How To Use Bitcoin – The Most Important Creation In The History Of Man

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John James replied on Thu, Jun 9 2011 2:03 PM

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Michael Suede:

Please explain to me how fractional reserve banking or interest rate manipulation would be possible with Bitcoins.  The nature of bitcoins is such that interest rate manipulation or fractional reserve banking with them is impossible.

Please explain how fractional reserve banking or interest rate manipulation would be possible with tulip bulbs.  Or Internet stocks.  Or houses. 

You are extremely confused.  You just spent all this time claiming bitcoins are a commodity and yet you're trying to claim their price couldn't get artificially inflated because they themselves can't be inflated?  You really should have thought about that before typing it.

But anyway, nice dodge.  Am I to assume your continuing avoidance of my question means you have no decent answer?

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Michael Suede replied on Thu, Jun 9 2011 2:12 PM

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You dodged my question, I answered yours.

You are claiming that bitcoins are like tulip bulbs, which is utterly preposterous.  Tulip bulbs are not divisible, they degrade over time, they can't be sent across a wire transaction, and they can be arbitrarily replicated to absurd numbers if the demand for them exists.

Now, please explain how fractional reserve banking or interest rate manipulation would be possible with bitcoins.

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Clayton replied on Thu, Jun 9 2011 4:27 PM

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"@Sam Armstrong: There's nothing in Austrian theory that says that speculative booms and busts are impossible absent government intervention."

...

Either way, it is the manipulation of interest rates by direct government intervention or government ignoring property rights that bring about business cycles.

It is what brings about the inflationary boom-bust cycle described in ABCT. However, inflation is not the only cause of business cycles, generally.

And, yes, Bitcoin can be inflated by whatever decision-making process is in place to change the 21 million number. Yes, it can be changed. Bitcoin is crap.

Clayton -

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Clayton replied on Thu, Jun 9 2011 4:28 PM

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At least a tulip bulb can grow a tulip. I'll buy into Bitcoin when they figure out how to make a Bitcoin that actually does something useful.

Clayton -

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Michael Suede replied on Thu, Jun 9 2011 4:57 PM

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It is what brings about the inflationary boom-bust cycle described in ABCT. However, inflation is not the only cause of business cycles, generally.

Do tell.  Please explain the "other" mechanism that causes business cycles according to ABCT.

And, yes, Bitcoin can be inflated by whatever decision-making process is in place to change the 21 million number. Yes, it can be changed. Bitcoin is crap.

Sure, anyone can take the open source code and modify it to make it inflationary.

Of course, they would have to convince every single user of Bitcoin to download their version AND go through a coin conversion process in the open market since the coins would be incompatible across versions.

Barring that taking place (which is about as likely as monkies flying out of my butt) they cannot be inflated.  The nature of the currency code is such that any change to the currency itself branches the new currency unit off into its own networked world.  It would not be able to interact with the existing version.

I'd also like to add that if you favor a gold standard, you can't send gold across a wire.  If you wish to do transactions across the web on a gold standard, one MUST use digital units to represent real gold.  Since the banks would be in control of those digital units, there are NO protections on cooking the books or using fractional reserve banking accounting.

This is in contrast to bitcoins, which can not be inflated digitally.

If you want to make the case that gold is less prone to inflation than bitcoins, you can only do so in a world where everyone directly exchanges real gold coins.  As soon as you start using units to represent gold, they can be arbitrarily inflated and fractionally reserved.

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Sam Armstrong replied on Thu, Jun 9 2011 5:05 PM

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I had forgotten to respond to this and Clayton got it.  But to simplify and reiterate his point, he's just saying bitcoins are overvalued.  I suppose it depends on how exactly you want to define "bubble", but what Clayton has been talking about in this thread is that the people involved in bitcoin are wrong.  That's it.  His argument is that they mistakenly place more value on the bitcoins than they are actually worth in terms of all other goods in the market.

Considering none of us know how much people value cryptographic data  other than through market pricing, I find it incredibly presumptuious to say it's overvalued. This is what speculators are doing. They are betting that the goods avaliable for bitcoin will in the future match what they are speculating the price at now. If the amount of goods never reach that point, then he's correct. But if they do reach that point, then the speculators were correct. So why is everybody speculating that the goods will reach that point? Why are they all wrong? Shouldn't there be those speculating downward to make the correction if you and clayton are correct? Why is nobody putting their money where their bubble filled mouth is?

