Topic: Economic Devastation - page 37. (Read 504811 times)

Thaaanos we have profound differences in opinion. I have broken your post down into its core arguments below.

1) Sound money does not generalize on the macroscale.

This is a claim unsupported by the historical record. Societies including our own have lived under a gold standard in the past. Rome's currency was sound for more or less the entire history of the Roman republic. It was not until the Roman republic failed and Rome became empire that the currency was debased in earnest 



2) Slight inflation targeted at 2% does not have major redistributive effects.

An inflation rate of 2% will result in a loss of almost 50% percent of purchasing power over a period of a single generation 30 years. I would call that a major redistributive effect.

3) The redistributive effects from inflation are "equalizing effects".

I completely disagree inflation primarily benefits first movers those granted the authority to debase the currency. Banks and those with political connections are the prime beneficiaries. Inflation redistributes from bottom and especially the middle class to the financial elite. Rather then an equalizing effect it worsens inequality.

4) Knowledge does not come cheap... So funding will always be needed to equalize the playing field...a slight inflation guaranties the availability of funding.

There is nothing wrong with working to finance an education. Indeed this used to be how it was normally done until we decided to sell out our children's future with government guaranteed non dischargeable student loans. The "guaranteed" of funding you speak up results in ballooning out of control costs malinvestments in non productive fields and lifetimes of debt servitude.

5) It is necessity that at least one equalizing and redistributive force will exist. Redistribution in form of diffusion of wealth is a stability requirement.

To the degree this is true this is what taxation is for. Taxation, however, is much more transparent and thus requires both public justification and also allows for opposition to develop.

6) There is no such thing as morality in macroeconomics, morality comes in politics.

Cooperative rather than predatory behavior develops naturally over time in transparent systems composed of repeatedly interacting agents able to choose between cooperation and defection. Immoral behavior in economic interactions is not sustainable over the long run as victims either go extinct or learn to protect themselves.

For the group cooperation is the superior economic choice. Subgroups with rule systems that facilitate cooperation aka morality will therefore outcompete and eventually replace those without such rules. The fact that Macroeconomics devotes little attention to long term sustainability of systems or the role of morality in maintaining this stability says more about the infancy and incompleteness of macroeconomics then it does about morality.

...

(Copy of my post in another thread, but probably relevant here)


When you get time, TPTB (I know, LOL...), let me know and I will send you my new Public Key (GnuPG) if emailing me via PGP encryption is of interest to you.

Same for you trollercoaster.  Anyone else, PM me, and we'll see.  Maybe I'll invite CoinCube to join in as well, maybe AFTER I get better at using this...

I have a new website that I am working on, my first one.  Right now there is nothing at the Home Page, in the next week or two or three I will start adding material for public enjoyment (a GnuPG tutorial (!), gold information (coin sizes, etc.), Peru photos, some basic Bitcoin info, etc.).

I will also (likely) have a "club" for those interested in "alternative investment", privacy ("for Dummies"), Bitcoin, and related topics.  NO, I will not ask for money, smile,,,

And, I will fairly soon set up a mySQL database with our company sales info (private of course).  Maybe other databases too should I go off in THAT direction...

So, there is nothing there now, that will slowly change.

Once I have an acceptable Home Page, I will announce my website.

I agree with most of your text, as I strongly believe there is no such thing as morality in macroeconomics, morality comes in politics which is why I put politics above economic growth. Sound money for a household is good and proper but doesnot generalize on the macroscale, also we are not talking about major inflation only a slight percentage that is normally targeted the 2% which is a bit arbitary true but doesnot have major redistributive effects , and the ones that exist I deem them more as equalizing effects.

We have made the conversation again about knowledge age, but as you know, taking up student debt, knowledge doesnot come cheap, so fundless knowledge is not going to be, knowledge is power and there will always be gate keepers. Even if it was completely free so,eone should support you while you study, cause study and work do not mix.

So funding will always be needed to equalize the playing field, be it for knowledge, getting the tools to create house,car, or starting a new bussiness. So a slight inflation guaranties that availability of funding.

Even if we are ushered into a new paradigm, I hold as necessity that at least one equalizing and redistributive force will exist, You may see ideas as minimum guarantee income poping up in euroland as a response to deflationary pressures.
Redistribution in form of diffusion of wealth is a stability requirement, no way around it.

That said current system is ill and ridden with corruption none can argue that, Even in segregating payments system from investment will not ensure that faults will not propagate from one to the other.

