Author Topic: Is it too late [bitcoin]?  (Read 14753 times)

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #200 on: December 04, 2017, 12:24:05 PM »
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.

zoltani

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Re: Is it too late [bitcoin]?
« Reply #201 on: December 04, 2017, 01:49:38 PM »
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?

ďThe hardest thing in the world is to simplify your life. Itís so easy to make it complex. Whatís important is leading an examined life.Ē

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frozen

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Re: Is it too late [bitcoin]?
« Reply #202 on: December 05, 2017, 09:21:04 AM »
If I were to invest in bitcoin this late in the game, what is your advice?
How would someone who is just learning about Bitcoin and other crypto currencies invest for the first time?
Are Bitcoin futures offered via CME group available to individual investors?

L.A.S.

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Re: Is it too late [bitcoin]?
« Reply #203 on: December 05, 2017, 10:00:25 AM »
If I were to invest in bitcoin this late in the game, what is your advice?
Don't do it.
Quote

How would someone who is just learning about Bitcoin and other crypto currencies invest for the first time?
Take your money and put it in VTSAX or an equivalent global stock index fund.  Since bitcoin is ostensibly currency, any economic benefit is does in fact produce would inure to the economy and businesses themselves.  However, as of yet, cryptos have virtually no impact on the global economy and constitute a pure speculation.  By investing in actual businesses you will avoid loosing money in cryptos when the bubble pops.
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Are Bitcoin futures offered via CME group available to individual investors?
Probably not. Keep in mind a future is a leveraged bet on the underlying asset.  Leverage increases volatility.  Cryptos are volatile enough as it is.  I don't comprehend why anyone would want to make a leveraged bet on them to increase volatility.

The CME group proposal as best as I can understand it is half-baked since it does not address which bitcoin, bitcoin future contracts are to be settled against if there is an intervening hard fork between when the futures contract is written and when it settles.  This oversight is ripe for manipulation.
« Last Edit: December 05, 2017, 10:37:59 AM by L.A.S. »

Cwadda

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Re: Is it too late [bitcoin]?
« Reply #204 on: December 05, 2017, 10:01:32 AM »
Quote
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, it's awful. 

They also post about it being a passive investment opportunity, which is even worse.

Cwadda

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Re: Is it too late [bitcoin]?
« Reply #205 on: December 05, 2017, 10:03:01 AM »
Quote
If I were to invest in bitcoin this late in the game, what is your advice?
Don't.  You won't see people around these forums advocating for it. The point of MMM is to get rich slow.

Quote
How would someone who is just learning about Bitcoin and other crypto currencies invest for the first time?
There is a documentary on Netflix about it. I haven't seen it but have been meaning to.  It got good reviews.

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #206 on: December 05, 2017, 11:03:34 AM »
Keep in mind a future is a leveraged bet on the underlying asset.  Leverage increases volatility.  Cryptos are volatile enough as it is.  I don't comprehend why anyone would want to make a leveraged bet on them to increase volatility.

The CME group proposal as best as I can understand it is half-baked since it does not address which bitcoin, bitcoin future contracts are to be settled against if there is an intervening hard fork between when the futures contract is written and when it settles.  This oversight is ripe for manipulation.

What makes you think that volatility will increase when futures markets open up? It is widely expected to decrease volatility.

Leverage works both ways and in CME's futures market, every long position must be matched with a corresponding short position.

Also, CME's futures market will have volatility limits imposed like some of their other markets have in place to limit or halt trading if there are price fluctuations beyond specific thresholds (https://www.investopedia.com/news/could-bitcoin-futures-help-limit-volatility/).

Right now in the bitcoin market, there is no reciprocal pressure on the market when panic selling ensues because there aren't many options out there for shorting your position. This means that investors are completely exposed to volatility which is why panic selling takes place. These futures markets will give investors opportunities to limit their risk in the market and thus this will have an effect on the underlying market.

Also, I don't think CME is making an oversight in regards to hard forks. They state on their website that there will be a policy in place for viable hard forks should one be planned. Also, their reference rate is based on several large exchanges and therefore their pricing in their futures market is directly dependent on how the market itself reacts to the hardfork. I don't think there will be much of a conflict in existing futures contracts in the event of a hardfork.

talltexan

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Re: Is it too late [bitcoin]?
« Reply #207 on: December 05, 2017, 12:29:06 PM »
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.



