Topic: Limited coins and hoarding - page 6. (Read 8882 times)

You didn't answer the question of "how is the limit one of its big advantages?"

If there are a billion bitcoins worth a penny each, that is no different from 21 million bitcoins being worth a few dollars each if all it is is a payment processor.

All this deflationary economy bullshit goes out the window because there is, in fact, no economy. Now we go back to the game of hot potato and wonder not if but when someone decides to sell an early hoard of coins and causes anyone stuck with bitcoins to lose all kinds of wealth for the sake of this payment processor. Anyone who invests in the "currency" plays a game of "when can I predict that the early adopters will be too greedy to keep hoarding," and what you have is a bona-fide pyramid scheme and/or greater fool scheme.

The problems mentioned stem from a confusion about what Bitcoin is. There is a naive idea that world governments might adopt Bitcoin, and it might become the worldwide currency and so it might impact the economy because of problems associated with inflation and deflation of the money supply and such. Don't worry, that's not going to happen. USGov will stick with the USD whatever happens - and so it is only inflation/deflation in the USD that you need to worry about if you're a USian.

Bitcoin increasing or decreasing in value doesn't matter in the same way that gold increasing or decreasing in value doesn't matter (unless you're holding it, or have borrowed it, or are backing your currency with it).

You might agree to repay someone 10 ounces of gold. The gold price might go parabolic and you'd be stuffed. So what. Not gold's fault. Not bitcoin's fault. Your fault!

If you take a position in Bitcoin, either short or long, it is a speculative one and you should be prepared to lose your shirt.

Price your goods in USD. Denominate your loans in USD. Let the USGov keep the USD stable.

Make and receive your payments in Bitcoin. Cash in, cash out. Let the speculators and hoarders worry about the day-to-day value. It doesn't matter to anyone else.

How is the limit one of its big advantages? A deflationary spiral isn't possible because early adopters will step in and take a good chunk of the value away?
Even if the coins were distributed in a more realistic fashion such as for real work performed, what measures are there to stop what happened during the great depression from happening with bitcoin? Is there going to be some measure to prevent bad investments? Are we to just hope that bitcoin never becomes large enough compared to the world economy? I mean for crying out loud, bitcoin has already experienced a deflationary spiral, and early adopter money was released from the hoards to resolve it. Demand far outstripped supply, though in this case it was due to the supply being held back by a select few rather than bank failures and what not.

Imagine if there was actual investment going on in bitcoin and the price rose from $2 to $30. How in the ever-loving FUCK would someone pay back a loan? "uhhh, hey bro I can't pay you back for that snickers bar because that amount of money would now buy microsoft, sorry dude"

Now, just to keep us all intellectually honest, it is probable that Bitcoin would prevail over an improved crypto-currency simply because of its momentum and first mover advantage.

That said, the limit on BTC is one of its big advantages. Even Krugman can see that.

You're right, hoarding doesn't impact liquidity. There are enough Bitcoin users and speculators that there will always be buyers and sellers, and hence liquidity. To increase liquidity, we need more buyers and sellers, not more Bitcoin.

I've noticed that folks who talk about liquidity are usually ones who are just unwilling to accept the price a market is putting on a good. Hence banks talk about being 'illiquid' rather than being insolvent. House owners talk about the market being 'stagnant' rather than bust.

Some have mentioned cost savings. Another big reason is that the two parties do not need the permission and approval of a third party (Visa) in order to do business. In some situations, this is a huge advantage.

Today (at least in the US) merchant agreements can't prohibit discounts for alternatives they can only prohibit increased cost for credit cards.

Here is an example of gas stations offering cash discounts:
http://www.creditcards.com/credit-card-news/gas-discounts-for-cash-1275.php

Now the one con in the article was that cash is inconvenient.  Hmm imagine if someone made a digital cash like system so consumers wouldn't need to carry around cash to get discounts?  Someone should think of that.