It's the same as if I created a new company manufacturing widgets.  Widgets aren't really very useful now, but a lot of people are convinced that they will be in the future...people believe that widgets will be widely sought after as an alternative to some good most people already use (making them more valuable)...and of course the more people that use widgets the more useful they become (which in turn makes them even more valuable).  Based on this belief about future value, people are willing to pay much more for shares in my company than they otherwise would.

This is exactly why Gold has reached the valuation it has now. The price of gold is not accounted for by it's industrial usefulness. It is precisely because it's useful for exchange that it has reached the heights it has. Granted gold did not reach it nearly as quickly, but we've never really had the chance for a cross platform commodity to come into existance in the information age. Is it not equally likely that the speculators are correct? This isn't fiat. This is entirely driven by the market. In fact, it's working in spite of government decree (people are exchaning something worthless but decreed by the government to be worth something, for something "worthless" but not decreed by the government), something I find a compelling reason to agree with the market.

This is what Clayton is saying is the case with Bitcoin.  You don't need new money being printed for people to mistakenly be willing to overpay for something and thus raise its price to an artificial level...especially not something starts off as basically a penny stock.  It doesn't take much for something that's 6 cents per unit to see a price jump.  And sure, if you look at it as a percentage, an increase to $20 over two years is ridiculous (which kind of supports Clayton's point)...but you don't need an increase in the money supply to show a 33,000% movement in something when that thirty-three thousand percent equates to $19.94.

But that ignores the possibility that it was incredibly undervalued at 6 cents per unit. When you consider that hardly anybody knew about it for those first few months, and now it's gotten alot of media attention, that would seem just as likely. And there are people putting their own money up saying exactly that. There is nothing a priori that will tell us this is inherently unvaluable.

I think the rise of selling game currencies for purely in game rewards shows just how subjective valuation of a currency can be. The fact that bitcoin is essentially a cross platform game currency (which was it's first use) that can't be counterfited and can be taken out of and put into any game, can/has lead to real world uses. So tell me, Is there a WoW gold bubble?

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Nielsio replied on Thu, Jun 9 2011 5:06 PM

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What to me seems potentially very powerful is an encrypted/decentralized reputation system, and possibly arbitration system as well.

The reason private reputation systems don't appear today is because it's actually illegal. The first reason is because there are privacy laws meaning the government will crack down on you if you try to establish them. The second reason is that trying to act on reputation is in many cases also illegal; these are equality laws. If you try to deny people from your store, the government will also crack down on you, because your store is consired public property in the way it's treated (smoking laws are a good example demonstrating this).

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John James replied on Fri, Jun 10 2011 2:13 AM

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Michael Suede:

You are claiming that bitcoins are like tulip bulbs, which is utterly preposterous.  Tulip bulbs are not divisible, they degrade over time, they can't be sent across a wire transaction, and they can be arbitrarily replicated to absurd numbers if the demand for them exists.  Now, please explain how fractional reserve banking or interest rate manipulation would be possible with bitcoins.

You cannot be serious.  How is "fractional reserve banking or interest rate manipulation" possible with anything that has been in a bubble?  How is fractional reserve banking possible with a house?  How is interest rate manipulation possible with an Internet stock?  Those things were in bubbles were they not?  They were overvalued, were they not?

It sounds like you're saying it's only possible for a Federal Reserve note to be in a bubble.  Is that your argument?  That nothing else (bitcoins, houses, stocks, tulip bulbs) cannot ever be in a bubble because you cannot fractionally reserve bank with them, or manipulate the interest rate with them?

You dodged my question, I answered yours.

Uh...okay, I must have missed it.  Please point me to where you answered this: "If bitcoins were declared illegal, (which would not be hard, as supported in the link) do you think any major business is going to accept them or deal with them in any way?  Of course not.  And who the heck is going to continue to use a currency that you can't transact in with any reputable business?"

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bitcoin2cash replied on Fri, Jun 10 2011 11:34 PM

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I've already corrected Nielsio on this once. BTC is a commodity. Bitcoin is a proof-of-work system. It's useful because it proves that you've spent resources generating BTC. This means someone can charge for otherwise relatively free actions such as signing up to a website, posting on a forum or sending an email. This forces spammers to incur higher costs, making spam less profitable and reducing the overall amount.

