Topic: How come the bank failure destroy the wealth??? (Read 8896 times)

True, banks always charge as a middle man between all the business, and they only charge a small amount, otherwise they will just destroy their own creditability

Gold's creditability is backed by it's stable physical and chemical status and scarcity, and scarcity itself could already create some value and lots of desire, seems to be the human nature

Money's creditability is backed by law and government. From several hundred years' perspective, gold is much more trustworthy than dollar, but as long as U.S. government rules, US dollar is as valuable as gold, so Bernanke said that the gold just act as money for historical reason

Anyway, now I tends to believe that only small amount of wealth exist in eternal form, the most direct feeling about wealth is how much wealth we consume. Financial crisis greatly reduced the amount of wealth we can consume for years, due to uneven distribution of the wealth after housing bubble, but the wealth as a whole did not get destroyed at all

Banks charge people to use currency. The higher they charge, the more expensive it is to do business, the higher the prices. If it gets too expensive to do business, business slows down.

People don't realize banks charge them to use currency. This is essentially what inflation is, a percent fee to use dollars per year.

I mean, for example, if I want to sell you an apple, and we agree on using dollars, then I will want to charge you for the apple plus all costs and profits.
If dollars are costing 3.6% per year, or whatever inflation government lies about this year, then I will want to charge 3.6% higher to make up for it. So I will charge you the apple plus 3.6% currency costs, plus say 5% other operating costs, plus 5% profit. People do this intuitively.

But unfortunately then consumers try to blame 'greedy business owners' who 'overcharge' them. This is what happened in Weimar hyperinflation. Everyone blamed farmers for 'taking advantage of everyone' and charging so high for food, when in actuality they were charging for the cost to use currency, which was in the 100's% per year. All people had to do was use a cheaper currency.

This is why Bernanke says gold is not money, because it's a cheaper currency. Gold would ruin Federal Reserve's monopoly, which allows them to charge so high anyway.

I use examples because I want to keep it simple. Why don't you use an example that proves me wrong or that simply explain your point instead of keep telling me that I'm wrong?
It seems that you have something personal against me and if that's the case we probably won't be able to have a productive discussion.

"It is obvious that you won't change your mind".
"You're pretending you don't understand".
"I've already told you you're wrong".
"You talk like if you knew everything".
"Modern economists think like this just because they hate Marx".
"LTV is not a false proposition, it's a tautology"

All empty sentences for me.
If you explain your point in a simple manner, maybe I can get it.
I'll first summarize what I have understood from your explanation to avoid further misunderstandings.
But this has gone too off-topic so I have started a new thread.

Judgment of the value is very personal, so if we respect each person's judgment, then market is the only place that we could get a unbiased price

And there is also social behavior: Even if you do not accept the price, if enough people around you accept the price, you will tends to accept it

Maybe precise and stable are totally not belong to social science, but that is bad, it means we will always end up in a political debate  

However you learned the LTV was wrong. Once you accept this, you can understand. I have pointed out several times that you have it completely backwards, yet you keep trying to use examples to explain how it is false, when those examples are not how the LTV is used. I'm not going to keep explaining it when it is obvious you don't want to change your misguided opinion of it.

No. Honestly. I'm just this dumb.
English is not my native language neither, so maybe that's the cause. Can you write in Spanish or Portuguese?

Wow dude, you seem to be intentionally trying to not get it.

Yes, it is an attempt to explain that phenomena, but I think it's a failed attempt.
If I can find just one false prediction deduced from the theory, I can prove it is wrong:

Mining rare rocks in the deep of the hearth doesn't make those rocks valuable, even if the costs of mining are as high as for gold or diamonds. Therefore, the costs of production cannot be the cause of the "value" (and price) of every product.

Is there anything wrong with that reasoning?

Marx did not come up with the labor theory of value. It has been a concept that has existed for a very long time.


"It is not that pearls fetch a high price because men have dived for them; but on the contrary, men dive for them because they fetch a high price."