For the end of 2015 and the start of 2016 I wanted to share this moment of joy captured in time.

https://www.youtube.com/watch?v=dsPDY606Joo

Happy New Year

Well, whoa, ho!  Here is someone who is likely to have a Happy New Year!  Nice purchase, perhaps a collector's item if Bitcoin grows as most of us hope.

Gold and Bitcoin, a great combination.  Especially in ONE place.

So the gold coin I bought just arrived in the mail.
Looks like this.




It is a Titan Bitcoin
https://www.titanbtc.com/

Interestingly they are totally sold out of their copper and silver physical bitcoins but their still have a few left of their rarest run the pure gold physical bitcoins.

Only 150 of these made and to my knowledge only the second pure gold physical bitcoin ever made. The first was the 1000 BTC gold casascius coin.

The individuals who create innovation and mobilize capital may or may not be debtors. Debtors are simply those who pull consumption forward from the future to the present. One of the more interesting ideas from The Rise of Knowledge is the concept that future innovators will be increasingly dependent on knowledge production and that knowledge production is increasingly non financeable. If this premise is correct the relevance of debt to innovators and growth generators will likewise decline.  

I have nothing against debtors per say, I am one, I took out debt for my student loans as well as for my house. However, the simple reality is that under our current system debt is intrinsically tied to theft. When I took out my loans I devalued everyone else's money in the economy by some small fraction. The biggest beneficiary of those loans is the bank who now get a very reliable payment directly from my salary. Whether I am a beneficiary remains to be seen. Those who lost out in the transaction include everyone holding cash or bank deposits as they experienced a real if imperceptible decline in the purchasing power of their savings. This simple act of theft is the only way to do business or create new money in our economy and as such it is accepted as normal and justified. We are told it is necessary for "liquidity" or to "keep the economy going" and told that reverting to sound money would cause "economic collapse."

If we could travel back in time and talk with the educated Roman elite we would probably find them fielding very similar arguments in favor of their system of latifundium.  
  
http://ic.galegroup.com/ic/whic/ReferenceDetailsPage/ReferenceDetailsWindow?zid=6fae6d8fdf9d15a41cc6febe529b8a4e&action=2&catId=&documentId=GALE%7CBT2350051324&userGroupName=lith7757&jsid=25f368963f5c91938e51a396aec21fb2

The ancient Roman elite would probably argue that slave labor was required to keep food production going. They would report it as uneconomical to produce food any other way. They would justify any evils of their system as necessary to keep Rome strong and feed its large population. They would belittle reform and warn that abolishing latifundia would lead to famine, starvation and perhaps the collapse of the empire itself.

The sad thing is that those ancient Romans may have been correct. Their system was by that point perhaps dependent on slave labor and sudden reform may have led to catastrophe. However, the dependence of Rome on slavery rather then a defense of slavery is simply a sign of the systemic corruption of Rome. At its heart slavery is a system of theft and is thus fundamentally inefficient. As such it is a system doomed to eventual replacement either externally or internally. Humans have always sought guaranteed income and the theft of another's labor is lucrative especially if it is legalized and enforced. Because of this profit it was not until very recent times that the practice was abolished. The last country to abolish slavery was Mauritania which "officially" abolished slavery in 1981 but did not actually make it a crime to own slaves until 2007. As a human race that is where we stand. We finally made slavery illegal everywhere 8 years ago.

Our economic system like that of the Romans is hopelessly dependent on theft. The entire economy is wrapped and warped by the ebb and flow of debt and fiat currency leaving us in a constant battle to be the fastest to debase everyone else's savings and be the fastest to deploy debt and grab the "income producing assets". Transitioning to any form of sound money seems impossible for it would result in widespread economic collapse with its accompanying high probability of famine, and war. However, like the Romans our dependence on theft is no defense of our status quo. Rather it is simply a indication of systemic rot.

Your description of those who use deflationary currency as hoarders is an oversimplification. It is true that a deflationary currency in an era of growth is redistributive. It allows for the owners of such a currency to claim a portion growth of the economy and its labor without actually contributing to that growth. However, transitioning to an inflationary currency does not necessarily transform hoarders into investors. Instead it simply transforms them from the beneficiary of redistribution to its victims and creates a new class of elite that consists of those who control that newly created currency.

The only economically optimal solution is one in which there is no redistribution. This only occurs in a currency that approximates the ideal of no inflation and no deflation. Such a currency or multiple currencies would maximize the incentive to invest without resulting in a redistributive decline in purchasing power if one chooses not to consume or invest.        

