Topic: Economic Devastation - page 38. (Read 504811 times)

A but he still expects that ideal money is a single point to converge to, Not sure that is true as diffrent markets will have different "ideals", No one size fits all.
B multiple participation will not neccesary be an evolutionary game, gresham law doesn apply on free floating currencies, So multiple currencies may be used for access to diffrent markets without one dominating over the other. The most prominent factor for adoption in a network is availability. Ie if I can borrow in euros, i will choose euros over dollars, regardless of other metrics. Digital moneys however may break geospatial barriers and overcome supply issues, but can they be flexible enough to support variant markets? not so sure. Cause money is a political choice, and not all markets thrive under the same policy

It will cost more to fill up the blocks then any benefit of inflating or deflating.. currently im only inflating if services are used and 2x the amount of service fee which is the dust output threshold (very low)... thus you'd need to create spam the block with services which will cost a service fee aswell as the normal relay tx fee... it will cost more to spam then the amount it will inflate.

Bitcoin would normally not create economic devastation if it's logistics were more ambitious.

From http://sites.stat.psu.edu/~babu/nash/money.pdf


Regarding A) I would agree that the best that can be achieved in the foreseeable future is to approximate such an ideal. I believe Nash acknowledged that as well which is why he referred to this concept as asymptotically ideal.

Regarding B) Nash's argument appears to be that when individuals are able to participate in multiple networks simultaneously the network operating with a currency unit that is closer to ideal money will eventually win out as individuals gradually migrate over to the monetary unit that is closer to the ideal.

That is my gross impression anyway from the lecture summary posted above. Having not read his actual paper my understanding of his argument may be flawed.


To better assess this it would be helpful to see the arguments he uses to make his case.
If anyone has access to the Southern Economic Journal I would be interested in getting a copy of this article

http://econpapers.repec.org/article/sejancoec/v_3a69_3a1_3ay_3a2002_3ap_3a4-11.htm

Interesting read thanks.

The critical postulates from the the Nash lecture above are the following:

1) Money should ideally have the function of a standard of measurement and this should ideally be comparable to the watt or the hour or a degree of temperature.
2) Ideal money should be free of "inflationary decadence" and the ideal rate of inflation over the long term is a zero rate of inflation
3) Currencies are in competition with each other and over time and individuals are increasingly able to "vote with their feet" leaving inflationary currencies for those that are more stable.
4) Over time competitive pressure will result in natural selection and lead us ever closer to ideal money. This process is referred to as asymptotically ideal money    

Unfortunately, these ideas are essentially left as unsupported posits in the lecture linked above with little in the way of supporting framework.
I would have liked to read the actual publication referenced in the lecture to see if Nash has developed deeper justifications supporting these ideas. The referenced paper in the lecture does not seem to be be available online. Its abstract is here.
http://econpapers.repec.org/article/sejancoec/v_3a69_3a1_3ay_3a2002_3ap_3a4-11.htm

However, if we assume Nash is correct on all of his posits it does lead to some interesting conclusions. Namely if Nash posits 1-4 are assumed to all be true then we can infer the following:

A) Ideal money has both zero inflation and zero deflation over time. Only a currency that neither gained or lost purchasing power would meet the criteria of a standard of measurement comparable to a watt, the hour, or a degree of temperature. Deflationary currencies would fail this test just as inflationary currencies do.
B) Money that is not ideal, but better then the existing system would be expected to thrive and supplant that system until a superior solution even closer to the ideal is discovered
C) For Bitcoin to meet the criteria of a true ideal currency the the human population would need to stabilize at a fixed number and technological progress would have to plateau or the bitcoin protocol would need to be modified to modify the supply of coins in existence in response to technological improvements and or population changes.

Where did he say euro will last? We all know that..

Actually i agree with you and am designing it into my coin such that it will inflate when it is in use amd deflate when not based on blocks getting filled up or not.. Ofcourse rate of inf def will be very small to not have a short term affect. This way you tie supply to real world usage somewhat and it scales with the usage of the currency.

With bitcoin it may have an issue with scaling if everyone was to own satoshis we may not habe enough of them in 21 million to go around, leaving poor ppl hanging out to dry.

actually by cryptos we can have access to more information on the economy as all transactions are visible, and we could just as well add more info ie product ids etc, and get near perfect measures.
however hard coding money supply bitcoinlike is a very bad idea imho as it creates moral hazard. The decision on expanding or contracting money supply could be decentralized, ie a pool could decide if their mined blocks will get reward or not, and miners could in decentralized way control money supply, It looks counter intuitive why a miner would forfeit the bonus but its a choice he could make, could still collect fees though.
john nash is dead wrong on creating the labels bad/good money. money is a tool not a god. It is good or bad based on its effect on economy not by some intrinsic quality. he is wrong about euro too, euro will end in tears.

http://sites.stat.psu.edu/~babu/nash/money.pdf

asymptotically ideal is what I believe he refers to as something like bitcoin. Note we will never have perfect money, where inflation is tied to a real economic indicator that is easily auditable and one that cant be tampered with, but bitcoins falls under the curve closer to infinity than inflation targetted currencies today.