Can you provide more details about how you calculated this 4% figure? Jargon is fine, I have a graduate degree in economics.

jorjor

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Re: Is it too late [bitcoin]?
« Reply #208 on: December 05, 2017, 12:56:24 PM »
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.



Can you provide more details about how you calculated this 4% figure? Jargon is fine, I have a graduate degree in economics.

He's just saying that at the current rate at which Bitcoins are mined, the total supply will increase about 4% this year. There were 16.4 million BTC in mid-2017. The reward rate is 12.5 BTC per block. At a block rate of around 10 minutes per block, that adds 650000ish BTC per year, or around 17.06 million in mid-2018, for an increase of about 4%.

That doesn't count the lost Bitcoins that are out of circulation which would leverage the trend rate. For example, if enough were lost forever such that there are really only 12 million in circulation in mid-2017, adding 650,000 BTC would give you an increase in the trend rate of about 5.5%. BTC are still being lost today, but I'd guess it's at a lower rate now that they are worth more and the stakes are higher.

That rate trends down to 0% over time.

ETA: I edited to add the calculations while lifeanon was posting essentially the same thing just below this.
« Last Edit: December 05, 2017, 01:09:51 PM by jorjor »

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #209 on: December 05, 2017, 01:00:21 PM »
Can you provide more details about how you calculated this 4% figure? Jargon is fine, I have a graduate degree in economics.

Currently, every block mined rewards 12.5 new bitcoins. The network is designed to mine one block every 10 minutes on average. This means that each hour will introduce 75 new bitcoin to circulation. There is currently a total of about 16.7 million bitcoin that have been mined to date. This means that annually at a rate of 12.5 new bitcoin every 10 minutes, there will be about 657,000 new bitcoins added (until the next halving in ~2020). So the annual inflation rate is around 4%...

657,000/16,700,000 = 3.93%

https://charts.bitcoin.com/chart/inflation
https://www.reddit.com/r/Bitcoin/comments/1s3buc/chart_of_bitcoin_inherent_inflation_rate_til_it/?st=jau1dgkw&sh=c08ff143

talltexan

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Re: Is it too late [bitcoin]?
« Reply #210 on: December 05, 2017, 01:08:16 PM »
Thank you for that clarification. The change in money supply by itself is not enough to compare to an "inflation" rate, because the later includes a measure of the price of real goods and services that are produced using that currency. Comparing that 4% figure to any mainstream measure of inflation in the US economy would not be correct.

For Bitcoin, the set of goods/services are very different than for the average household using the US Dollar, they would skew more towards web/computer related items, and, yes, some "gray market" transactions. I have never heard of a rent or housing transaction being done in bitcoin, although I am sure there are several like this by now. The definition you give for reaching that 4% figure would be more akin to the growth of a measure of money supply, such as M1, which is the amount of currency in circulation, as well as liquid deposits in checking accounts.

According to data from the FRB of St. Louis, this measure increased by about 7.5% over the twelve months ending in October 2017.https://fred.stlouisfed.org/series/M1SL Indeed this would suggest that during those twleve months, the money supply for the US economy increased faster than did that for the "Bitcoin Economy."

shadow

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Re: Is it too late [bitcoin]?
« Reply #211 on: December 05, 2017, 01:30:13 PM »
Don't.  You won't see people around these forums advocating for it. The point of MMM is to get rich slow.

The traits that I relate to are frugality, minimalism, and stoicism. It's irrelevant to me to take into consideration that acquiring wealth should have a time restriction.

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #212 on: December 05, 2017, 01:49:06 PM »
Thank you for that clarification. The change in money supply by itself is not enough to compare to an "inflation" rate, because the later includes a measure of the price of real goods and services that are produced using that currency. Comparing that 4% figure to any mainstream measure of inflation in the US economy would not be correct.

For Bitcoin, the set of goods/services are very different than for the average household using the US Dollar, they would skew more towards web/computer related items, and, yes, some "gray market" transactions. I have never heard of a rent or housing transaction being done in bitcoin, although I am sure there are several like this by now. The definition you give for reaching that 4% figure would be more akin to the growth of a measure of money supply, such as M1, which is the amount of currency in circulation, as well as liquid deposits in checking accounts.

According to data from the FRB of St. Louis, this measure increased by about 7.5% over the twelve months ending in October 2017.https://fred.stlouisfed.org/series/M1SL Indeed this would suggest that during those twleve months, the money supply for the US economy increased faster than did that for the "Bitcoin Economy."

