies to actually make payments in the medium term.

Also, credit where credit is due, I didn't think the incipient launch of "bitcoin futures" would have such a big effect on the price of the currency itself. Lifeanon predicted that this news would cause a big uptick in demand (and hence price). With the first bitcoin futures market launching on Sunday, it is clear that I was wrong in my prediction, and Lifeanon was correct.

ketchup

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Re: Is it too late [bitcoin]?
« Reply #228 on: December 07, 2017, 09:07:46 AM »
Now up $4400 in about 36 hours.

As Walt said, you can be very optimistic about the long term potential of cryptocurrencies, and still be worried that the current price trajectory of bitcoin is in a bubble that is going to result in a lot of people who are completely new to crypto buying during the rapid upswing getting burned by losses in a crash, damaging the reputation of cryptocurrencies as a whole, and causing harm to the general public's interest in the adoption of cryptocurrencies to actually make payments in the medium term.

Also, credit where credit is due, I didn't think the incipient launch of "bitcoin futures" would have such a big effect on the price of the currency itself. Lifeanon predicted that this news would cause a big uptick in demand (and hence price). With the first bitcoin futures market launching on Sunday, it is clear that I was wrong in my prediction, and Lifeanon was correct.
We'll see what happens when futures actually launch though.  Some on /r/bitcoin and the like seem to think "big money" is entering right now in an effort to pump and dump via shorting it once futures are available and it'll correct next week.  Nobody really knows though, of course.  My crystal ball is in the shop.

Also, I sold about a grand's worth of BTC just before this 36 hour ridiculous gain.  Whee.
« Last Edit: December 07, 2017, 09:09:48 AM by ketchup »

waltworks

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Re: Is it too late [bitcoin]?
« Reply #229 on: December 07, 2017, 09:24:17 AM »
As Walt said, you can be very optimistic about the long term potential of cryptocurrencies, and still be worried that the current price trajectory of bitcoin is in a bubble that is going to result in a lot of people who are completely new to crypto buying during the rapid upswing getting burned by losses in a crash, damaging the reputation of cryptocurrencies as a whole, and causing harm to the general public's interest in the adoption of cryptocurrencies to actually make payments in the medium term.

People are not thinking of these as currencies, they are thinking of them as magic free money. When that comes to an end (and there's still no way to go buy a bagel for lunch with any of them) I *hope* that some form of low transaction cost crypto payments system survives and is widely adopted. I agree with Maizeman here, though - the existing price trajectory is a bad thing in the long run.

The removal of the stranglehold of the credit card companies and money transfer fees is the societal benefit we want here. That 2-5% skimmed off the top of every transaction is a HUGE drag and an enormous waste. I *hate* that I can't accept quick electronic payments from customers or send payments to vendors without someone (ok, really, everyone) paying these fees.

That idea is getting lost in the "just buy as much bitcoin as you can because it always goes up" craziness. The goal here should be to let people seamlessly pay for and be paid for things (as cheaply and securely as possible) without *any excitement or expectation of crazy gains at all*. It should be boring!

-W

Lews Therin

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Re: Is it too late [bitcoin]?
« Reply #230 on: December 07, 2017, 09:27:22 AM »
Why is there an increase in value in Bitcoins? I don't understand why someone would pay 2$ for 1$ (since Bitcoin is an exchange mechanism)

waltworks

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Re: Is it too late [bitcoin]?
« Reply #231 on: December 07, 2017, 09:51:58 AM »
At what point do regulators step in? I mean, if the value gets high enough (especially if people are creating Bitcoin derivatives), it *does* become a systemic risk. Right now a bunch of people would lose a bunch of money, but not enough to cause a recession or other downstream consequences. Give it another couple orders of magnitude and it's a big big problem.

Man, I'm glad I'm FI and don't have to worry about this. It would drive me a little bit nuts to either own or NOT own any bitcoin during times like these. As it stands I can just break out the popcorn and hope that not too many people get hurt.