Read a long explanation I posted here if you're interested: http://mises.org/Community/forums/p/24195/418504.aspx#418504

Please, stop spreading the myth that BTC isn't a commodity. That's simply false.

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John James replied on Sat, Jun 11 2011 2:31 AM

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bitcoin2cash:

Please, stop spreading the myth that BTC isn't a commodity. That's simply false.

Uh...what?  Who are you talking to?

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Clayton replied on Sat, Jun 11 2011 2:02 PM

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@bitcoin2cash: 

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

A commodity is a specific kind of good. It is a good which is "fungible", that is, any one unit of it is exchangeable for any other unit of it. While Bitcoin has the property of fungibility (a Bitcoin is a Bitcoin), the real issue is whether a Bitcoin is a good - specifically, whether it is a good in its non-monetary use - and the fact is that it is not. A "spent" Bitcoin is completely useless, no one will ever use it for anything ever again and outside of its use within the Bitcoin chain, it never had any.

It is true that people are trading real money for Bitcoins. But the argument that Bitcoins are valuable because they are valuable is transparently circular and utterly fails to address the logical problem that Mises tackled with his regression theorem... how did money come to be valued as money in the first place? You cannot give an account of how Robinson Crusoe could one day end up using Bitcoins - absent government force and consistent with the principle of human action. There is simply no path from here to there because Bitcoins are worthless.

Clayton -

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Clayton replied on Sat, Jun 11 2011 2:10 PM

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Why is nobody putting their money where their bubble filled mouth is?

As I said, I would be more than happy to short BTC if I could find someone willing to loan me some.

Clayton -

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bitcoin2cash replied on Sat, Jun 11 2011 10:04 PM

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@Clayton

I've just explained how Bitcoin is a proof-of-work system and can be used to prevent spam by requiring BTC before performing actions such as joining a website, posting a comment on a forum or sending an email. I don't see any acknowledgement of that fact in your reply. BTC has a use outside of being a currency. It's a replacement for CAPTCHA's. If Robinson Crusoe wants to join a website that requires BTC instead of solving CAPTCHA's then he'll want to use it. Of course, if you're going to argue that a single person, with no other humans in existence, still wouldn't have use for BTC then your argument is reduced to absuridity. A solitary human being wouldn't have use for televisions, radios or telephones either, which are certainly commodities but require the existence of other human beings to be useful.

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My Buddy replied on Sun, Jun 12 2011 12:07 AM

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Robinson Crusoe couldn't use bitcoins as a medium of exchange because bitcoins require the internet, the programming necessary to run them, and all of the infrastructure that entails (and if Robinson had the spare time to create all of that, creating a medium of exchange would be the least of his worries)

Likewise, Robinson Crusoe would never find himself using gold, silver, expensive pieces of paper or ammunition either, as all of those require refining and hard work to create, but all also have few tangible benefits to a man on his own on a desert island. Why is gold valuable? It has some industrial applications, true, but those are generally few and far between, not to mention that most of gold's practical uses can be generally be supplied even better by other metals.

Why is bitcoin worthwhile? Because it is a medium of exchange that fulfills the major requirements (easily divisible, doesn't degrade, etc) and it is infinitely preferable to the worthless pieces of monopoly money that constitute that role today. It isn't worthless, it is a large amount of electrons in a very specific formation that constitute quite a bit of processing power. Short of a general collapse of society scenario, it can't cease to be of value at all, and if that happened then gold would be practically worthless, too. It works as jewelry, but jewelry would not be in high demand assuming everything went tits up. It is, as said above, used in certain electronics and industrial applications, but if the infrastructure that keeps bitcoin around fell then so would the infrastructure that requires gold. Also, you can't eat gold.

Oh, and bitcoin does have an purpose besides a currency as it functions as a service, specifically money transfer (something demanded by banks, paypal, etc).

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MoonShadow replied on Tue, Jun 14 2011 2:10 PM

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Clayton:

@Suede: *shrug... I'm still looking for someone to loan me BTCs... if you're willing to earn a big profit in BTC, I will sign a real-world contract with you to repay you 150 BTC in one year's time in exchange for a loan of 100 BTC today.

Okay, I'm game if you can show a decent credit rating and really will sign such a contract.  I have well over 100 BTC, and I'm willing to risk it to break you.  If a BTC is worth $1000 in one year, what are you going to offer in settlement?  What kind of collateral do you have?