I am not saying this will happen tomorrow or that it will EVER happen but VISA and the other CC demand ever increasing profits.  Those costs combined with chargeback fees, and losses due to fraud do add up.  Credit cards aren't free for the merchant and thus aren't free for the consumer either. 

It was asked why a consumer would use Bitcoin over CC.  There is your answer.  Cost savings.  Now trust matters more in Bitcoin but I would have no problem trusting many of the places I shop online with Bitcoins.  I can't remember the last time I made a chargeback but I pay a hidden cost of 5% to 10% tacked onto every item even when no chargeback occurs.  Some transactions are risk and you can always use CC there (or some reversable system built on top of Bitcoin).

Saying there must be a balance between no lending and too much lending implies that there was no lending before fractional reserve?
Logic 101? Bueller?


6 of one... Either you lend only to the most credit-worthy to bring down the risk premium, or you raise the risk premium higher as the value of the money will be worth more when it is due. Either way, it is much more difficult to obtain investment because the currency itself is a safe investment, regardless of some one-liner on economic theory.


Ooh look an ad hominem to follow up the logic 101 fail.

Bear with me for some US-centric wikipedia quotes:

"The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907."

"The Panic of 1907, also known as the 1907 Bankers' Panic, was a financial crisis that occurred in the United States when the New York Stock Exchange fell almost 50% from its peak the previous year. [...] Primary causes of the run include a retraction of market liquidity by a number of New York City banks[.]"

You mean to tell me that the federal reserve was created because a few banks had the power to take down the New York economy? I wonder why that was able to happen.

Surely the time of year had nothing to do with it:

"the money supply in New York City fluctuated with the country's annual agricultural cycle. Each autumn money flowed out of the city as harvests were purchased and—in an effort to attract money back—interest rates were raised. Foreign investors then sent their money to New York to take advantage of the higher rates."

LOL

I'll let you finish reading up on the rest since I'm sure you can figure it out.

You know this is pretty much word salad, right?  This isn't about one business telling another that it can't work for some made-up reason, this is about a real, fundamental disadvantage one payment method has over another that isn't going to go away just because you want it to.

Imagine if Borders bookstore told Amazon that they cannot compete with brick and mortar stores because customers can't send cash through the mail? Would it now be Amazon that is bankrupt instead of Borders? Whodathunk it? Stop living in fantasyland that never sees technology advance progress. Visa does not run on magic. Once venture capitalists see the potential of investing in decentralized payment processing, they will flock to places like MT Gox, Trade Hill, Intersango, etc.

Never.  I've had one or two people attempt to cheat me on e-bay, but have had no trouble getting my money back.


Not from a Bitcoin vendor, or at least one which did not have a long and stellar history.  The ethics of a high percentage of the people in the community are appalling to me, but this is not surprising when one thinks about it a little bit given the nature of the strengths of the solution.

I'll start to think about patronizing Bitcoin merchants when they start to think about sending my the item first then I pay when I receive it.

I would suspect that it will be a fairly long time before BTC is good for run-of-the-mill mail-order crap (absent an undesirable scenario where it is highly regulated.)  BTC strikes me as being pretty good for either paying periodically for services (e.g., a shell account) or for face-to-face transactions.  And not much more.

That's the problem:  there's no way for that to happen.  Imagine Amazon started offering 5% off with Bitcoin.  Visa tells them to stop it or they'll lose their account.  What do you think comes next?  

The big retailers have too much to lose if they can't process credit cards.  Small retailers are unknowns and thus potential scammers.  

Stop living in the fantasy of what the world would look like if everyone used Bitcoin and start thinking through how one could actually get there.  It's far from easy and probably impossible without some fundamental changes to Bitcoin itself.

I thought it was implied, considering I assumed that you were responding to me.  If I was in error, I apologize for my arrogance.


This is actually backwards.  The rising purchausing power of a deflationary currency tends to suppress interest rates in the absence of fractional reserve lending.

You do not understand the 'post-global' economic history.


Just thought I might through that little bit in there to enlighten you. I've got many more.