-W

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #232 on: December 07, 2017, 01:59:55 PM »
At what point do regulators step in? I mean, if the value gets high enough (especially if people are creating Bitcoin derivatives), it *does* become a systemic risk. Right now a bunch of people would lose a bunch of money, but not enough to cause a recession or other downstream consequences. Give it another couple orders of magnitude and it's a big big problem.

Man, I'm glad I'm FI and don't have to worry about this. It would drive me a little bit nuts to either own or NOT own any bitcoin during times like these. As it stands I can just break out the popcorn and hope that not too many people get hurt.

-W

Actually the higher the value goes, the lower the risk would be because volatility would go down. The global derivatives market is already a system risk. Adding the straw that is bitcoin to the camel's back I don't think will make much of a difference. Regulators haven't really stepped in on the unregulated ~$1.2 quadrillion derivatives market yet, what would make them step in on a few billion dollar derivative market?

Also, I don't think the risk goes away whether your FI or not, unless you've found a way to not be tied to the markets or the economy in anyway.

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #233 on: December 07, 2017, 02:22:59 PM »
Now up $4400 in about 36 hours.

As Walt said, you can be very optimistic about the long term potential of cryptocurrencies, and still be worried that the current price trajectory of bitcoin is in a bubble that is going to result in a lot of people who are completely new to crypto buying during the rapid upswing getting burned by losses in a crash, damaging the reputation of cryptocurrencies as a whole, and causing harm to the general public's interest in the adoption of cryptocurrencies to actually make payments in the medium term.

Also, credit where credit is due, I didn't think the incipient launch of "bitcoin futures" would have such a big effect on the price of the currency itself. Lifeanon predicted that this news would cause a big uptick in demand (and hence price). With the first bitcoin futures market launching on Sunday, it is clear that I was wrong in my prediction, and Lifeanon was correct.

Actually I was wrong too. I was far too low in my estimate. I didn't think the price would be anywhere near what it is currently. As you and others have stated, that is quite alarming. I'm a big bitcoin bull long-term, but I'm not rabid to the point where I can't recognize when something might not be sustainable.

It isn't the price that I'm concerned with. What's also alarming is the fact that the big price spike today was largely seen on Coinbase which is the market entry point for all new users to bitcoin. That means that the large spike in price likely has to do with new users making first time purchases. New users are a good thing, but when it happens in a frenzy like it did today, then that's probably not going to end well for many of those new users. Especially considering the fact that arbitrage sharks were just circling around waiting to eat some of the new users willing to buy at sky high prices relative to the going rate for bitcoin on most other exchanges.

waltworks

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Re: Is it too late [bitcoin]?
« Reply #234 on: December 07, 2017, 02:33:20 PM »
Also, I don't think the risk goes away whether your FI or not, unless you've found a way to not be tied to the markets or the economy in anyway.

Sorry, those paragraphs were intended to be separate thoughts. Poorly written on my part. What I meant was that I don't have to spend any time kicking myself for not putting all my money in bitcoin a year ago, nor do I have to sweat out when to sell my Bitcoin gains. I can just watch and be entertained.

If the whole economy goes to hell because of bitcoin somehow, I'm just as screwed as everyone else. :)

-W

thenextguy

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Re: Is it too late [bitcoin]?
« Reply #235 on: December 07, 2017, 02:47:26 PM »
Why is there an increase in value in Bitcoins? I don't understand why someone would pay 2$ for 1$ (since Bitcoin is an exchange mechanism)

Currencies are constantly increasing/decreasing in value. It's not unique to Bitcoin.

https://www.bloomberg.com/markets/currencies


seattlecyclone

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Re: Is it too late [bitcoin]?
« Reply #236 on: December 07, 2017, 02:53:44 PM »
Why is there an increase in value in Bitcoins? I don't understand why someone would pay 2$ for 1$ (since Bitcoin is an exchange mechanism)

Currencies are constantly increasing/decreasing in value. It's not unique to Bitcoin.

https://www.bloomberg.com/markets/currencies



Yes, but for most currencies a 1% change in a day is a pretty big deal. I know that something costing $10 today will cost roughly $10 tomorrow.

