oralloy
 
  -1  
Wed 26 Feb, 2014 03:26 am
@Lordyaswas,
Lordyaswas wrote:
But that paper money is basically a promise to pay on demand, and the institution that made the promise has several hundred truck loads of gold bullion to back up that promise.
Big difference.

The US has been off the gold standard for some time now. Some time around FDR I think.

That's why we've been able to print so much money these past several years. All it cost us was the paper and ink.
Lordyaswas
 
  2  
Wed 26 Feb, 2014 03:36 am
@oralloy,
Every new dollar printed, weakens the overall dollar market.

I used gold as a simple example. An economy has to back up its currency with something tangible.

If an unknown person offered to buy my lawn mower using a promisory note, I'd tell him to go forth and multiply.

A few of people will make a lot of money out of bitcoin. A lot more suckers at the bottom will fund all that gain.
Maybe not today or tomorrow, but one day soon.

Think South Sea Bubble.

oralloy
 
  0  
Wed 26 Feb, 2014 03:43 am
@Lordyaswas,
Lordyaswas wrote:
Every new dollar printed, weakens the overall dollar market.
I used gold as a simple example. An economy has to back up its currency with something tangible.

So what does the United States back its currency with?


Lordyaswas wrote:
A few of people will make a lot of money out of bitcoin. A lot more suckers at the bottom will fund all that gain.
Maybe not today or tomorrow, but one day soon.
Think South Sea Bubble.

If you refer to people trying to get rich by speculating on currency markets, probably so.

But there are also people who try to make money through BitCoin mining. And people who merely use BitCoin as a way to buy and sell goods. Those people should do OK (though they aren't trying to get rich like the currency speculators are).
0 Replies
 
BillRM
 
  1  
Wed 26 Feb, 2014 05:52 am
@oralloy,
Quote:
However, I don't know how things would work out with my dialup connection. If they need me to do some calculations on a transaction and get the results back to them, and I spend five days downloading the data before I can even start crunching it, I'll probably be more of a hindrance than a help.


No you would need to buy the bit coins like I am planning on doing as first of all you would need to import a whole complete bitcon chain to do mining and that is many G bits of data and next to have a real chance of being a miner now you need one hell of a high power computer set up.

Given the build in limit of 22 millions bitcoins buying and holding seems the way to go.
BillRM
 
  1  
Wed 26 Feb, 2014 05:53 am
@Lordyaswas,
Quote:
But that paper money is basically a promise to pay on demand, and the institution that made the promise has several hundred truck loads of gold bullion to back up that promise.


No one back paper money with gold any longer it just paper as bitcoins are just digit information.
0 Replies
 
BillRM
 
  1  
Wed 26 Feb, 2014 05:56 am
@Lordyaswas,
You can not just print/create bitcoins as the rate of new bitcoins and the total amount that can exist is limits by the math bey0nd any human ability to change.
0 Replies
 
oralloy
 
  0  
Wed 26 Feb, 2014 07:23 pm
@BillRM,
BillRM wrote:
No you would need to buy the bit coins like I am planning on doing as first of all you would need to import a whole complete bitcon chain to do mining and that is many G bits of data and next to have a real chance of being a miner now you need one hell of a high power computer set up.

Given the build in limit of 22 millions bitcoins buying and holding seems the way to go.

Maybe if the goal is making lots of money (though note that Lordyaswas is correct that currency speculation is quite risky).

My goal though is only to help support BitCoin because I like the concept. Any money that I made would be secondary.

But yes, I definitely need to wait until I am able to get broadband before I consider mining.

BTW, as they start doling out fewer and fewer BitCoins, they plan to start charging a fee for transactions, which will be used to pay for the services of the miners.
BillRM
 
  1  
Wed 26 Feb, 2014 08:57 pm
@oralloy,
You would be a fool to place serous money into bitcoins but a few thousands dollars seems a good investment.

Hell if you had purchase a thousands dollars of bitcoins a few years ago you would be a millionaire by now.

The currency is limited to at most 22 millions coins and that will not be reach for many decades.

Right now there is somewhere near 12 millions coins in existence.
0 Replies
 
Thomas
 
  2  
Thu 27 Feb, 2014 11:41 am
@oralloy,
oralloy wrote:
Thomas wrote:
The technology of Bitcoin is nifty, but the monetary economics of it never made sense to me.