I wasn't making any comparison to anything else. I was merely discussion bitcoin's inflation rate in regards to the currency itself. I wasn't discussing anything with regards to something like the consumer price index (CPI) which is what I think you're alluding to which takes into account the price of goods and wages, etc.

Since bitcoin is a negligible part of our economy, it has a negligible impact on the CPI and therefore it isn't measurable at this point. If bitcoin were to ever become a major part of our economy, it will absolutely be deflationary in nature due to the amount of bitcoin being lost compared to the amount in circulation. By the time that were to occur, the number of newly mined bitcoin will be extremely small. However, by that time, its volatility would also be very low due to the relatively static nature of the supply and demand for it it.

BattlaP

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Re: Is it too late [bitcoin]?
« Reply #213 on: December 05, 2017, 02:03:50 PM »
Please provide examples of the real-world, practical applications of deflationary currencies which support the claims that they are so great compared to inflationary ones.

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #214 on: December 05, 2017, 02:25:07 PM »
Please provide examples of the real-world, practical applications of deflationary currencies which support the claims that they are so great compared to inflationary ones.

Well there really isn't any real world example of inherently deflationary or inflationary currencies themselves. So it really comes down to looking historically to see how the economy (low unemployment, economic growth, etc) has performed during periods of deflation and inflation.

Several federal reserve economists did just that and looked historically at economic performance during periods of inflation and deflation. They found a much higher correlation between inflation and depressions and that there were many more periods of growth during periods of deflation than there were periods of depression.

https://www.minneapolisfed.org/research/sr/sr331.pdf

"... the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929-34). We find virtually no evidence of such a link in any other period. ... What is striking is that nearly 90% of the episodes with deflation did not have depression. In a broad historical context, beyond the Great Depression, the notion that deflation and depression are linked virtually disappears."

https://mises.org/library/deflating-deflation-myth

talltexan

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Re: Is it too late [bitcoin]?
« Reply #215 on: December 05, 2017, 02:32:13 PM »
That's because the long period of deflation that occurred during the late industrial revolution (think 1865-1913) came with extraordinary productivity growth. The productivity growth caused both the deflation and the prosperity.

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #216 on: December 05, 2017, 02:41:53 PM »
That's because the long period of deflation that occurred during the late industrial revolution (think 1865-1913) came with extraordinary productivity growth. The productivity growth caused both the deflation and the prosperity.
That's a light bulb moment for me.  I think it would be hard to argue that the productivity and prosperity growth over the last two or three decades wasn't similarly extraordinary.

As I follow the summaries of the fed meetings, it seems they are quite perplexed at why inflation is so persistently resistant to ignite; struggling to hit their target.

Perhaps a valid argument to be ever-vigilant in trying to combat deflation?
« Last Edit: December 05, 2017, 02:48:50 PM by ILikeDividends »

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #217 on: December 05, 2017, 02:46:00 PM »
That's because the long period of deflation that occurred during the late industrial revolution (think 1865-1913) came with extraordinary productivity growth. The productivity growth caused both the deflation and the prosperity.

Are you suggesting that there has been no growth in productivity since post-WWII where there has also been no notable deflationary periods? Has our economy changed so drastically that these periods cannot be compared?

"Note that most of the episodes in the data set that have deflation and no depression occurred
under a gold standard; does that somehow make them irrelevant for shedding light on deflations
under a fiat system? No. If we interpret such standards as a rule with some commitment, as many
(like Bordo and Finn Kydland 1995) do, then these episodes seem at least as relevant for thinking
about the effects of following a Friedman rule as are the episodes in the post-WWII data, when
policy was more discretionary. And if we think that the world economy has changed so much since
WWII that all the data before it sheds no light on what might happen in an economy today, then
there is not much to discuss, since in the post-WWII period, there are no episodes of deflation.
Moreover, as has been commonly noted, inflation is actually negatively related to output growth in
the post-WWII data.