Bitcoin has doubled in the past month. They're not really the same thing.

thenextguy

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Re: Is it too late [bitcoin]?
« Reply #237 on: December 07, 2017, 02:58:34 PM »
Why is there an increase in value in Bitcoins? I don't understand why someone would pay 2$ for 1$ (since Bitcoin is an exchange mechanism)

Currencies are constantly increasing/decreasing in value. It's not unique to Bitcoin.

https://www.bloomberg.com/markets/currencies



Yes, but for most currencies a 1% change in a day is a pretty big deal. I know that something costing $10 today will cost roughly $10 tomorrow.

Bitcoin has doubled in the past month. They're not really the same thing.

The post I was responding to implied that currencies shouldn't change in price. (Why is there an increase in value in Bitcoins?) The poster didn't question the rapid or large changes in Bitcoin price, but the mere fact that it was changing at all. So you're adding irrelevant details to the topic being discussed: Do currencies change in price? The answer is "yes." All the time.

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #238 on: December 07, 2017, 03:15:16 PM »
Why is there an increase in value in Bitcoins? I don't understand why someone would pay 2$ for 1$ (since Bitcoin is an exchange mechanism)

Currencies are constantly increasing/decreasing in value. It's not unique to Bitcoin.

https://www.bloomberg.com/markets/currencies



Yes, but for most currencies a 1% change in a day is a pretty big deal. I know that something costing $10 today will cost roughly $10 tomorrow.

Bitcoin has doubled in the past month. They're not really the same thing.

The post I was responding to implied that currencies shouldn't change in price. (Why is there an increase in value in Bitcoins?) The poster didn't question the rapid or large changes in Bitcoin price, but the mere fact that it was changing at all. So you're adding irrelevant details to the topic being discussed: Do currencies change in price? The answer is "yes." All the time.
A dollar is going to be worth a 100 cents regardless of whether its exchange rate rises or falls against the Euro.  You will only notice that difference if you're trying to buy an asset or commodity (bread, for instance) with USD which is priced in Euros, because you have to then exchange your dollars for Euros at the going rate in order to purchase that bread.

I won't get into a debate about whether gold or bitcoins are currencies.  Regardless of where you stand on that, it is inarguable that both are assets that react to the forces of supply and demand.  And that is why both gold and bitcoins go up or down in price at any given time.  They are both assets that are subject to market forces, priced in whatever currency you happen to be buying or selling them in at the time.

If you want to "spend" a part of your bitcoin on a loaf of bread, you have to sell enough of it to pay for the bread, and pay capital gains tax (if any) first, at the market price, before you can do that.  You could probably spend your bitcoin directly to get access restored to your hacked computer, but I kind of consider that to be an outlier scenario at the moment.
« Last Edit: December 07, 2017, 04:05:33 PM by ILikeDividends »

Aggie1999

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Re: Is it too late [bitcoin]?
« Reply #239 on: December 07, 2017, 03:50:17 PM »
So much for these unhackable cryptos...

http://money.cnn.com/2017/12/07/technology/nicehash-bitcoin-theft-hacking/index.html

And, since by its nature the bitcoins can't be recovered -- they are not subject to government seizure, remember -- nicehash can kiss them goodbye.

In theory the bitcoin protocol itself might be "nearly unhackable" (whatever that means), but in practice it's only a matter of time before a breach could hit you, too....

To those thinking of buying a bitcoin or other crypto, you're money is gone when you buy.  Whether you can cash out later and get any money back is a completely different story.  Just ask all those poor folks who lost their private keys or kept their bitcoins at a hacked exchange.  There is no legal remedy or regulation to resolve these problems, nor is there a large organization with good customer service to "make things right." 

Here is your only remedy if you suffer a problem with bitcoin: Go sh*t in your hat.

For someone who dislikes crypto-currencies so much, you certainly hang around these parts frequently spreading FUD like no one's business.

+1

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #240 on: December 07, 2017, 03:54:52 PM »
A dollar is going to be worth a 100 cents regardless of whether its exchange rate rises or falls against the Euro. 