And it is based on the false proposition that price is an absolute quality that can be measured through value.

See what I did there? It's arguing whether or not A = 3-1 or A = 1+1. The price is known, both theories attempt to discover why the price is what it is. There are no absolutes in either. The variables are always going to add up to the price because the price is the only thing we know. They are both attempts to explain phenomena. LTV is generally an intrinsic explanation, marginalism is generally a subjective explanation. Marginalism just happened to be developed around the same time that Marx adjusted the LTV to suit his needs, and marginalism filled in most of the blanks that Marx (or the LTV) had not yet explained. Just because the LTV has not received similar treatment does not mean that it is false, it just means that modern economists switched perspectives and stopped working on it (mostly because they hated Marx).

I'm getting a little confused. I thought that I mostly knew your position but I don't.
Please let's clarify where we agree and disagree, so we can have a more productive talk.


We agree here.
But I assumed that stupidity was implicit in the marxian theory of value.
Please, show me how it doesn't.
I guess we can also agree that there's no intrinsic value, for example in gold, like some austrians believe.  


I assumed we wanted to know things that are always true, so-called principles or laws.
I don't think LTV is a tautology, I think it is a false proposition: "things are worth (and priced) what it costs to produce them".
And it is based on the false proposition that value is an absolute quality that can be measured through prices.
The reason why stuff is priced approximately what it costs to produce them is that if a business spends more in production it goes bankrupt.
And if a business prices its products far above its costs, the competition takes its place. But never because the costs of production give the product any value.

That's my understanding of the LTV.
How would you describe the LTV?
What do you think about it? It is an always true proposition?
If not, when is it true?


I didn't assumed you haven't spend time trying to understand bitcoiners. I assumed that you didn't understand them from your claim "bitcoin is a scam".


Sorry, I misunderstood you again.
Yes, I didn't provide any proof that bitcoin is not a scam. I was just expressing my feelings about your condemning claim.
This is not based in logic so it may be a fallacy. Not sure if it fits in the "appeal to majority" type.
But the important thing is that we don't agree there, so you can't base your reasonings on "bitcoin is a scam" and expect to convince me.


I assume I'm right when it comes to any kind of theory. Then logical contradictions or contradiction with an observable phenomenon, allows you to change and refine your model.
What's wrong with that. Don't you do the same? You should.
I don't always understand what people means, but I don't assume you "propose one tautology over another" neither.
Let's take it easy.

My theory of energy: A product can contain or made by using lot's of energy but still worth nothing because people have no way to transform those energy to serve their needs, but a product worth something must contain certain amount of energy, energy is what living creatures always seeking during the phase of their life

This means, people will not value something which contains no energy at all, every consumable goods have energy inside, consuming those energy will make the life continue

From this point of view, every product have a minimum energy required to produce them, no matter how efficient the manufacturing process is, this minimum energy requirement can not be changed, and this could be regarded as the base value of everything

And of course the valuation of human are really difficult to anticipate, especially some intangible products, besides this base value, there are other factors

Back to the topic, in the boom era, people feel they are much richer due to registered asset value gain, but the energy contain in the assets that they own did not change, so eventually the price bubble break, and they feel much poorer. Although loss is just a paper loss (the energy contained in the house that they own do not change), but due to the house price dropped, they now have to pay a higher monthly rate to banks, that is the real loss of energy (they have to work harder to produce those energy)

It would be a pretty stupid theory if it assumes that value is an absolute concept.

"Smith's theory of price (which for many is the same as value) has nothing to do with the past labor spent in the production of a commodity. It speaks only of the labor that can be "commanded" or "saved" at present. If there is no use for a buggy whip then the item is economically worthless in trade or in use, regardless of the all the labor spent in its creation."

That is the exact opposite of what you just said.


Where has either of us used the term "law" to describe anything here?
The LTV is a tautology, like almost every economic theory, so every case is "correct" for LTV assuming you can find a buyer.