Notable quote which would make sense to most here :
"money should have the function of a standard of measurement and thus that it should become comparable to the watt"
Btw i believe nash was satoshi.

However this is a dual system.    revenue vs debt -> if the revenue increases due to new opportunities and lack of inflation, then the interest rate can increase on that debt too.

While with fiat the banks have the upper hand that they can loan at 0.36%, and pocket the spread, if fiat goes away (by people not using it) then the decentralized world will have big interest rates 6-10%, but the income will be so big that people can easily pay this.

Therefore yes its a free market, if the economy is strong, due to decentralization, then interest rates can easily go up.

Can you expand on the nash concept of ideal money. I am unfamiliar with his theory.

The wikipedia page is not helpful.
https://en.wikipedia.org/wiki/Ideal_money

It says only
"In John Nash’s lecture he mentioned "Good money’,is money that is expected to maintain its value over time. ‘Bad money’ is expected to lose value over time, as under conditions of inflation"
and
"John Nash mentioned in his lecture that Euro might become an ideal money in the future, because Euro is used in a large range of places and has a good stability"

Stating that ideal money is money that maintains value over time forces you to define "value" and address why money that maintains "value" is superior to money that increases or declines over time.

In an economy where a decentralized cryptocurrency became dominant the current economic elite would only be able to buy a powerful opening position. To maintain elite status thereafter would require those individuals to compete and produce. Otherwise their share of the pie would shrink progressively every time they consumed and/or choose to reproduce beyond replacement levels.

This is drastically different from the economic situation of today which allows connected individual to essentially debase the money supply on demand (at very little cost) and buy up or corner economic opportunity while having the government bail them out (further debasing the money supply) in the event of investment error.

P2P lending can only only dominate once it becomes cost competitive. That necessitates the end of fiat currency. I got an offer to refinance my student loans the other day at 2.3% variable with payments over 5 years. I have a great job and good credit. However, the reality is that only someone with access to FED funding would probably be willing to make a loan like this. A bank can borrow at 0.36% (current federal funds rate) make a loan to me at 2.3% and pocket the spread. P2P cannot match that because they do not have access to easy funds at 0.36%  
 

Thats the million dollar question.. Inflation targetting is the best we had before bitcoin, and if bitcoin classifies closer to what nash termed ideal money then yea it will win themarket over due to increases in efficiency by moving out the middlemen who tend to be dishonest

Thus the solution is to remove from government the power of currency creation (via the development of superior competitors) and force it to eventually live only through taxation? Without this power banks would be forced to raise capital through legitimate means (investors and depositors) rather then just borrow newly created fiat from the FED. Governments would be likewise be unable to realistically backstop banks. When there is limited free wealth to go around the share that can go to "friends" would plummet.

You got it.. The govt trusts them to make good decisions for everyone and the banks inr eturn get favourable rates to make money, that and im sure they are family/buddies who share a piece of the free wealth.

The problem is as always the "Privilege"  to quote Hagbard Celine

(1) With banks the privilege of having the backing of the state , and   
(2) With "friends" having the privileged access to funding ie large loans without collateral, early loans in the business cycle.

But I think that the 2nd is the most damaging and creates the need for the 1st

Banks dont care for defaults, they print money? Lol another wild claim coming out from you.. Hard to take you seriously when you say such stupid things.

I recommend some finance courses to get you up to speed on how the world works.. Hard to know the solution when you dont understand the problem.

Chris martenson has a good ebook to checkout its pretty short and highly educational.

The banks are not the deep problem, it is about who controls the banks, who controls the productions mediums, money gets value because you can get things with it, and is the seller who says what is money and what is not

Banks dont own it either because their basic operating model is to only have ten percent of whatever money they are loaning out.   A bank is nothing without its backers, like we saw in the big melt down that if that short term credit walks away then you're a man all alone in the world very fast with no friends these banks are nobody.
   Banks arent really owners in my view, more operators like everyone else.

The old family owned model is much rarer today.   Its more franchised operations with everything considered nationally, money flows all around.  Im not all against that because trading is the modern world and quite often a profitable wealthy way forward, its efficient basically.   Its not personal though, there is little special thought in a typical franchise and thats why we have words like contagion because all this money will depart as relentlessly as a tide goes out.
  It'll maroon the unpopular circumstances, who have no capital of their own, the ghost town factor where incredibly a working town can become zero almost unbelievably fast.    I imagine the tide flows to China or whoever actually has capital, I dont even know they are rich either