Hoarding currency is portrayed by authoritarian governments as an anti-social response to economic dislocation.

But, it is an entirely rational response to deflation.

Consider how the SNB acted to counteract deflation in the late 70s to persuade savers to stop "hoarding":  negative nominal interest rates.

The US Fed pursued a ZIRP for 7 years to little avail.   

Since there is no need to keep bitcoin in a bank, unlike hard assets or fiat currency, the government does not have similar levers to force savers to spend their money.

Hoarding has acquired a bad rap over the decades (centuries). 

But, I see nothing wrong with hoarding of one's assets if there are no better choices out there!  It's part of freedom, and essential to those who value saving "just in case" (of a rainy day).  Savers should be rewarded IMO!

I buy and HODL gold and BTC.  I do spend some BTC as I use it for gold (my only purchases w/ BTC), but the rest I keep.  For several reasons (easy to transport, another class of asset, etc.).

Your first actor credit seekers simplify down into simple consumers once you look at them in more depth. Credit seekers are those who seek to pull consumption from the future into the present. Once they obtain credit they may use that on pure consumption, or they may redeploy that purchasing power into an activity that they believe will generate returns but in either case they are approaching the market as any consumer would and thus as you said would prefer inflationary currencies.

Your third actor "farmers" which you describe as owning a true cash cow can exist in only one a select few circumstances.
1) Investment in industries protected from competition by political influence aka laws. 
2) Direct beneficiaries of government largess and redistribution aka pork.
3) Those able to debase the money supply directly for their own gain aka banks.

It may be a common dream to own a business that generates ever increasing returns with no re-investment of time,effort, or capital but the only way such a business can exist is via some form of political suppression or indirect theft. Such "farmers" or potential "farmers" are essentially direct or indirect seekers of the government dole and large scale government largess of this kind is facilitated by inflationary currency.

It is only your second actor the true investor who would prefer a non inflationary currency. The investor is an individual with some form of capital to deploy. Such an individual would logically prefer:

A) Not be forced to prematurely invest or invest in sup optimal opportunities because the value of his capital was rapidly depreciating.
B) To be paid for his time and effort in a currency that holds its value and does not need to be immediately redeployed.
 
Thus if individuals are able to move freely between competing currencies the debtor and the government mooch will happily stay in the inflationary currency but actual growth generators are strongly incentivized to move to non inflationary options.
I will leave it as an exercise for the reader to predict the long term future of a currency system which attracts debtors and government parasites while whenever possible being abandoned by the productive growth generators of society.

https://bitcointalksearch.org/topic/ann-syscoin-final-20-launched-encryption-marketplace-btc-integration-757255

The miners cannot change parameters as they are enforced by consensus which is enforced on connectblock on every node. If they mine an empty block they wont get the reward of the service fees so there is no point in doing that because someone else will take it if they dont.

The threshold I put in is just a safegaurd from inflating small supply amount befofe network affect takes the coin over. This gives incentive to hold the coin while network affect comes because it is deflationary until the services really start to be used (10 per block), it really could be anything that makes sense and its just timing really. If network affect never comes it will deflate away to find equilibrium between users holding and users using the coin, so it kind of creates a reenforcing cycle of incentives not only to hold but to start using it.

What multiplier? When you create the service you burn some coins based on amount of data used(services are allowed up to a few kb).. Then i regenerate those burned coins or lesve them burned depending on some arbritrary threshold i said something like 5 services per block would leave them burned (deflation) and when usage picks up such that they get to over 10 a block becomes inflationary. Remember im using 1 min blocktimes and a 100kb max block size.

Those 2 just cancel each other out effectively converge to a 0% inflation rate and the fact that there are no net consumers or net producers but a combination makes the convergence faster. However we tend to prefer to keep consumer side happier ie have a demand driven economy.

But imo the money supply is determined mainly by the next 3 actors

1 Credit seekers (business creators)
2 Investors
3 "farmers" owning a cash cow

the first would prefer inflation so that the debt underperforms the equity created
the second would also prefer inflation as they too will prefer their stake in the business to outperform the money burned or any collateral to appreciate to ensure repayment and steady cash flow
the 3rd is everyones dream to own a business that generates cash with no re-investment they would prefer deflation as it will give them increasing value. but cash cows are not usefull or wanted in an economy so their preference is not taken into account.
We want to keep the first 2 happy, as above because the main concern of a society is unemployment not wealth retention.