A more compelling objection is that the data from periods of world wars are just not relevant
for other periods. We thus investigate the data excluding all war-related episodes. We find that war
does seem to play a role in generating depression. Of the 21 depression episodes without deflation,
10 were related to a world war: 4 during WWI, 3 during WWII, and 3 right after WWII. (We
view Japanís dismal growth in 1949ó54 as war-related.) But that does not change our result about
deflation and depression. Based on all of the data outside of the Great Depression, a regression
of output growth on inflation has a slope coefficient of .04 (.03). Excluding all the data from
the war-related episodes (1914ó19, 1939ó44, 1944ó49) and the 1949ó54 episode for Japan gives a
slope coefficient of .10 (.03). These data thus show little or no relationship between deflation and
depression. This finding is consistent with that of Michael Bordo, John Landon-Lane, and Angela
Redish (2002)."

maizeman

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Re: Is it too late [bitcoin]?
« Reply #218 on: December 05, 2017, 02:47:12 PM »
Actually it looks like productivity per unit of labor growth is actually declining significantly in the last couple of decades.

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maizeman

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Re: Is it too late [bitcoin]?
« Reply #219 on: December 05, 2017, 02:48:48 PM »
That's because the long period of deflation that occurred during the late industrial revolution (think 1865-1913) came with extraordinary productivity growth. The productivity growth caused both the deflation and the prosperity.

Are you suggesting that there has been no growth in productivity since post-WWII where there has also been no notable deflationary periods? Has our economy changed so drastically that these periods cannot be compared?

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.

With a fixed money supply, changes in the size of the economy (and the velocity of money) are the main drivers of inflation/deflation. Once the size of the money supply can change it has big impacts on inflations/deflation which I'm guessing tend to swamp out the effects of changes in money velocity or the size of the economy (although maybe talltexan can comment on this point since I don't have any actual economics training).
« Last Edit: December 05, 2017, 03:09:18 PM by maizeman »
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lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #220 on: December 05, 2017, 03:23:33 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.

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.

maizeman

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Re: Is it too late [bitcoin]?
« Reply #221 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).
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waltworks

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Re: Is it too late [bitcoin]?
« Reply #222 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 #223 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 #224 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, ŗ 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 #225 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 »
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ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #226 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 #227 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

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Re: Is it too late [bitcoin]?
« Reply #228 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.*
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ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #229 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 #230 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.
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ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #231 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 #232 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.

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Re: Is it too late [bitcoin]?
« Reply #233 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)




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Re: Is it too late [bitcoin]?
« Reply #234 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.)
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JAYSLOL

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Re: Is it too late [bitcoin]?
« Reply #235 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. 

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Re: Is it too late [bitcoin]?
« Reply #236 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 ;)
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Re: Is it too late [bitcoin]?
« Reply #237 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.

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Re: Is it too late [bitcoin]?
« Reply #238 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.

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Re: Is it too late [bitcoin]?
« Reply #239 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 #240 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 #241 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.
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mjr

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Re: Is it too late [bitcoin]?
« Reply #242 on: December 06, 2017, 06:57:36 PM »
I just watched the Robert Jordan Ted Talk video

Maizeman a Wheel of Time reader :-) ?

worldtraveler

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Re: Is it too late [bitcoin]?
« Reply #243 on: December 06, 2017, 07:58:45 PM »
Now we see the results. Bitcoiners are HODLers. They save. They hoard. They have turned against consumption in favor of saving. I see it myself all around me. Young people who are invested in Bitcoin turn down luxury consumption. They donít own cars. They bike and walk. They donít spend big on dinners. They live off cheap groceries. They know that everything they consume today eats into their capacity for consumption, investment, and building wealth for the future.

If you ever despair of the future, just consider how much capital is currently being built up in the crypto sector. There will come a time, maybe in five to 15 years, when all this deferred consumption is going to be unleashed on the world economy in the form of real capital to build wealth and prosperity. And consider too: this is not about one economy, not about one nation. Itís about the whole world, capital and prosperity without borders.

The pundits can fulminate all they want. Technology doesnít care.

https://fee.org/articles/in-defense-of-bitcoin-hoarding/

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Re: Is it too late [bitcoin]?
« Reply #244 on: December 06, 2017, 08:02:14 PM »

maizeman

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Re: Is it too late [bitcoin]?
« Reply #245 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. ;-)
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waltworks

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Re: Is it too late [bitcoin]?
« Reply #246 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

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Re: Is it too late [bitcoin]?
« Reply #247 on: December 06, 2017, 09:17:11 PM »
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.

https://www.youtube.com/user/aantonop/videos

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Re: Is it too late [bitcoin]?
« Reply #248 on: December 07, 2017, 06:36:41 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.


lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #249 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.