A bitcoin is going to be worth 100,000,000 satoshis regardless of whether its exchange rate rises or falls against the dollar.

I hope you realize why that doesn't make sense now, right?

You will only notice that difference if you're trying to buy an asset or commodity (bread, for instance) with USD which is priced in Euros, because you have to then exchange your dollars for Euros at the going rate in order to purchase that bread.

I won't get into a debate about whether gold or bitcoins are currencies.  Regardless of where you stand on that, it is inarguable that both are assets that react to the forces of supply and demand.  And that is why both gold and bitcoins go up or down in price at any given time.  They are both assets that are subject to market forces, priced in whatever currency you happen to be buying or selling them in at the time.

If you want to "spend" a part of your bitcoin on a loaf of bread, you have to sell some if first, at the market price, before you can do that.  You could probably spend your bitcoin directly to get access restored to your hacked computer, but I kind of consider that to be an outlier scenario at this point.

A US dollar does have a value that rises and falls in and of itself regardless of whether or not you're exchanging it for another foreign currency. If you're only looking at the exchange rate between the USD and a EUR, for example, you're only looking at the relativity between the two. So if the USD falls compared to the EUR, some of that difference could be due to the EUR's strength and some of that could be due to the USD's decline.

Meanwhile, back home if part of the drop in the USD compared to the EUR was due to the USD's decline in value, then a loaf of bread will suddenly be more expensive to buy with US dollars. You might not notice it day to day, but you most certainly will over the course of a few years or even decades.

Like thenextguy said, all currencies change in price and that change is noted in its actual value whether you're exchanging it for another currency or for a good at the store.

Volatility will come down with bitcoin as its market matures. Volatility is not a critique against bitcoin, but a critique against the fact that the market is as small as it is. However, price volatility is not a hinderence to its use as a currency or medium of exchange if all goods are still priced in USD or any other fiat currency. The cost in bitcoin can simply be adjusted or calculated at the time of purchase when paying with bitcoin and this can happen automatically with whatever POS system is being used. There's no need to adjust good prices according to the price of a bitcoin. It is however a hinderence to lending which is why you won't see loans pegged to the price of a bitcoin for quite a while. Loans can be issued in bitcoin, but as with goods, their amounts and amortization schedules will be pegged to USD to protect the borrowers and lenders from large increases or decreases over the course of the loan.

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #241 on: December 07, 2017, 04:08:30 PM »
A dollar is going to be worth a 100 cents regardless of whether its exchange rate rises or falls against the Euro. 

A bitcoin is going to be worth 100,000,000 satoshis regardless of whether its exchange rate rises or falls against the dollar.

I hope you realize why that doesn't make sense now, right?

Please explain how it doesn't make sense.  I will have 100 cents worth of buying power in the USA regardless of whether the USD rises or falls against the Euro.  Its value or utility doesn't change here regardless of whether it goes up or down against the Euro.

Bitcoin doesn't have an "exchange rate" any more than gold does.  Both have a market price.

I agree that a bitcoin is going to be worth 100,000,000 satoshis regardless of whether its price goes up in dollar terms or not.  Are you saying that your statement doesn't make sense?

I don't realize a capital gain or loss when the dollar's buying power changes due to inflation or deflation.
A fifty year old dollar is still worth a dollar now.  It just has less buying power now.

Your situation with bitcoin is similar, but with one very big difference.  You can't buy much of anything with your bitcoin without first realizing a capital gain or loss by selling it for whatever the market thinks it's worth in current dollars at that time; just like with gold.

If I hide a dollar under my mattress for 10 years, I can still spend it for whatever goods or services it will buy at a later time, without realizing a taxable gain or loss.

You can't even hide a bitcoin under your mattress, but that's neither here nor there.
« Last Edit: December 07, 2017, 04:39:12 PM by ILikeDividends »

dougules

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Re: Is it too late [bitcoin]?
« Reply #242 on: December 07, 2017, 04:35:58 PM »
A dollar is going to be worth a 100 cents regardless of whether its exchange rate rises or falls against the Euro. 