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__xc replied on Sat, Jun 18 2011 12:49 AM

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Clayton, please do feel free to short bitcoin.  Your trades will be welcome.

"Shorts,
You know who you are. It is time to put your money where your mouth is, and do some option trading.

https://bitoption.org is up and running. It will keep gaining features this week, but there are currently over $1k USD in options offers on the site, and more coming in quickly. I'll look forward to seeing those bear trades roll in. You now have a way to actively trade against BTC; enjoy! I have had fun building it." -bitoption

bitoption.org (further description and explanation: http://forum.bitcoin.org/index.php?topic=9611.0)

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Alternatives Considered replied on Mon, Jun 20 2011 8:07 PM

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I'm certainly intrigued with the idea of bitcoins and I have to admit that a lot of the people responding to you and doing so very douchily (what's up with that? Have mises people become so accustomed to being treated rudely by the rest of the world that they feel compelled to treat each other rudely?), but my personal concern, which you can take perhaps as some echo of how the market might react to bitcoins, is: what's going to happen when there are 869 different brands of "bitcoin"? Sure, the current "bitcoin" has a finite amount, but what's to stop people from creating "Andy'sBitCoins" and "John'sBitCoins" using the exact same setup and algorithm etc? And given that there's nothing to prevent that, it becomes an economic question to ask how the market will react. The optimistic answer is that the current bitcoin will have some sort of lock-in advantage and people will still value them while not valuing the competitors. The pessimistic answer is that if there are is a neverending sequence of competitors, holders of current bitcoins may indeed see thiers as being at risk and the price for them may plummet.

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Em_ptySkin replied on Mon, Jun 20 2011 8:42 PM

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Thirty Three Thousand Percent in two years!?!?!?!?!??!?!?!?!

hahahaha

i have tons of priceless real estate in Rwanda if anyone cares to start the bidding?  I'm just not there because my girlffriend doesn'y like the humidity.  It's really peaceful and serene. I promise.

Peter Schiff had the BitCoin guy on today.  I'm gonna listen in a  bit here and post back, my guess is.  IT's A BAD INVESTMENT. (in his opinion. 'past performance is no indication of future success'.)

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Smiling Dave replied on Mon, Jun 20 2011 10:11 PM

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The Most Important Creation in the History of man has dropped from $17 to one cent in a few minutes.

http://www.economicpolicyjournal.com/2011/06/bitcoin-nightmare.html

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Em_ptySkin replied on Mon, Jun 20 2011 10:13 PM

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AAAAAAAHGGGGGHHHHH (thanks for posting that video)

WHUUUDUHTHUNK ITDDD GET HACVKD claiminxxx to be muney !!!

Get real folks, the internet is not to be monetized.  that is the point.  it is the breakdown of IP law and enforcement EMBRACE IT.  Money is for physical production, not instant replication, let's keep ot to physical production

http://eatingpropaganda.blogspot.com/2011/06/internet-epitome-of-anarchy.html 

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Clayton replied on Mon, Jun 20 2011 10:57 PM

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@Jacob: A minor quibble... the costs of digital reproduction are not exactly zero, even though it's very close... this is important for the same reason it's important that the cost of producing a grain of rice is not exactly zero, even though it's very close. Status quo copyright law is being challenged by the rapid technological developments in copy technologies and this process will continue unabated for some time. Copyright law was already corrupt, even before the dawn of the personal computer but now that the costs of copying have gone down many orders of magnitude in just the last three decades the corruption of copyright law is unusually naked. Copyright law is certainly going to change whether the Establishment players like it or not. But the end result will not be libertarian, either, and I think that people who think that a mere technology (computers) can usher in a new era of justice in IP law are mistaken.

Clayton -

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Clayton replied on Mon, Jun 20 2011 11:00 PM

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@Smiling Dave: Argh, I missed my opportunity to short BTC... dammit.

Clayton -

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Em_ptySkin replied on Mon, Jun 20 2011 11:24 PM

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@Jacob: A minor quibble... the costs of digital reproduction are not exactly zero, even though it's very close... this is important for the same reason it's important that the cost of producing a grain of rice is not exactly zero, even though it's very close. Status quo copyright law is being challenged by the rapid technological developments in copy technologies and this process will continue unabated for some time. Copyright law was already corrupt, even before the dawn of the personal computer but now that the costs of copying have gone down many orders of magnitude in just the last three decades the corruption of copyright law is unusually naked. Copyright law is certainly going to change whether the Establishment players like it or not. But the end result will not be libertarian, either, and I think that people who think that a mere technology (computers) can usher in a new era of justice in IP law are mistaken.

