But fractional reserve primarily existed because there simply isn't enough gold to go around when the population and economy grows. Either a dollar must be worth less than a dollar in gold--pissing off everyone who holds dollars, or fractional reserve must be implemented to help ease the demand of a dollar being worth wayyy more than a dollar of gold--because a relatively fixed supply of money will otherwise eventually cause massive deflation. The reserve was supposed to keep purchasing power stable. Obviously they failed then and continue to fail now on purpose because it is the only way to ease debt.
A fixed supply of money that slowly trickles in for some useful amount of work would be a nice system, if that were anywhere near what happened with bitcoin. Instead, in layman's terms, one half has the other half by the balls.
Topic: Limited coins and hoarding - page 7. (Read 8859 times)
Splitting hairs. Gold has the potential as a currency and it has been used as a currency in the past. It is generally not used as currency for various reasons as outlined in the post that your replied to.
Gold has fallen out of favor as a medium or exchange because
* it can be counterfitted relativley easily
* the amount of gold in coin can be altered
* it is difficult to have small units of exchange. For example making a 1/1000th ounce coin would be inpractical.
* as a medium of exchange some value will be lost due to abrasion
* difficult to transport large amounts safely
Bitcoin doesn't have the issues that Gold has and thus would be a more viable global currency.
Gold has fallen out of favor as a medium or exchange because
* it can be counterfitted relativley easily
* the amount of gold in coin can be altered
* it is difficult to have small units of exchange. For example making a 1/1000th ounce coin would be inpractical.
* as a medium of exchange some value will be lost due to abrasion
* difficult to transport large amounts safely
Bitcoin doesn't have the issues that Gold has and thus would be a more viable global currency.
All of those issues are based on the actual metal and all are solved by using a currency backed by gold. Which, crazily enough, most of the world did until the great depression. Then the world stopped because it caused a deflationary spiral.
See, this is a perfect example. The term 'deflationary spiral' implies a negative feedback loop occurred, which was true on it's face. But that same feedback loop would not have occured if not for the monetary intervention of the Federal Reserve, which officially exists to temper the ridgidity of the gold standard. The depression of 1929-1930 occurred as a correction to the bubble of the 'roaring twenties', which was a bubble, in part, because of loose monetary policy by the Federal Reserve. It then became "Great" because of misguided fiscal & trade policies of Congress, with the added bad luck of a concurrent famine known as the "dustbowl". In short, if we were really on a gold standard (without fractional reserve lending to add 'flexibility') then the Great Depression wouldn't have been so great.
Splitting hairs. Gold has the potential as a currency and it has been used as a currency in the past. It is generally not used as currency for various reasons as outlined in the post that your replied to.
Gold has fallen out of favor as a medium or exchange because
* it can be counterfitted relativley easily
* the amount of gold in coin can be altered
* it is difficult to have small units of exchange. For example making a 1/1000th ounce coin would be inpractical.
* as a medium of exchange some value will be lost due to abrasion
* difficult to transport large amounts safely
Bitcoin doesn't have the issues that Gold has and thus would be a more viable global currency.
Gold has fallen out of favor as a medium or exchange because
* it can be counterfitted relativley easily
* the amount of gold in coin can be altered
* it is difficult to have small units of exchange. For example making a 1/1000th ounce coin would be inpractical.
* as a medium of exchange some value will be lost due to abrasion
* difficult to transport large amounts safely
Bitcoin doesn't have the issues that Gold has and thus would be a more viable global currency.
All of those issues are based on the actual metal and all are solved by using a currency backed by gold. Which, crazily enough, most of the world did until the great depression. Then the world stopped because it caused a deflationary spiral.
This won't happen in Bitcoin because (quoting the wiki) "The key difference is that people don't foresee a fixed cost (unit amount) that they must pay with Bitcoin." So that somehow prevents hoarding, obviously.
All you'll get is analogies to gold, which is the heart of Bitcoin's problems as a currency. Bitcoin isn't gold, neither Bitcoin nor gold are a currency, and neither would work as a global medium of exchange without major disruptions to world economies.