It's the same concept that is behind paper currency. People trade currency for goods, and trade goods for currency.

That's not where the monetary economics fail. To understand where they do fail, lets go back to basics. Let's recall that money is whatever serves people as their medium of exchange, store of value, and unit of account. Bitcoin has proven functional as a medium of exchange, but highly volatile as a store of value and a unit of account. That makes it dysfunctional in its role as money.

And there's a reason for that: Nothing in the Bitcoin system puts an upper or lower limit on the price of Bitcoin.

This is not true with other monetary systems. With gold, for example, you have a lower bound for its price because gold is useful for things like making jewelry, filling teeth, and galvanizing electrical contacts. On the other side, you have an upper limit on its price that is set by mining technology. When the gold price rises above a certain level, mining operations find it profitable to dig out more of it, increasing its supply, and decreasing its prices in turn.

Dollars function differently than gold, but they, too, have upper and lower limits on their value. The lower limit on their value is that you can pay taxes to your local, state, and federal governments with them. (If and when that changes, I will agree that dollars are just as flaky as Bitcoin.) Putting an upper limit on the value of the dollar is monetary policy. As long as the federal government wants to maximize its tax revenue, the Fed will contribute to this goal with a suitable monetary policy. That policy involves stimulating the economy to take the tax base high, while avoiding to devalue tax revenue with excessive inflation. That's why dollars have low and fairly predictable inflation.

Bitcoin, by contrast, has none of that. There's no lower limit on its price because it's useless. And there's no upper limit either because the total quantity of bitcoins is arbitrarily capped at 21 million. Once supply hits this limit, nobody can mine more of them, no matter how much that would benefit its users.

Summing up, the recent Bitcoin debacle was predictable by anyone who has read the monetary-economics chapter of an econ-101 textbook. Those who find the debacle surprising, I suspect, were either taken in by the nifty technology or blinded by libertarian ideology.
BillRM
 
  1  
Thu 27 Feb, 2014 11:54 am
@Thomas,
Dollars are let worthwhile then bitcoins as no government can flood the market place with bitcoins unlike dollars.

Paying taxes big damn deal if that what you are claiming dollars worth is base on!!!!!!!

An there is nothing stopping local governments from accepting bitcoins for taxes for that matter.

As far as the value of bitcoin jumping around that is the function of it being a new concept and those jumps tend to be on the up side far more then the down side.
Thomas
 
  2  
Thu 27 Feb, 2014 12:05 pm
@Thomas,
PS: Now that I finished reading Ragman's article (it's never good policy to stop in the middle), I notice that the mt-gox Bitcoin exchange was broken into, and that this was what made them close it down and made the Bitcoin price tank. So I actually erred on the side of giving Bitcoin too much credit. With its evident vulnerability to intruders, the system isn't even as nifty as I'd thought.
0 Replies
 
Thomas
 
  1  
Thu 27 Feb, 2014 12:17 pm
@BillRM,
BillRM wrote:
An there is nothing stopping local governments from accepting bitcoins for taxes for that matter.

When they do, I will revise my opinion of Bitcoin accordingly. Right now, I'm talking about Bitcoin as it is, not as it conceivably might be.

BillRM wrote:
As far as the value of bitcoin jumping around that is the function of it being a new concept and those jumps tend to be on the up side far more then the down side.

True, but so what? Currencies don't exist to enrich their producers through seigniorage. They exist to serve their spenders as a medium of exchange. A currency that appreciates by a factor of 100 in two years, as Bitcoin has done, is attractive for hoarding but not for spending. Even if the volatility abates, it won't work as money if deflation continues as brutally as it has been so far.
InfraBlue
 
  2  
Thu 27 Feb, 2014 02:18 pm
The debacle wasn't caused by Bitcoin's alleged lack of upper or lower limit on its price, though. The debacle was casued by a massive theft of Bitcoins and the weakness of the financial institution from which they were stolen to protect itself from theft.

In that regard all that these institutions have to do is to beef-up their security measures.

The mere fact that Bitcoins are deemed valuable enough to steal testifies to their worth.
maxdancona
 
  2  
Thu 27 Feb, 2014 02:19 pm
@Thomas,
Hmmmm. This is a very interesting analysis, but I think you are making some unwarranted jumps in logic, for example the current debacle is apparently caused by an act of theft facilitated by gross mismanagement by an exchange, not by a failure of economic policy. I fail to see the connection between the two.