I agree that it is not exactly zero the infrastructural costs can get high if you really get into what they are and where they are going, but i don't see Verizon et al. scaling back what is already there.  Also, i think the cloud system is the only way they can effectiely stop ALL piracy, but that comes at the cost of major functions ofthe devices themselves (which i will die protecting haha) which is why i think the internet and computers does have a serious potential (as does the hacking community (assuming they do not get/are compromised by undercover authorities) to fight back against the state.)  It requires the cooperation of people who have the ability to fight back, which is very unlikely, however.  Lulsec and http://en.wikipedia.org/wiki/Anonymous_(group) will help.  They can never force us off of p2p.  it is an impossibility save digging up the cables.

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Isaac "Izzy" Marmolejo replied on Mon, Jun 20 2011 11:33 PM

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One thing to remember though guys, Bitcoin is still fairly new, so it is going to have its crashes. Sure when the crash first started, many people thought that the price dropped simply because people lost interest in Bitcoin, but the real reason why the value fell was because of a hacker messing around with one site, Bitcoins value is going back up now.

One can conclude that these crashes should make one even more skeptical of bitcoins but im not so sure that is a valid conclusion. Ebay had a crash in the late 1990s and people after that crash were saying stuff like, "See, I told you buying stuff online was inefficient and unreliable" or "See, I told you Ebay was a scam!"

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Em_ptySkin replied on Tue, Jun 21 2011 1:39 PM

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The guy from BitCoin was on Peter Schiff's radio show yesterday and Schiff let him speak for a pretty good amount of time.  H e talked about how the code itself was secure and likened the 'hacking' to an irresponsible person losing a credit card and someone finding it and using it.

It did sound convienient as competition for PayPal.  The real benefit is the ease of liquidation between currencies.

Not a good investment it is, but could prove useful in the future when im trying to buy MJ seeds from Amsterdam.

We need a worldwide Gold Standard (or commodity). Think if a pound of rice costs the same in New York that it does in Bangladesh (or just the purchasing power of a single unit of money was equal) there would be no need for labor exploitation or outsourcing of jobs because there would be no excess profit in it.

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Clayton replied on Tue, Jun 21 2011 1:47 PM

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if a pound of rice costs the same in New York that it does in Bangladesh (or just the purchasing power of a single unit of money was equal) there would be no need for labor exploitation or outsourcing of jobs because there would be no excess profit in it.

WTF?

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Smiling Dave replied on Tue, Jun 21 2011 1:47 PM

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Thoughts on the Peter Schiff interview yesterday with Mr Bitcoin:

1. He treated the guy with kid gloves. Peter went to the heart of the matter with his first question, mainly "But Bitcoin has no intrinsic value." Which should have ended the whole thing right there, but Mr Bitcoin mumbled some nonsense and Peter moved on.

2. Mr Bitcoin was explaining to Peter how vital it is to have new laws and regulations to make sure bitcoin has its place in the sun. The guys at economicpolicyjournal.com are not pleased. http://www.economicpolicyjournal.com/2011/06/this-is-what-will-really-crash-bitcoin.html

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My Buddy replied on Tue, Jun 21 2011 3:08 PM

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Nothing has intrinsic value. There is no such thing as intrinsic value.

Also, most bitcoiners are against laws and regulations of any kind.

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Clayton replied on Tue, Jun 21 2011 4:40 PM

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LOL. Mt. Gox is not even accessible. I thought I was exaggerating when I said Bitcoin was a pump&dump. Turns out pump&dump wasn't an exaggeration at all.

Clayton -

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Em_ptySkin replied on Tue, Jun 21 2011 5:21 PM

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@Clayton, "WTF?"

In an anarchic world market with a 100% gold standard.

Imagine a borderless market with a floating exchange commodity standard, such as gold.  If i could take my gold ounce and pay for rice in NY or India with the same amount of gold then the distribution of necessary resources is everywhere equal. I'm assuming this is the market Hayek and Rothbard would envision if the market was truly left to decide.  Does that make sense? Supply and demand would equilibrate rice and money everywhere in the world, cateris paribum.