It's hard to focus on arguments when you dismiss them out of hand. I was only employing the same tactic you are. But really, I'm just commenting on the fact that you believe your economic theory is right and others are wrong because, well, because. It really doesn't even apply to this thread, I just got tired of you saying "that is LTV; LTV is wrong."


But you are assuming that I haven't spent time understanding what "he currently thinks." How could I possibly be in a position to bash bitcoin without understanding its economic theory or distribution "theory"? Most of my ire is directed at the latter. All non-bitcoin currencies appear as a credit for some form of labor. There must be an underlying value other than scarcity. Once the currency is widely accepted and distributed, then and only then could you have a currency switch to fiat. Bitcoin went straight to fiat, and a limited supply fiat at that, to the immense benefit of early adopters. THEN there was actual labor required to produce them when competition took hold. It worked backwards. It is ridiculous.


I can't say for sure what Satoshi's intentions were. I think the anonymity and disappearance says it for him though, but that is my opinion. Regardless, I think the utility of this "currency" is absolutely unsound, and my evidence is the wide valuation of it since its inception. Early adopters had to be complicit in this wide valuation, or it would not have happened. Therefore I believe the distribution scheme is highly flawed because of that power given to the early adopters. But yada yada yada half the people around here are early adopters or are people who think that they can make money, so this argument falls flat with them.


The position would be "bitcoin is not a scam." You didn't address what I said, you appealed to the majority (a fallacy). You also did not address what I said about bitcoin in that post either, but misquoted me and presumed I did not understand their position.


Assuming you are right when it comes to economic theory is a dangerous precipice. Assuming others are proposing one tautology over another regardless of context is just pedantic.

Sorry, I don't get it.


Economics is a social science, agreed. But there's still falseability.
The theory says: "The value of a product is a function of its costs of production".
And it's easy to prove it wrong.
Let's say I spend a million dollars producing a shit sculpture and half a million producing another one.
For me, they both are worth nothing.
That theory also assumes that value is an absolute concept and it's not. Value is always relative to the person who values. 


Something that is not always correct is not a law. Meaning it is not always universally true.
Also, in what cases is the LTV correct? 


Well, yeah. Most economists mocked at Peter Schiff when he was calling for real state bubble but it turned out that he was right.
Let's forget people, attitudes, affiliations and the like to just focus on arguments, please.


I'm just saying that is hard to change someone's mind without understanding what he currently thinks.


Sorry, I thought you were implying it. A misunderstanding.
Only Satoshi is a scamer then?


What position?
Most people in this forum disagree with me in economic matters. In the freicoin forum (not precisely crowded) there's also people who won't support a coin with demurrage if it has a fixed supply.
What position are you talking about?
Also, what fallacy?


No. I assumed I understood what you meant. If I got you wrong just correct me, explain it again in another way you think I'll understand.


When I make statements, yes, I assume I'm right. I find less interesting to say things I know (or think if you prefer) are wrong.
It seems that I sound even more arrogant when I write in English than when I write in my native language.
I just don't see the need to put "I think that" before all of my claims.

Or maybe the rest of the equation was implied?


Cost to produce theory of value. And no, you cannot definitely say that LTV is wrong, that is my point. Since when did economics become an exact science?

http://en.wikipedia.org/wiki/Labor_theory_of_value


Some, but not all. If it is correct some of the time, does that mean it's universally wrong? I suppose if you want to redefine the word wrong.


And these people are the butt of modern economists' jokes. Does that mean they are wrong?


Yes, poor unlearned me. If only I could understand.