The analogy with gold as a global currency is valid. But bitcoin improves on gold in that it is possible to easily buy/sell/trade in tiny fractions of one bitcoin. So even though there is a finite supply, the value will simply increase until equilibrium is found. Since bitcoins are easily divisible--and their divisibility could even be increased from the current 8 digits--it doesn't matter how high their value goes to reach equilibrium.Visa is not a money.
I'm regularly amused by members who do no comprehend Praxeology or Economics telling me how consumers should act.
Since you're obviously an expert in both, what do you think will motivate a consumer to use an irreversible method like Bitcoins to buy something online instead of their Visa card? I'm educated in both. (Actually, I'm educated in Praxeology, Economics is a subset) There is no such thing as an expert in either discipline, because they are both social sciences. Trustworthy Economists don't call themselves "experts", other people do. It's like the "guru" word among unix programmers, it's a title that you earn, not one you claim.
As the the question, "what do you think will motivate a consumer to use an irreversible method like Bitcoins to buy something online instead of their Visa card?" the answer is very simple. Lower transaction fees over the Internet, and eventually merchant discounts. Once upon a time, cash was cheaper than using a credit card, until the credit card companies got wise and started demanding vendors sign contracts to not advertise prices lower than the credit card prices. This is why the dual price displays on gas pumps disappeared in the 1980's. But you can still get a cash discount from such vendors on larger items, such as a new tv, if you know who it is in the store you have to talk to. Online vendors, for the most part, don't sign such agreements; and even if they did, they could be undercut by another website selling the exact same products for bitcoin only.
All you'll get is analogies to gold, which is the heart of Bitcoin's problems as a currency. Bitcoin isn't gold, neither Bitcoin nor gold are a currency, and neither would work as a global medium of exchange without major disruptions to world economies.
The analogy with gold as a global currency is valid. But bitcoin improves on gold in that it is possible to easily buy/sell/trade in tiny fractions of one bitcoin. So even though there is a finite supply, the value will simply increase until equilibrium is found. Since bitcoins are easily divisible--and their divisibility could even be increased from the current 8 digits--it doesn't matter how high their value goes to reach equilibrium.Splitting hairs. Gold has the potential as a currency and it has been used as a currency in the past. It is generally not used as currency for various reasons as outlined in the post that your replied to.
Gold has fallen out of favor as a medium or exchange because
* it can be counterfitted relativley easily
* the amount of gold in coin can be altered
* it is difficult to have small units of exchange. For example making a 1/1000th ounce coin would be inpractical.
* as a medium of exchange some value will be lost due to abrasion
* difficult to transport large amounts safely
Bitcoin doesn't have the issues that Gold has and thus would be a more viable global currency.
All you'll get is analogies to gold, which is the heart of Bitcoin's problems as a currency. Bitcoin isn't gold, neither Bitcoin nor gold are a currency, and neither would work as a global medium of exchange without major disruptions to world economies.
The analogy with gold as a global currency is valid. But bitcoin improves on gold in that it is possible to easily buy/sell/trade in tiny fractions of one bitcoin. So even though there is a finite supply, the value will simply increase until equilibrium is found. Since bitcoins are easily divisible--and their divisibility could even be increased from the current 8 digits--it doesn't matter how high their value goes to reach equilibrium.All you'll get is analogies to gold, which is the heart of Bitcoin's problems as a currency. Bitcoin isn't gold, neither Bitcoin nor gold are a currency, and neither would work as a global medium of exchange without major disruptions to world economies.
The analogy with gold as a global currency is valid. But bitcoin improves on gold in that it is possible to easily buy/sell/trade in tiny fractions of one bitcoin. So even though there is a finite supply, the value will simply increase until equilibrium is found. Since bitcoins are easily divisible--and their divisibility could even be increased from the current 8 digits--it doesn't matter how high their value goes to reach equilibrium. I'm regularly amused by members who do no comprehend Praxeology or Economics telling me how consumers should act.
Since you're obviously an expert in both, what do you think will motivate a consumer to use an irreversible method like Bitcoins to buy something online instead of their Visa card? Hopefully (eventually) lower prices. CC fees are expensive, and merchants routinely lose even more via fraud. Those aren't "free" and get wrapped into the cost of doing business. If Bitcoin gets popular enough hopefully merchants will offer discounts for using Bitcoin. The true cost of doing business with CC is easily 5% when you combine the fraud, charge back fee costs, merchant account costs, and the "vig". For some high chageback businesses it is north of 10%.