A bitcoin is going to be worth 100,000,000 satoshis regardless of whether its exchange rate rises or falls against the dollar.

I hope you realize why that doesn't make sense now, right?

Please explain how it doesn't make sense.  I will have 100 cents worth of buying power in the USA regardless of whether the USD rises or falls against the Euro.  Its value or utility doesn't change here regardless of whether it goes up or down against the Euro.

Bitcoin doesn't have an "exchange rate" any more than gold does.  Both have a market price.

I agree that a bitcoin is going to be worth 100,000,000 satoshis regardless of whether its price goes up in dollar terms or not.  Are you saying that your statement doesn't make sense?

I don't realize a capital gain or loss when the dollar's value changes due to inflation or deflation.

Your situation with bitcoin is similar, but with one very big difference.  You can't buy much of anything with your bitcoin without first realizing a capital gain or loss by selling it for whatever the market thinks it's worth in current dollars at that time; just like with gold.

If I hide a dollar under my mattress for 10 years, I can still spend it for whatever goods or services it will buy at a later time, without realizing a taxable gain or loss.

You can't even hide a bitcoin under your mattress, but that's neither here nor there.

It is an exchange rate.  Bitcoin is or at least is meant to be a currency.  The idea was that you'd be able to pay for a croissant and coffee with it.  And that's also why holding bitcoin is holding cash. 

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #243 on: December 07, 2017, 04:44:15 PM »
A dollar is going to be worth a 100 cents regardless of whether its exchange rate rises or falls against the Euro. 

A bitcoin is going to be worth 100,000,000 satoshis regardless of whether its exchange rate rises or falls against the dollar.

I hope you realize why that doesn't make sense now, right?

Please explain how it doesn't make sense.  I will have 100 cents worth of buying power in the USA regardless of whether the USD rises or falls against the Euro.  Its value or utility doesn't change here regardless of whether it goes up or down against the Euro.

Bitcoin doesn't have an "exchange rate" any more than gold does.  Both have a market price.

I agree that a bitcoin is going to be worth 100,000,000 satoshis regardless of whether its price goes up in dollar terms or not.  Are you saying that your statement doesn't make sense?

I don't realize a capital gain or loss when the dollar's value changes due to inflation or deflation.

Your situation with bitcoin is similar, but with one very big difference.  You can't buy much of anything with your bitcoin without first realizing a capital gain or loss by selling it for whatever the market thinks it's worth in current dollars at that time; just like with gold.

If I hide a dollar under my mattress for 10 years, I can still spend it for whatever goods or services it will buy at a later time, without realizing a taxable gain or loss.

You can't even hide a bitcoin under your mattress, but that's neither here nor there.

It is an exchange rate.  Bitcoin is or at least is meant to be a currency.  The idea was that you'd be able to pay for a croissant and coffee with it.  And that's also why holding bitcoin is holding cash.
I'd love to be a fly on the wall when you try to explain that to the IRS auditor for not reporting your capital gains.

You can conflate market price with exchange rate if you wish to, but that doesn't make it true.

And you can "intend" it to be a currency all you want.  I'm not going to debate that any more than you would debate about whether my intentions could turn a bowl of oatmeal into a currency..
« Last Edit: December 07, 2017, 04:47:39 PM by ILikeDividends »

maizeman

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Re: Is it too late [bitcoin]?
« Reply #244 on: December 07, 2017, 04:46:55 PM »
You can't even hide a bitcoin under your mattress, but that's neither here nor there.

Actually you can if you have a hard copy private key, but that's also neither here nor there. ;-)

Quote
Bitcoin doesn't have an "exchange rate" any more than gold does.  Both have a market price.

I'd argue exchange rate vs market price is a distinction without a difference. The whether you say market price or exchange rate, you need variable numbers of dollars to buy a given amount of euros, RMB, bitcoin, gold, or porkbellies. In all four cases that price is determined by how many people are willing to buy (and at what prices) and how many are willing to sell (and at what prices).

But I remain open to being proven wrong though. How would you define the difference between a market price and an exchange rate (other than that one applies to a currency and one applies to a commodity, because that would just become circular reasoning).