Bitcoin was designed to create a new, wealthy elite on top of a currency. The implications of the system, were it to get popular, would have been obvious to its creators (unless you want to insult their intelligence, you are pretty good at that). 25% of all the currency to ever be created is to be made in the first two years? Oh that couldn't possibly cause a problem. It's funny how Satoshi doesn't code, document, or think around here anymore. I'm not calling everyone who thinks bitcoin is a good idea a scammer, I'm just saying it brings out the worst in people because they are motivated by taking money from people down the line in a pyramid/greater fool commodity (ergo I think bitcoin is a scam). I think if Satoshi's intentions were actually good, he wouldn't have coded 25% of the monetary base for himself and a few friends, and he wouldn't have disappeared shortly after bitcoin hit mainstream.

Notice how you say "it's a shame you call them scammers" when I said no such thing. Why is it that you put words in my mouth that I did not say? Do you feel your position is threatened, so you have to resort to using a fallacy? Or are you just assuming that you know what I meant better than what I said? Perhaps it is just like you assume you know economic theory better than everyone else.

Maybe he wasn't making a conceptual mistake but just a typographic one.
I don't know what is CTP-TV, but definitely you can say that LTV is wrong.
As classical mechanics, it is incompatible with some observable phenomena in nature.


There's people who sincerely believe that bitcoin, gold or silver can change the monetary system for the better. You should try to understand why they think like this instead of always show you don't trust their intentions. Bitcoin is not perfect, but I don't think it is a scam. Many people is putting their (most times) unpaid coding, documenting and thinking effort here and it's a shame that you call them scamers.

But as niko says, this is all off-topic.

+1

Bitcoin, if it ever becomes popular, will only transfer the control of money flow from the greedy hands of bankers into greedy hands of the populus. Not sure if that would be a good thing or not, but even in this early stage it clearly damaged the potential of the idea. It also eliminates centralized control over money supply, as it is now hard-coded into algorithm, which I think it is a good thing (especially because it is deflationary, and it would somewhat curb wasteful consumerism).

But all this has got nothing to do with the subject of this thread.

He did mention Adam Smith and how value is now considered to be a factor of supply and demand just 2 sentences prior to the one you quoted. So I think pointing out that something with a high energy cost will have a high value as "LTV" in that context is inaccurate. LTV or CTP-TV are not wrong, they are just not the whole picture. Like Newton's theory of motion versus Einstein's. And it is not a given that current economic theory, Einstein's theory, or any other theory is true either. It is just a better description for the same phenomena. So by saying "that is LTV, LTV is wrong" I think you are doing everyone an intellectual disservice.


This forum brings out the worst in me because I see the worst in people here (--I'm not referring to you). So many people unashamedly promote the scam that is bitcoin and it revolts me. There is absolutely no question in my mind that bitcoin is a scam, and the guise of solid economic principles makes it even more fraudulent. People perpetuate this silly economy not to change the world, but to increase the weight of their pocketbooks. Bitcoin is a vessel to bring out the worst in people. And it does so in such an ingenious way that they often don't even realize it. I feel like I have a moral obligation to set things right, but I know my voice is one of the few dissenting and that I probably have no effect and it is frustrating. The intellectual dishonesty around here is so high that I feel like I'm reading Fox News or listening to a politician speak in a campaign.

Sorry for trying to explain things to people in an economics forum.
I'll let you know when the book is out.
Seriously, I want to answer you in the discussion we're having, but I haven't had the time.

By the way, I'm not a doctor. Not even economist, just computer scientist. But the monetary issue has been obsessing me for the last 5 years. Friends of mine that are economists (with degree and all) haven't thought about money half the time I've done.

And a little advice: try not to be so rude just because people don't agree with you.
We're all trying to change the world for the better, right?

When can we expect the next book, dr. jtimon?

You're using labor theory of value there. But things are not valuable because they're expensive to produce.
What happens is:

1) Prices show how people value things
2) If the costs of production are lower than the selling price, more items of that type are produced, if the costs are higher, the production stops.
So production costs are a function of value instead of the other way around.


Not sure, but I think that it was just his answer to the critics that said that their policies may look effective in the short run but slow growth in the long run.
I think an expert in Keynes explains these sentence and others in the EconStories youtube channel.