Comments on Maison Fleury: BitCoin. Thoughts on QE

USD in a bank deposit seems like a really good adv...

2011-11-28T12:58:02.317-08:00

USD in a bank deposit seems like a really good advice...

From the bitcoin thread on the forum Then I'...

2011-06-17T04:12:47.897-07:00

From the bitcoin thread on the forum

Then I'm going to sell whatever bitcoins I have remaining, take it as a life lesson, and count this as a not so fun experimentation with cryptographic currency.

I am then going to focus on making plain old paper dollars and store them in a bank where at least I'll have the full force of society or some central government insurance backing me up - not to mention some recourse to the law in case of any theft.

OUCH

Can BTC survive the heist? I don't think so. W...

2011-06-17T03:42:00.574-07:00

Can BTC survive the heist? I don't think so. What was dodgy is now deadly.

There are things that come from bitcoin that do no...

2011-06-08T16:57:21.956-07:00

There are things that come from bitcoin that do not exist elsewhere.

It is not only a currency but a payment network. The network fee for processing a bitcoin is a fraction of the fee for other payment networks. Just like you pay less at a gas station that is cash-only, you will likely get a discount and pay less when using Bitcoin for ecommerce purchases.

Those who don't have cheap, easy access to credit find the immediate settlement (i.e., about an hour) to be incredibly important.

Think of how Wal-Mart's busiest time is late at night, just minutes before midnight when funds from direct deposit are made available on the first of the month. These people aren't there at midnight for fun, they have been waiting on those funds and the second they arrive they are spent. Bitcoin can have a higher velocity than the banking system allows.

These may be properties that no economists are even thinking about, but those of us on the ground, getting our hands dirty realize that bitcoins are a game changer:

"When you start messing with bitcoins you really get a handle on how stupidly fucking slow normal banks are."
http://twitter.com/#!/ikostar/status/78332432826372096

"Nothing like a $49.60 PayPal fee. They need some competition...badly."
http://twitter.com/#!/JT_McGee/status/77803581549445120

"I think I'm done waiting for my bank to credit the 2 tiny deposits Dwolla made a wk ago yesterday. How long does it take to credit 12 cents?"
http://twitter.com/#!/watchpocket/status/76695388471570432

It has been proven that Bitcoin is 500 Million Tri...

2011-06-07T08:43:51.024-07:00

It has been proven that Bitcoin is 500 Million Trillion times as valuable as gold.

"Worth it's weight in gold" ? try again!

http://forum.bitcoin.org/index.php?topic=12945.msg178755#msg178755

The deflation argument doesn't hold up. You t...

2011-06-07T08:39:38.731-07:00

The deflation argument doesn't hold up. You think that money needs to be inflationary to get people to want to spend it. You are assuming that money can only be "pushed" through society.

In fact, money can be "pulled" through society as well. Even though my money will be worth more tomorrow, I will spend it, if a seller "pulls" hard enough.

The most obvious example is computer equipment. Why did you EVER buy a computer in the past 20 years, when you KNEW with certainty that it would be cheaper in the future. Answer, because the price became compelling enough that it figuratively pulled the money from your hands. You didn't spend the dollars because the you knew the dollars were "going to be worth less tomorrow" (the inflationary argument). No, you spent the dollars on that computer because the price got "low enough" that it was a good value in your mind.

With Bitcoins, money will be pulled through the system. There are already vendors who welcome, encourage, desire payment in Bitcoins. They will pull the money through the system - through incentives.

and since this is my blog and I like to keep thing...

2011-06-07T05:50:42.704-07:00

and since this is my blog and I like to keep things above obvious statements like
"if economic growth slows, there will be less (or no) deflation, " while possibly true in the narrow context of your currency are obviously not true in the 'real' world, in fact it works the other way around. It reveals a deep misunderstanding of basic 101 monetary concepts.

Gavin, 1/ the point of QE is that it is dynamic....

2011-06-07T05:47:19.669-07:00

Gavin,

1/ the point of QE is that it is dynamic. Not set in stone. So no, a 'fixed' rate of inflation doesn't do the trick.

2/ You don't need inflation (although a mild amount is an economic stimulant). In essence you can divide your currency to adapt to growing economics (hereby making early adopter wealthy in nomina). So i believe that your community can stay quite healthy AS LONG AS IT IS SMALL.

3/ You will experience panics. In my yoda voice: oh yes, you will. And then I think you may survive due to your small size and the fact that your currency shows massive volatility, thereby attracting speculation which will provide a steady flow of 'real money'

4/ Lack of convertability may come to bite you but I believe this may not be a bad thing. As long as you have a 'legit" community that uses this instead of barter and you weed out excessive speculation you may be able to sustain a full frontal panic. I just don't know. I think your small size helps you.

5/ If you get big, you will be thrown in jail. Then you can brag about being the new "assange" :)

let's talk

If I were Satoshi, I would have chosen a small con...

2011-06-07T05:36:12.813-07:00

If I were Satoshi, I would have chosen a small constant rate of inflation (a couple/few percent per year).

But Satoshi probably did the right thing, because the "only ever 21 million" DOES help the bootstrapping problem. And as long as the future money supply is predictable, I think people will adapt and thrive.

I believe in the Wisdom of Crowds and bottom-up spontaneous order a lot mor than I believe in Wise Leaders Steering the Economy.

RE: the gold standard and the depression: I've got some monetary history books in my To Read pile, but I'll channel Russ Roberts and ask: do we really know much? The Great Depression is a data set with one point....

And in the mid run you will see panics, violent on...

2011-06-07T05:12:27.878-07:00

And in the mid run you will see panics, violent ones.

Hey Gavin, Glad I got your attention. Yes and no...

2011-06-07T05:11:11.765-07:00

Hey Gavin, Glad I got your attention.

Yes and no. The gold system has proved that you can grow an economy with a fixed money supply and have it thrive. In other words your community will grow in good times and under the umbrella of the larger economy.

The dynamics you describe are VERY context dependent. Any book on the great depression goes over the dynamics and I am sure you are familiar with them. A fixed money supply (gold) is detrimental to the DYNAMICS going on in deflationary times. Essentially on top of the economy slowing you add a deflationary monetary contribution.

In other words, far from being self-regulated it becomes unstable.

In any case, I would be interested in knowing WHY you have opted for a limited supply. I argue that while beneficial in the short run, in the mid-term you are attracting the wrong kind of people (speculators) with little interest in your economic impact. Thoughts?

Is this the deflation-is-bad argument?: A fixed m...

2011-06-07T05:01:32.104-07:00

Is this the deflation-is-bad argument?:

A fixed money supply is bad because if the economy is growing there won't be enough money to go around.
So the cost of money increases.
Which encourages hoarding.
Which decreases investment.
Which depresses economic growth.

If that IS the argument, then it seems to me the system should be self-regulating; if economic growth slows, there will be less (or no) deflation, more investment, etc etc.

2011-06-07T05:00:15.081-07:00

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