Quote
I don't realize a capital gain or loss when the dollar's value changes due to inflation or deflation. ... If I hide a dollar under my mattress for 10 years, I can still spend it for whatever goods or services it will buy at a later time, without realizing a taxable gain or loss.

That's because you live in the USA where our tax code is denominated in dollars. If you lived in Europe or China where the tax codes use Euros or RMB you would indeed realize taxable gains or losses as the value of a dollar changed. If you hold Euros or RMB in the USA you would indeed incur tax liability as the the market price of these currencies increased (in USD terms). I think these are actually taxed as ordinary income, not capital gains.

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #245 on: December 07, 2017, 05:00:52 PM »
You can't even hide a bitcoin under your mattress, but that's neither here nor there.

Actually you can if you have a hard copy private key, but that's also neither here nor there. ;-)

Quote
Bitcoin doesn't have an "exchange rate" any more than gold does.  Both have a market price.

I'd argue exchange rate vs market price is a distinction without a difference. The whether you say market price or exchange rate, you need variable numbers of dollars to buy a given amount of euros, RMB, bitcoin, gold, or porkbellies. In all four cases that price is determined by how many people are willing to buy (and at what prices) and how many are willing to sell (and at what prices).

But I remain open to being proven wrong though. How would you define the difference between a market price and an exchange rate (other than that one applies to a currency and one applies to a commodity, because that would just become circular reasoning).

Quote
I don't realize a capital gain or loss when the dollar's value changes due to inflation or deflation. ... If I hide a dollar under my mattress for 10 years, I can still spend it for whatever goods or services it will buy at a later time, without realizing a taxable gain or loss.

That's because you live in the USA where our tax code is denominated in dollars. If you lived in Europe or China where the tax codes use Euros or RMB you would indeed realize taxable gains or losses as the value of a dollar changed. If you hold Euros or RMB in the USA you would indeed incur tax liability as the the market price of these currencies increased (in USD terms). I think these are actually taxed as ordinary income, not capital gains.

I said I wasn't going to debate whether bitcoin is a currency, and I'm going to hold to that.

But I think I can convince you of the difference in those terms simply by using the dictionary.

ex·change rate
noun
noun: exchange rate; plural noun: exchange rates; noun: rate of exchange; plural noun: rates of exchange

    the value of one currency for the purpose of conversion to another.

cur·ren·cy
ˈkərənsē/
noun
noun: currency; plural noun: currencies

    1.
    a system of money in general use in a particular country.
    "the dollar was a strong currency"
    synonyms:   money, legal tender, cash, banknotes, bills, notes, coins, coinage, specie
    "foreign currency"
    2.
    the fact or quality of being generally accepted or in use.
    "the term gained currency during the second half of the 20th century"
    synonyms:   prevalence, circulation, exposure; More
    acceptance, popularity
    "a term that has gained new currency"
        the time during which something is in use or operation.

Bitcoin fails the test on both counts.

USD, Euros, and RMB all pass with flying colors.

Now, I'm not saying that bitcoin isn't a currency.  But that doesn't mean that I agree that it's a currency, either.  I'm simply saying that by definition, it doesn't have an exchange rate, while it very clearly does have a market price.

I concede the point about hiding it under a mattress.  Well played. ;)
« Last Edit: December 07, 2017, 05:46:52 PM by ILikeDividends »

Lews Therin

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Re: Is it too late [bitcoin]?
« Reply #246 on: December 07, 2017, 05:04:21 PM »
The moment it gets accepted (Which is what people are betting on) it will be a currency/method of exchange.... If it ever does.

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #247 on: December 07, 2017, 05:07:39 PM »
Please explain how it doesn't make sense.  I will have 100 cents worth of buying power in the USA regardless of whether the USD rises or falls against the Euro.  Its value or utility doesn't change here regardless of whether it goes up or down against the Euro.

Bitcoin doesn't have an "exchange rate" any more than gold does.  Both have a market price.

I agree that a bitcoin is going to be worth 100,000,000 satoshis regardless of whether its price goes up in dollar terms or not.  Are you saying that your statement doesn't make sense?