How many times have you been scammed by amazon or newegg or other major brand.  Also true cost of credit cards is more like 5%+ not 1%.  If you could buy everything you currently buy on amazon (or insert favorite retailer here) for 5% less would you?

Did I say that? I don't see where, so I guess like the Bible I'm going to have to update my post to fit!

But the reality is that if holding on to gold/dollars/bitcoins is a better bet than lending because of the "guaranteed" increase in value, there isn't much point in lending! Or if you do lend, it is at a very high interest. This may or may not be a primary cause of stagnation depending on whether you ask the bitcoin wiki or post-global economy history.


Wow thanks for that pedantic and enlightening definition! People might have gotten confused without it, because we know how easy it is to confuse people via obfuscation around here. 

There was no lending before fractional reserve banking?  There is much history that is going to have to be updated!  Even the Bible must have been mistranslated!

BTW, what you call a 'dollar', isn't.  It's a federal reserve bank note.  A 'dollar' is historicly, and legally, defined as a particular weight in pure silver.  Roughly a troy ounce.  A 'bit' was a silver coin cut into 8 pieces, which is why 'two bits' is a quarter.  The term 'dollar' was an American distortion of the word "Thaler" (http://en.wikipedia.org/wiki/Thaler) and is still very much, legally, a reference to a silver coin.

For most, no.  The credit cards also have the advantage that consumers are used to the system, and thus demand that system from vendors.  Which is why vendors use credit cards despite hating them.  But Bitcoin doesn't need most, only some.  As it chips away at the online market share of PayPal and Visa, it will become ever less obscure to the common consumer, and savvy vendors are going to start offering discounts for bitcoin.  Success need not be defined by the destruction of credit card companies, and likely couldn't anyway.  The advantages of credit cards could literally be added to bitcoin by those same credit card companies, if they so choose.


Some will try, undoutedly.  But try to undercut Walmart.com without a high level of trust from an established customer base.


Why?  Do you send your CC data to vendors online that you wouldn't trust to deliver on their promise?  If so, why would you trust them with your CC data?  There is more criminal profit to be had from selling or using the list of customers' data than from taking your bitcoin purchause and never sending you anything.  This is also why Ebay has vendor feedback, because you can still be screwed by a trickster.  Keep extending your trust online when it's unwarranted, and eventually you are going to have a real consequence.  Perhaps you are always protected by your CC company, but if you're gulible enough, eventually they will drop you like any other insurance company.


Bitcoin is already a currency, what you ask for is a complete banking structure.  That will come, eventually, to whatever extent the market may demand.  As I mentioned, there is literally noting stopping Visa form issuing Bitcoin credit.


Not that I will present, but I'm sure that you could find enough for yourself if you thought about it for a minute.

It's great that you ignore where I said the goal was to keep purchasing price of a dollar stable. But besides that, if you are of a mind that no one should be able to lend to spur economic growth, good for you, but it isn't going anywhere and any system that tries to thwart that (bitcoin) is going to fail as an economy nowadays. There must be a balance between no lending (leading to stagnation) and terrible lending (leading to eventual collapses). Bitcoin and pure-gold standards will and have led to stagnation.

So you think a possible savings of 1-2% will be enough to make most consumers willing to forego the fraud protections and grievance procedure that come with their credit cards?  Won't scammers take advantage of this and set up online Bitcoin shops that advertise lower prices without ever actually delivering anything?  I'm no expert in economics, but as a consumer I can tell you that I value the peace of mind that comes with using my credit card for online shopping far more than a tiny potential discount.  For Bitcoin to have a chance at becoming a currency, this issue can't be shrugged away:  the case will have to be made that one won't lose their money if they buy from what turns out to be an unscrupulous vendor or no one is going to use it.

This sounds like something you completely made up.  Do you have any evidence that online vendors aren't under contractual agreement with the credit card companies to not offer discounted prices on other forms of payment?

The 5000 years of history preceeding 1913 is a glaring contradiction to your premise here.  And even if not all 5000, the preceding 137 years of American experiences with a gold standard and two prior national banks certainly does.