EDIT: I mean nothing Marxist by 'excess profit' i should have said "profit opportunity" or "profit motivation."

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Clayton replied on Tue, Jun 21 2011 5:39 PM

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magine a borderless market with a floating exchange commodity standard, such as gold.  If i could take my gold ounce and pay for rice in NY or India with the same amount of gold then the distribution of necessary resources is everywhere equal. I'm assuming this is the market Hayek and Rothbard would envision if the market was truly left to decide.  Does that make sense? Supply and demand would equilibrate rice and money everywhere in the world, cateris paribum.

No, it doesn't make sense. There's no reason in the world why rice should be the same price in NY and Bangladesh. I think you are gravely confused about ECON 101 concepts if you think that fiat money is responsible for the local variation in prices of commodities around the globe.

Clayton -

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z1235 replied on Tue, Jun 21 2011 6:42 PM

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Jacob:

 If i could take my gold ounce and pay for rice in NY or India with the same amount of gold then the distribution of necessary resources is everywhere equal.

FYI, you could exchange fiat USD for fiat Indian Rupee (and vice versa) on the open market today. So I see no reason why you couldn't arbitrage such an obvious profit opportunity as the price of rice differential between NY and India right now. 
 

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Smiling Dave replied on Tue, Jun 21 2011 6:57 PM

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There have been long threads about the phrase intrinsic value, many prominent Austrians quoted using it. IIRC, the no such thing as intrinsic value guys retreated.

Search, my son, and learn.

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Smiling Dave replied on Tue, Jun 21 2011 7:04 PM

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Izzy,

You surely aren't saying that everything people think of as a fad or a scam turns out to be another Ebay. There is a bridge near Brooklyn for sale, if you're interested. I'll introduce you to Bernie Madoff if you want.

Bitcoin indeed has no intrinsic value, a fatal flaw.

Someone argued that dollars have no intrinsic value either, but they are doing fine. To which Peter replied that the dollar has a value in that you have to pay your taxes in dollars. Artificial and propped by violence as that value is, bitcoin lacks even that.

The latest thing you hear from the bitcoin folks is that it's not money, it's a wallet. But my wallet doesn't go from $17 to a penny in 5 minutes.

Others equate it with paypal, only a thousand times more safe. But paypal is indeed a wallet. I don't buy paypal coins that go up and down in value. They just hold onto my digital dollars for me 

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Phaedros replied on Tue, Jun 21 2011 7:12 PM

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Holy crap you guys are dumb. Bitcoin doesn't need to have "intrinsic value' in order to be used as a medium of exchange, i.e. money.

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Em_ptySkin replied on Tue, Jun 21 2011 7:29 PM

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Well I'm not blaming fiat currency directly for it, but the labor variations in each country.  The point is to have production growth equal everywhere and I would assume that the reason why that is not the case is, for the most part, because countries manipulate their currencies through bank transactions.

If those bank transactions that create credit growth and give artificial flux to the prices, that is what creates the conditions that give rise to the necessity to produce or the incentive to import.  So it is not fiat money in itself, but the implications that it gives for motivation, and especially in the political process, to try and cheat others.  Gold , or any physical medium, prevents artificial forms of wealth from giving the illusion of growth or decline in conditions that define what is economic and where.  I thought this was the point of it.  To prevent out of control credit growth.

EDIT: "FYI, you could exchange fiat USD for fiat Indian Rupee (and vice versa) on the open market today. So I see no reason why you couldn't arbitrage such an obvious profit opportunity as the price of rice differential between NY and India right now. "

That is the point; it doesn't account for the true value of the labor everywhere.  The labor of an American worker is worth more because when we work we create more money.  But an Indian worker can work the same amount of time in India and not create as much paper wealth.  There is no reason for this other than the currencies of the two countries, with value is measured funkily be the central banks and private banks.

EDIT 2:  The only reason that business's move overseas is because labor is cheaper.  That is the case because of the percieved production and/or tax reciepts that will be created by the people there.  This is the whole game of the IMF when they tell countries to print money to "encourage foreign investment" it makes resources and labor cheaper in the countries  So the U.S. loses jobs to India et al. and the Fed monetizes debt and we expand our welfare system, subsidies, and trade deficit to accomodate for the disparity of imports to exports as well as consumption patterns to reinvestment/savings patterns.  One money everywhere unmanuipulated other than by market conditions would command equal purchasing power everywhere respective to other goods.