I don't realize a capital gain or loss when the dollar's buying power changes due to inflation or deflation.
A fifty year old dollar is still worth a dollar now.  It just has less buying power now.

Your situation with bitcoin is similar, but with one very big difference.  You can't buy much of anything with your bitcoin without first realizing a capital gain or loss by selling it for whatever the market thinks it's worth in current dollars at that time; just like with gold.

If I hide a dollar under my mattress for 10 years, I can still spend it for whatever goods or services it will buy at a later time, without realizing a taxable gain or loss.

You can't even hide a bitcoin under your mattress, but that's neither here nor there.

Because that's no different than saying that the value of a dollar is a dollar. It isn't necessarily that it doesn't make sense, but just that it is an absurb obviousness that wasn't in question by anyone. A dog will always be a dog too.

Just $1 buys you a bagel today doesn't mean that will always hold true. An exchange rate between two different currencies is only the relativity of those values between the currencies being exchanged.

The fact that bitcoin needs to be exchanged before being spent is irrelevant as to whether it has the capability of being used as a currency. If you take a euro to a US store, you probably won't be able to buy much with it. That doesn't mean that it doesn't have use as a currency at all. It's just that you'll have better success with it in Europe. If you use bitcoin in Japan where merchant adoption is much higher, then you won't find this as being a problem. Considering the fact that bitcoin is a global currency, then it is to be expected that its success as a currency would vary greatly by region.

Being forced to pay taxes on any capital gains or losses on every exchange of bitcoin in the US is definitely a hindrance to its use as a currency (what relevance was this to the discussion?). I do have hope that will change someday in the US. But, that's a local regulatory problem for whatever region you're in. Since bitcoin is global, that's not the case for everyone that goes to use it as currency (why were capital gains brought up?).

The original point that was being discussed however was just simply the fact that currencies go up and down in value and that is not unique to bitcoin alone. I don't know what you're arguing and why there were so many tangents taken here. Excuse me if I jumped all around, but I'm just trying to address each of the various points you brought up.

Looking back at thenextguy's post who you responded to, it looks like you're now in agreement with him (that currencies can change value in their own right). So I guess we all are in agreement. So that's great! Cheers.

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #248 on: December 07, 2017, 05:23:34 PM »
Please explain how it doesn't make sense.  I will have 100 cents worth of buying power in the USA regardless of whether the USD rises or falls against the Euro.  Its value or utility doesn't change here regardless of whether it goes up or down against the Euro.

Bitcoin doesn't have an "exchange rate" any more than gold does.  Both have a market price.

I agree that a bitcoin is going to be worth 100,000,000 satoshis regardless of whether its price goes up in dollar terms or not.  Are you saying that your statement doesn't make sense?

I don't realize a capital gain or loss when the dollar's buying power changes due to inflation or deflation.
A fifty year old dollar is still worth a dollar now.  It just has less buying power now.

Your situation with bitcoin is similar, but with one very big difference.  You can't buy much of anything with your bitcoin without first realizing a capital gain or loss by selling it for whatever the market thinks it's worth in current dollars at that time; just like with gold.

If I hide a dollar under my mattress for 10 years, I can still spend it for whatever goods or services it will buy at a later time, without realizing a taxable gain or loss.

You can't even hide a bitcoin under your mattress, but that's neither here nor there.

Because that's no different than saying that the value of a dollar is a dollar. It isn't necessarily that it doesn't make sense, but just that it is an absurb obviousness that wasn't in question by anyone. A dog will always be a dog too.

I'm glad we can agree on that.

Quote

Just $1 buys you a bagel today doesn't mean that will always hold true. An exchange rate between two different currencies is only the relativity of those values between the currencies being exchanged.

The fact that bitcoin needs to be exchanged before being spent is irrelevant as to whether it has the capability of being used as a currency. If you take a euro to a US store, you probably won't be able to buy much with it. That doesn't mean that it doesn't have use as a currency at all. It's just that you'll have better success with it in Europe. If you use bitcoin in Japan where merchant adoption is much higher, then you won't find this as being a problem. Considering the fact that bitcoin is a global currency, then it is to be expected that its success as a currency would vary greatly by region.

