Krugman On Bitcoin and the Gold Standard 601
twoallbeefpatties writes "Prominent Keynesian economist Paul Krugman has left a note on his blog at NYTimes about his view of Bitcoin, discussing its similarity to the gold standard and suggesting a drop in 'real gross Bitcoin product' as its users hoard the currency rather than spend it."
Re:Bitcoin (Score:5, Informative)
But more importantly you are trolling because each 6990 consumes at least 300 watts during mining, which means you need 7.2kw for your whole setup. This far exceeds what a single outlet can provide.
Re:Bitcoin (Score:5, Informative)
how easy it was for people to scam you out of bitcoins by contesting Paypal payments
1. Scammer buys bitcoins on ebay.
2. Seller sends the bitcoins
3. Scammer pretends he never received them, and reports this as a fraudulent transaction to Paypal
4. Paypal asks the seller for evidence that he has sent the goods (i.e. a tracking number)
5. Sellers explains what bitcoins is, digital revolution, bring back the gold standard, Ron Paul 2012 et cetera
6. Instead of a tracking number, Paypal gets a bunch gibberish, so it rules in the scammer's favor
7. Rinse and repeat
This applies to pretty much all virtual goods on eBay, so it's not really a bitcoin problem as much as it is a Paypal problem.
This whole digression is moot in the end because there are dozens of bitcoin exchanges out there now, so there's no need to rely on Paypal. Admittedly it was a problem in the early days before exchanges were established, so that's no longer the case.
Re:STOP (Score:5, Informative)
The peace prize is a real Nobel, it's one of the original group set up by Alfred Nobel. The economics one isn't, it's a separate award that uses a very similar name, set up by the bank that handles the Nobel grant because they wanted to give their field some legitimacy off of the name.
Re:History also shows Keynesian policies can fail (Score:4, Informative)
Keynsian theory stated that the government should run deficits during cyclical depressions and surpluses during periods of growth that fully pay down the debt to "smooth out" the business cycle .
The second half prescription has never once been practiced because a government running a surplus is as unnatural as water flowing uphill.
Re:Terrible summary, decent blog post (Score:4, Informative)
"Intrinsic value" is an economic term, and as such, it's by definition vague ;)
It's a combination of scarcity, permanence (you can't destroy it - but feel free to delete your bitcoins), physical qualities (and yes, being nice for jewelry is a quality), and it has tended to hold its value over a LONG time (which is the weakest of those arguments IMO, but that's economics for you...)
Oil doesn't have a very well defined intrinsic value, because it is easily produced (the *current* scarcity is artificial based on production quotas), it has no permanence (its usefulness is based on consuming it), and its physical qualities/usefulness are not inherently valuable (there are alternatives, and if we don't start using them we're screwed).
Basically, the WHOLE POINT of a good monetary "standard" is that it is supposed to be STABLE and allow growth. Gold is not really the most stable standard because of all the speculation and inability of governments to control that - which is why we abandoned the gold standard. Its scarcity basically rewards saving and punishes debt (ie. tends to be deflationary), which means it's horrible for risk (think: the entire US tech industry). And it's not great for economic growth because the money supply is limited by mining gold.
Given all that, oil would be HUGELY worse for that stability....
Re:Keynesian? (Score:5, Informative)
The over extension of debt can be corrected by devaluing the the currency. You pump more money into the economy during the process, which creates jobs and stimulates economic activity. It will make your exports more attractive to other nations and while decreasing the demand of imports, which improves the trade balance.
This works and is how the US got out of the great depression with help from the New Deal and WW2.
Re:Bitcoin (Score:4, Informative)
A hilarious comment from the source shows how pathetic your trolling attempt is:
Not to mention that the door hinges on the side away from the plug, so you have to unplug the door to open it.
Re:Terrible summary, decent blog post (Score:4, Informative)
No, the real issue is that under the "gold standard", the money supply is related to gold finds - which are random events. It's not like the supply of gold is actually fixed. So someone could find a huge gold vein tomorrow, and crash the world economy. Just like printing money, but done by individuals!
Also, there is simply the unavoidable result of a fixed currency:
Country X says "my dollars are worth exactly 1 Y", for any option of Y. You take your money, and short lots of X dollars. Then you counterfeit X's currency (or wait for someone else to counterfeit it). Now your "short" position is worth more than you paid for it. Country X's only hope is to deflate their currency voluntarily each year, to account for counterfeiting.
This happened to the US several times, and that is why we are now off the gold standard. It's amazing how few people bother to figure that out before advocating the gold standard!
Re:Hoarding's the point. (Score:2, Informative)
The issue you are addressing here is a known issue, and something that anybody holding Bitcoins should be well aware of. Sadly, you don't mention that this "inflation" is kept in check by the fact that the growth in the number of Bitcoins is fixed by definition. Unlike the U.S. Dollar which can have Ben Bernanke type a few keys on the computer in his office and produce several trillion dollars, Bitcoins can't be "minted" enmass by any one person at once. Their rate of production is fixed and limited... where the "Bitcoin economy" more than takes that rate of production into stride.
This "30% annual rate" of growth is not a geometric progression, but an arithmetic increase of a fixed amount. Furthermore, the number of new coins "minted" is built into the software to gradually decrease to become practically non-existent. In other words, over time this growth diminishes. The philosophy here is that the growth of the economy in terms of adopters would be larger than the rate of increase in the money supply.... which generally has been true for the past year or so. As to if that growth in the number of users is sustainable is another question entirely.
Re:Keynesian? (Score:3, Informative)
http://en.wikipedia.org/wiki/John_Maynard_Keynes#During_the_Great_Depression