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Clayton replied on Wed, Jun 22 2011 12:29 AM

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Well I'm not blaming fiat currency directly for it, but the labor variations in each country.  The point is to have production growth equal everywhere

Why? What point? Whose point? Why is this the point? Who says there is a point?

and I would assume that the reason why that is not the case is, for the most part, because countries manipulate their currencies through bank transactions.

Production growth was unequal long before there were central banks or currency manipulation. Do you think that Papua New Guineans experienced lackluster growth by comparison to medieval Venice because of central bank inflation?

If those bank transactions that create credit growth and give artificial flux to the prices, that is what creates the conditions that give rise to the necessity to produce or the incentive to import.

Nonsense. Inflation indeed subsidizes exporters on the backs of domestic non-exporters. It is not true that a country can gain an economic advantage against its peers by inflating its own currency. It only appears that this is the case since the subsidized exporters do better than their non-subsidized peers in other countries. The fact is that the enrichment of the exporters is not paid by foreigners but by domestic non-exporters.

  So it is not fiat money in itself, but the implications that it gives for motivation, and especially in the political process, to try and cheat others.  Gold , or any physical medium, prevents artificial forms of wealth from giving the illusion of growth or decline in conditions that define what is economic and where.  I thought this was the point of it.  To prevent out of control credit growth.

No, that's not the point. There is no point... free market money is just whatever satisfies the demands of consumers for use in indirect exchange.

That is the point; it doesn't account for the true value of the labor everywhere.  The labor of an American worker is worth more because when we work we create more money.  But an Indian worker can work the same amount of time in India and not create as much paper wealth.

We don't have to measure the value of labor in dollars, we could measure it in gold or anything else. The fact is that the American worker is (or, at least, was) more productive than his Indian peer. His labor exchanges for more real goods... it is actually more valuable.

  There is no reason for this other than the currencies of the two countries, with value is measured funkily be the central banks and private banks.

You are confused.

EDIT 2:  The only reason that business's move overseas is because labor is cheaper.  That is the case because of the percieved production and/or tax reciepts that will be created by the people there.

No, it's because of our insane labor laws, inflated cost-of-living (housing bubble, etc.), Social Security/Medicare, and the gargantuan cost of our government.

  This is the whole game of the IMF when they tell countries to print money to "encourage foreign investment" it makes resources and labor cheaper in the countries  So the U.S. loses jobs to India et al. and the Fed monetizes debt and we expand our welfare system, subsidies, and trade deficit to accomodate for the disparity of imports to exports as well as consumption patterns to reinvestment/savings patterns.  One money everywhere unmanuipulated other than by market conditions would command equal purchasing power everywhere respective to other goods.

OK, one word to clear up all this crap about things being the same price everywhere.... transportation. It costs money to transport things from one place to another. Rice cannot be the same price everywhere because it's cheaper to produce rice in the paddy fields of China than it is in the arid sands of the Sahara. Hence, the price of rice will never be the same in the two places because you have to transport it from where it's cheap to grow it to where it is in demand for consumption. Please look over an introductory text on price theory and microeconomics.

Clayton -

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Clayton replied on Wed, Jun 22 2011 12:34 AM

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@Dave: Valuation is something that a subject does to an object. "I value this old keepsake very much." Value does not inhere in physical objects, it is not intrinsic. What is the value of the Sun? What is the value of the Universe? What is the value of a quark? These questions don't make sense because valuation is not like electrical charge or quantum spin or physical age.

Clayton -

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Clayton replied on Wed, Jun 22 2011 12:36 AM

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Holy crap you guys are dumb. Bitcoin doesn't need to have "intrinsic value' in order to be used as a medium of exchange, i.e. money.

*sigh, true believers... 

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Isaac "Izzy" Marmolejo replied on Wed, Jun 22 2011 1:29 AM

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Dave,

First off, let me say I am neutral in this debate... I am not arguing for or against Bitcoins. I am skeptical about it, but if others want to go and take the risk, more power to them. But I do not think that 'intrinsic value' has anything to do why I am skeptical about Bitcoins. It is contradictory to say such a term in my opinion because value is subjective. This reminds me of a topic on this forum a few months back dealing with this whole intrinsic value thing. If people value X, then X is going to have value, if people dont value X, then X is not going to have value.