I never disputed whether it has the capability of being used as a currency.  Bowls of oatmeal have the capability of being used as currency too.  Something being accepted as a currency has nothing inherently to do with what it is or can do.

Quote

Being forced to pay taxes on any capital gains or losses on every exchange of bitcoin in the US is definitely a hindrance to its use as a currency (what relevance was this to the discussion?). I do have hope that will change someday in the US. But, that's a local regulatory problem for whatever region you're in. Since bitcoin is global, that's not the case for everyone that goes to use it as currency (why were capital gains brought up?).

If it did not elucidate anything for you, you should feel free to ignore it.

Quote
The original point that was being discussed however was just simply the fact that currencies go up and down in value and that is not unique to bitcoin alone. I don't know what you're arguing and why there were so many tangents taken here. Excuse me if I jumped all around, but I'm just trying to address each of the various points you brought up.

Looking back at thenextguy's post who you responded to, it looks like you're now in agreement with him (that currencies can change value in their own right). So I guess we all are in agreement. So that's great! Cheers.
Yes, I too think it's good that we can agree on stuff we never disagreed about. 
« Last Edit: December 07, 2017, 05:31:19 PM by ILikeDividends »

maizeman

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Re: Is it too late [bitcoin]?
« Reply #249 on: December 07, 2017, 05:51:58 PM »
Quote
I'd argue exchange rate vs market price is a distinction without a difference. The whether you say market price or exchange rate, you need variable numbers of dollars to buy a given amount of euros, RMB, bitcoin, gold, or porkbellies. In all four cases that price is determined by how many people are willing to buy (and at what prices) and how many are willing to sell (and at what prices).

But I remain open to being proven wrong though. How would you define the difference between a market price and an exchange rate (other than that one applies to a currency and one applies to a commodity, because that would just become circular reasoning).

I said I wasn't going to debate whether bitcoin is a currency, and I'm going to hold to that.

But I think I can convince you of the difference in those terms simply by using the dictionary.

ex·change rate
noun
noun: exchange rate; plural noun: exchange rates; noun: rate of exchange; plural noun: rates of exchange

    the value of one currency for the purpose of conversion to another.

cur·ren·cy
ˈkərənsē/
noun
noun: currency; plural noun: currencies

    1.
    a system of money in general use in a particular country.
    "the dollar was a strong currency"
    synonyms:   money, legal tender, cash, banknotes, bills, notes, coins, coinage, specie
    "foreign currency"
    2.
    the fact or quality of being generally accepted or in use.
    "the term gained currency during the second half of the 20th century"
    synonyms:   prevalence, circulation, exposure; More
    acceptance, popularity
    "a term that has gained new currency"
        the time during which something is in use or operation.

Bitcoin fails the test on both counts.

USD, Euros, and RMB all pass with flying colors.

Now, I'm not saying that bitcoin isn't a currency.  But that doesn't mean that I agree that it's a currency, either.  I'm simply saying that by definition, it doesn't have an exchange rate, while it very clearly does have a market price.

I concede the point about hiding it under a mattress.  Well played. ;)

If I follow the reasoning from your two definitions, your argument is:

(A) the difference between an exchange rate and a market price is that an exchange rate is defined as the rate at which two currencies can be converted from one to the other, and a market price is is the rate at which one currency and one commodity can be converted from one to the other
(B) if bitcoin is not a currency, USD and bitcoin, by definition, cannot have an exchange rate.

I don't actually disagree with either A or B. But I will say that the logically consequence of accepting those two statements is that stating "[I think] Bitcoin doesn't have an "exchange rate" any more than gold does.  Both have a market price." is simply another way of restating "[I think] Bitcoin is not a currency."

Which is a perfectly reasonably view to hold. But saying bitcoin has a market price rather than an exchange rate is not a form of evidence that bitcoin isn't a currency, it's a somewhat less direct way of informing the reader that your view is that bitcoin is not a currency.