Of course it is a chicken or the egg scenario and it won't be solved overnight but CC aren't free and that offers an oppertunity for Bitcoin to be "better".
I especially use credit/debit cards for small purchases because the banks take a good chunk..
I'm missing the intent ... that causes pain to the merchant, who in turn raises the price -- the only winners are the payment network s and credit card issuers.
Right, the merchant raises prices, which in turn allows banks to make more fees. If the banks get away with charging higher fees to the merchant instead of the consumer, then the merchant again raises prices and the banks make more in fees.
The intent is to break that vicious cycle. At some point, Bitcoin will fit into the picture.
I'm regularly amused by members who do no comprehend Praxeology or Economics telling me how consumers should act.
Since you're obviously an expert in both, what do you think will motivate a consumer to use an irreversible method like Bitcoins to buy something online instead of their Visa card? I especially use credit/debit cards for small purchases because the banks take a good chunk..
I'm missing the intent
The intent was sarcasm.
I'm regularly amused by members who do no comprehend Praxeology or Economics telling me how consumers should act.
I especially use credit/debit cards for small purchases because the banks take a good chunk..
I'm missing the intent ... that causes pain to the merchant, who in turn raises the price -- the only winners are the payment network s and credit card issuers. Many merchants post minimum charge limits (though their merchant agreements almost universally prohibit that policy) so that their profits don't get demolished by payment network fees with these small purchases (e.g., purchases under $10).
I have said it before, but asymptotically limiting the number of bitcoins has bad repercussions.
One of the most serious problems is hoarding. Whenever you have a commodity that has a fixed supply against an increasing demand, inevitably hoarding occurs.
This is one of the key reasons why currencies are designed to expand: steady expansion of a currency improves liquidity.
Bitcoiners complain about non-use of coins and liquidity, but I think it is largely their own fault for capping the bitcoin supply, an elementary design blunder. Not only that, the closer we get to 21 million and the more users there are, the more intense the hoarding will become. This is basic economics stuff. Seriously, people around here need to read Adam Smith. (Hey, I know its a fat book, maybe your mom can help you with the big words.)
Also, as long as I am ranting, the procedure of giving bitcoins to people who run computational server farms is totally off the wall. The natural way to do P2P currency expansion is to award new coins proportionately to those who hold existing coins. Duh.
One of the most serious problems is hoarding. Whenever you have a commodity that has a fixed supply against an increasing demand, inevitably hoarding occurs.
This is one of the key reasons why currencies are designed to expand: steady expansion of a currency improves liquidity.
Bitcoiners complain about non-use of coins and liquidity, but I think it is largely their own fault for capping the bitcoin supply, an elementary design blunder. Not only that, the closer we get to 21 million and the more users there are, the more intense the hoarding will become. This is basic economics stuff. Seriously, people around here need to read Adam Smith. (Hey, I know its a fat book, maybe your mom can help you with the big words.)
Also, as long as I am ranting, the procedure of giving bitcoins to people who run computational server farms is totally off the wall. The natural way to do P2P currency expansion is to award new coins proportionately to those who hold existing coins. Duh.
Put your time where your mouth is and support my idea for EnCoin. It requires pretty much a completely new codebase, so it is a bit far yet from being a reality.
If too many people hoard and the prices rise, more people can create new coins (and there are rules governing creation that make it much less profitable for server farms and such).
Merchant reputation provides security for the network and merchants are encouraged to gain this reputation in the form of refunding some of a mandatory transaction fee. Any unrefunded fees go to those who already hold coins.
No big payoff for being an early adopter though since it is attempting to be a currency rather than a commodity. :/
Personally, I'm sticking with Bitcoin. I see it this way -- because it is trivial to "restock" my supply of bitcoin, I don't hesitate to choose it as the currency I use for spending. And because when I spend using Visa/MC/PayPal, the merchant gets less than a dollar for each dollar I spend, I believe it is only a matter of time before we start seeing incentives from merchants driving us to use Bitcoin as the payment method. i.e., I as a consumer gain more from using bitcoin for a payment than I would gain as a speculator from the increase in its value.