BillRM
 
  1  
Thu 27 Feb, 2014 02:21 pm
@Thomas,
My my bitcoins are worth too must to be a day to day currency?

Perhaps for now that might be more true than not but the currency will stability in value over the next few years and for now people are indeed using bitcoins and as long as you can get into and out of bitcoins you are must better off using/holding bitcoins as must as possible then cash who tend to go down year after year not up.
0 Replies
 
Thomas
 
  2  
Thu 27 Feb, 2014 02:26 pm
@maxdancona,
maxdancona wrote:
I think you are making some unwarranted jumps in logic, for example the current debacle is apparently caused by an act of theft facilitated by gross mismanagement by an exchange, not by a failure of economic policy.

True. I had already acknowledged that in my next post, before you and InfraBlue replied.

maxdancona wrote:
I fail to see the connection between the two.

There isn't any. Even if the mismanagement goes away, I expect that Bitcoin will eventually implode because of its deficiencies as money. And just to put a specific number on it, I'll say that "eventually" means "fewer than five years, which historically has been a typical time for speculative bubbles to pop.
0 Replies
 
maxdancona
 
  1  
Thu 27 Feb, 2014 02:29 pm
@Thomas,
My interest in Bitcoin is purely as a means of exchange. I like the idea of an unregulated, mostly anonymous way to exchange value. Obviously the volatility and immaturity of Bitcoin take away from its utility, but my hopes is that later types of digital currency will be more stable and thus more useful.

There is a lower limit on the price of Bitcoin. I guarantee you that the price of a Bitcoin will never fall below zero. Zero is a perfectly valid lower limit. I don't see any reason that this takes away from its utility as a medium of exchange anyway.

There is also an upper limit to the price. When Bitcoins start to become prohibitively expensive, other forms of digital currency will be developed to take its place (which will put downward pressure on the price of Bitcoins). As a user. I am not tied to Bitcoin... I am perfectly happy switching to the cryptocurrency that meets my needs at the time.

Bitcoins are the first widespread iteration of cryptocurrency, and yes it has problems and instability.

But I am not willing to abandon the idea that we can have a mostly anonymous means of transferring economic value over the internet. The biggest problem with Bitcoin, in my mind, is volatility. If there is an digital currency with a stable economic value it will be very useful.

Thomas
 
  1  
Thu 27 Feb, 2014 02:32 pm
@InfraBlue,
InfraBlue wrote:
The mere fact that Bitcoins are deemed valuable enough to steal testifies to their worth.

Not really. I bet there were burglars stealing tulips in 1636 Holland, too.
BillRM
 
  1  
Thu 27 Feb, 2014 02:38 pm
@maxdancona,
Quote:
When Bitcoins start to become prohibitively expensive, other forms of digital currency will be developed to take its place (which will put downward pressure on the price of Bitcoins)


Given that you do not need to buy or sell whole bitcoins in fact any bitcoin can be divide, if I remember correctly by a million or more of a bitcoin if needed no matter how costly a whole bitcoin might become it does not matter as if a bitcoin reach a value of a million dollars you would just buy and sell in units of one million of a bitcoins.
0 Replies
 
BillRM
 
  1  
Thu 27 Feb, 2014 02:38 pm
@maxdancona,
Quote:
When Bitcoins start to become prohibitively expensive, other forms of digital currency will be developed to take its place (which will put downward pressure on the price of Bitcoins)


Given that you do not need to buy or sell whole bitcoins in fact any bitcoin can be divide, if I remember correctly by a million or more of a bitcoin if needed no matter how costly a whole bitcoin might become it does not matter as it a bitcoin reach a value of a million dollars you would just buy and sell in units of one million bitcoins.
0 Replies
 
 

Related Topics

Bitcoin will ban - Discussion by jamil10
Bitcoin- What Is It? How do You Use It? - Question by Phoenix32890
Bitcoin - Question by gollum
pc storage because of btc - Question by martinopsal1
Physical Bitcoin - Question by gollum
 
  1. Forums
  2. » Bitcoin
  3. » Page 9
Copyright © 2019 MadLab, LLC :: Terms of Service :: Privacy Policy :: Page generated in 0.03 seconds on 09/17/2019 at 11:19:45