Credit demand is imo the best index to measure if an economy grows or shrinks, therefore I find no fault in the current system that expands the supply when a loan applicant needs funds

Individuals primarily tend interact with a currency system in one of two ways

1) Producers: Providing good and or services in exchange for the currency unit
2) Consumers: Exchanging the currency unit for goods and or services

Net producers would be happy to sell their goods and services for in exchange for a deflationary currency. Receiving payment in deflationary currency results in a future purchasing power that grows without the need to productively work or deploy/risk capital.

Net consumers would for the opposite reasons prefer to pay with inflationary currencies. Inflation allows for the maximization of today's purchasing power, minimizes the burden of debt repayments and transfers the problem of how to quickly deploy depreciating capital to someone else.

If individuals are able to freely move between competing currencies one would expect producers to minimize their involvement in inflationary currencies and consumers to likewise minimize their involvement in deflationary ones (to the degree possible). Market interactions require each producer be matched to a consumer you need a buyer for every seller. If we assume minimal costs in transitioning between currency options one would expect rapid convergence to the choice that results in the largest possible sustainable market.

Only at the the currency choice that most closely approximated 0% change over time (aka 0% inflation and 0% deflation in terms of purchasing power) would there be no economic incentive for market participants to transition to a competing currency. At that level a producer would still love to accept payments or give robustly secured and enforced loans in a deflationary currency but he will find few customers willing to buy his goods or take on such liabilities. Similarly, consumer would love to pay for or take on debt in an inflationary currencies but will find producers prefer to sell in more stable currencies.

Network effects, such as the current network effects which favor fiat currency increase the cost of transitioning to a superior alternative but unless the cost is prohibitive as to entirely prohibit any transition one would expect an existing network effect to only slow not stop such a transition.


That said just because a currency system is not ideal money does not mean it may not grow substantially or perhaps even replace the status quo as a superior solution that is closer to ideal money than our existing system.  Also bitcoin may be ideal if the future involves one of stable population levels and a future technological plateau.

No on my blockchain we can do service txs that are different, for decentralized market, imtegrated aliases certificates, encrypted messages. These txs are what i call service transactions which count toward real work, sending coins doesnt mean work has been done to me.

You keep miners honest by putting the rules in consensus rules so that everyone verifies they are doing what you think. If you make it make it more expensive to game the system then miners wont do it unless they want to waste money.

why 3? what if 3 is not important or even better not wanted. If you want to store value buy gold!
I would also add
4. credit creation
without it there is no money

...

Actually, IMO, allowing competing currencies (that really DO compete), would solve many of the problems cited above re "money".  Money has a slippery definition, almost everyone has their own ideas of what it is.

They guy I follow re "money" is a gold guy (FOFOA), but NOT in favor of a "gold standard" or similar.  He is in the camp that money ideally has the three below attributes all functioning well (but as he points out, NONE do):

1)  Unit of Account (how much wealth you have, what things are worth to a tax collector, ect.).  A measure.

2)  Means of Exchange (give some US$, euros, shekels, rupees, etc.) to buy stuff.  To make transactions convenient.

3)  Store of Value (the money in your wallet will be worth next year what it is today).   <--- Almost always fails given enough time.

Currencies essentially ALWAYS fail at Number Three.  The dollar's time will almost surely come...

*   *   *

"Triffin's Dilemma" (and FOFOA's own version) show that all three of the above are very difficult, especially for a "reserve currency" like the US$.  A reserve currency almost *has to depreciate* as it is exported to foreign countries to fund international trade).

FOFOA believes that gold will ultimately become the "Store of Value" of choice (as it has for most of the last 5000 years).  And that gold will not be "tied" to the dollar (that is, there will be no pretense of gold backing).  People will seek gold to preserve their wealth.

I have grossly over-simplified FOFOA's ideas.  But, they are worth a thought (or more) for any interested in how currencies and gold interact over longer periods of time.

Deflating is not easier because it costs money. Empty blocks will not deflate nor inflate.. Only if services are used and under some limit of block size will it deflate. It incentisivesizes userbase to push others to use the service to fill up blocks and miners are happy from the extra supply given to them. As a society it will benefit as supply would not throttle growth over long term. Currently bitcoin may have a fungability issue due to not enough satoshis to go around if everyone in the workd were to convert to it (high demand)
Inflation rate or deflation rate ive set to dust amounts to start off, because if we come up with a p2p breakthrough so we can easily imcrease blocksizes above 1MB every 10 mins (note im doing 100k every 1 min to give better consumer level options of settlement)... Then dust amounts may be optimal for supply adjustments over the long term. They are not double block rewrds but like a millionth of them or somethung.