+1Couldn't agree more!
I especially use credit/debit cards for small purchases because the banks take a good chunk. I write checks for larger payments because it is slower for the payment to process.
your point: hoarding is bad because of low liquidity.
How does hoarding impact liquidity? If everyone stopped hoarding, the price of bitcoin would just go down. then it's trading as usual.
How does hoarding impact liquidity? If everyone stopped hoarding, the price of bitcoin would just go down. then it's trading as usual.
Personally, I'm sticking with Bitcoin. I see it this way -- because it is trivial to "restock" my supply of bitcoin, I don't hesitate to choose it as the currency I use for spending. And because when I spend using Visa/MC/PayPal, the merchant gets less than a dollar for each dollar I spend, I believe it is only a matter of time before we start seeing incentives from merchants driving us to use Bitcoin as the payment method. i.e., I as a consumer gain more from using bitcoin for a payment than I would gain as a speculator from the increase in its value.
+1Couldn't agree more!
One of the most serious problems is hoarding. Whenever you have a commodity that has a fixed supply against an increasing demand, inevitably hoarding occurs.
This is one of the key reasons why currencies are designed to expand: steady expansion of a currency improves liquidity.
I agree with you 100%, but don't expect much traction on this issue here. Many of the hard-core Bitcoiners are too blinded by their own ideology to recognize the basic fundamentals of economics in the real world. All you'll get is analogies to gold, which is the heart of Bitcoin's problems as a currency. Bitcoin isn't gold, neither Bitcoin nor gold are a currency, and neither would work as a global medium of exchange without major disruptions to world economies.This is one of the key reasons why currencies are designed to expand: steady expansion of a currency improves liquidity.
But all they see is that the coins they hold would get really valuable if everybody started using them. Plus they aren't evil "fiat" money printed by the CIA and used to control their thoughts and therefore automatically good.
Wait, we're the one's blinded by ideology?
I have said it before, but asymptotically limiting the number of bitcoins has bad repercussions.
One of the most serious problems is hoarding. Whenever you have a commodity that has a fixed supply against an increasing demand, inevitably hoarding occurs.
This is one of the key reasons why currencies are designed to expand: steady expansion of a currency improves liquidity.
Bitcoiners complain about non-use of coins and liquidity, but I think it is largely their own fault for capping the bitcoin supply, an elementary design blunder. Not only that, the closer we get to 21 million and the more users there are, the more intense the hoarding will become. This is basic economics stuff. Seriously, people around here need to read Adam Smith. (Hey, I know its a fat book, maybe your mom can help you with the big words.)
Also, as long as I am ranting, the procedure of giving bitcoins to people who run computational server farms is totally off the wall. The natural way to do P2P currency expansion is to award new coins proportionately to those who hold existing coins. Duh.
One of the most serious problems is hoarding. Whenever you have a commodity that has a fixed supply against an increasing demand, inevitably hoarding occurs.
This is one of the key reasons why currencies are designed to expand: steady expansion of a currency improves liquidity.
Bitcoiners complain about non-use of coins and liquidity, but I think it is largely their own fault for capping the bitcoin supply, an elementary design blunder. Not only that, the closer we get to 21 million and the more users there are, the more intense the hoarding will become. This is basic economics stuff. Seriously, people around here need to read Adam Smith. (Hey, I know its a fat book, maybe your mom can help you with the big words.)
Also, as long as I am ranting, the procedure of giving bitcoins to people who run computational server farms is totally off the wall. The natural way to do P2P currency expansion is to award new coins proportionately to those who hold existing coins. Duh.
Lucky for you there now are several alternate currencies which address your concerns. See the forum section "Alternate cryptocurrencies" for more info:
- http://bitcointalk.org/index.php?board=67.0
Personally, I'm sticking with Bitcoin. I see it this way -- because it is trivial to "restock" my supply of bitcoin, I don't hesitate to choose it as the currency I use for spending. And because when I spend using Visa/MC/PayPal, the merchant gets less than a dollar for each dollar I spend, I believe it is only a matter of time before we start seeing incentives from merchants driving us to use Bitcoin as the payment method. i.e., I as a consumer gain more from using bitcoin for a payment than I would gain as a speculator from the increase in its value.
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