BITCOIN

Frequentlyhere

Re: developing countries, I don't accept your idea that "tens of millions of people around the world in need of a money that can be self custodied and transferred peerlessly to others".

We were talking about El Salvador earlier in the week. If there's such a pressing need as you say, why is that it Bitcoin has been shunned there despite being foisted upon the population formally?

It's barely used day to day, it's not used for remittances (I supplied some links on that with actual % numbers and everything - I think Bitcoin remittances had fallen to <2% of all remittances there).  And that is an economy that really does do a lot of remittances for it's size.

I will accept that there's been some uptick in usage of BTC where people are suffering very high inflation, in places like Turkey. That reflects a sad state of affairs though, and a suboptimal choice. If people have been trying to escape inflation in Turkey by buying BTC recently, then they've still gone and lost 75% of their money versus buying dollars or even gold. Is that what success looks like?  How far do these unfortunate people have to zoom out to be able to keep their store of value? Until the Fed pivots?

They've also potentially lost a lot more if they chose to use an exchange which went up in a puff of smoke - not everyone is as smart as you, Darren. Some don't even use computers at all, so they're hardly going to be up to speed with all of the faff of being your own bank.

Frequentlyhere

Last points, am genuinely a bit confused as to why you want to draw this technical distinction of how exactly money is paid and settled around the World.

Why should we care if a Revolut or credit card payment isn't technically settled for however long it is?  Providing the recipient can instantly use their funds and the person can instantly take away and use their product/service, why does that matter? 

Re: the value of intermediaries, I guess we'll have to agree to disagree. It's my view that the general population of the World value greatly the features of safe storage, deposit protection, fraud protection and goods/services purchase protection that using Government supported bank accounts/credit facilities bring.  I think these are valued far more than the value of being your own bank, which notably vanishingly few people seem keen to try and do.

Frequentlyhere

As an aside, the more we have this debate the more I feel you're just presenting the arguments of some sort of neo-Gold bug, Darren.

Taking a look at investopedia,

"Although people differ in their reasons for being a gold bug, they commonly share a perception that the purchasing power of fiat currencies will decline due to factors such as inflation, expansionary monetary policy, and the rising national debt"

Sounds pretty similar to the conversation just had, no? People have been at this same set of arguments for decades.

uk1

In order to give a little light relief to those that are angst ridden for reasons of  our own  making I’d like to inject a little lightness from Jeremy Clarkson.  I may be even more cluless but I do so hope this link to the article which I am allowed to share works and amuses.

 My market speculation paid off: not buying cryptocurrency 

https://www.thetimes.co.uk/article/jeremy-clarkson-my-market-speculation-paid-off-not-buying-any-crypto-xzxnfzn9c?shareToken=8192c3c35dc6c043da68c9c5240f3490

User232002

Frequentlyhere said:

You didn't expect anything different, Darren?  

"darren232002 said:

if it ever went back below $20k my beliefs are invalidated and I'd be selling everything I have"

Here is what I posted on 24th February 2022 in response to comments that Bitcoin has gone down as inflation had gone up.

darren232002 said:

Thrugelmir said:

Flakey holders it appears, running for the exit doors it seems. First sign of geo political tensions and the stable reserve currency Bitcoin sheds 12%.  Meanwhile gold rises over 2%. 

(1) Nobody expected anything different. We literally said about 5 pages back that Bitcoin is correlated to tech/growth right now but expect a dislocation at some point in the future.

The argument has never been inflation go up therefore Bitcoin go up.

Frequentlyhere said:

Re: The Fed, you indeed provided lots of numbers, but they weren't particularly relevant because you had missed the bit where, as several posters had pointed out to you, it was indeed perfectly sustainable because the Govt's debt is being inflated away

By ignoring the numbers presented, you continue to attempt to have a qualitative discussion about a fundamentally quantitative subject. The demise of fiat currencies is qualitatively assured by the nature of human greed, but at this point it is also mathematically assured too.

So, any debt is sustainable so long as interest rates are lower than inflation right?

Cool. Just asking, how did the market react when UK govt wanted to borrow a load of money at a rate lower than inflation?

Actually, given that debt is sustainable so long as inflation is high - how about we max out the country credit card right now? Go nuts right... But wait, why is every political party talking about austerity and budget cuts?

Of course I'm being dramatic to make a point - debt can be unsustainable even when interest rates are below inflation. The point I have continually made is that govts around the world are now running deficits continually to pay interest on their debts. They are printing money in order to do this. When this happens, the value of the currency is down only, and the value of hard assets is up only.

Here is this in graphical form. And this comes from the US govt, so its highly likely to be a rose tinted picture. As I've said before, tax revenue usually runs around 10% of GDP, so around 2035 there literally won't be any money left over to actually pay for anything else without printing it.

Frequentlyhere said:

Even if we somehow knew what inflation would be in a year's time, it doesn't mean that the interest rate needs to be set to that level now, I just don't accept your premise. They only need to be set at a level which reduces inflation by dampening demand.  

All of which you seem to want to tie to bitcoin, but I still really don't see how it does. We're living through high inflation now, and it's just not doing any favours to bitcoin whatsoever. Long term, early days, I know I know.

Even if somehow the Fed fails in it's mandate to reduce inflation though (I really doubt it), then the idea of people jumping into an asset that has dropped by 3/4 in value in the same period seems very very distant.

Oh, I suspect you are correct. For now.

In Adam Fergusson's 'When Money Dies,' there is a story of a rich Austrian woman deciding to keep her wealth in her native currency on the assumption that the initial decrease in the value of the currency will right itself in due course and if it doesnt, she will be able to swap out of the currency at a later time anyway. When she visits the bank some months later having seen the value of the currency plummet, the bank manager informs her that unfortunately nobody will take her Austrian Krone any more.

Frequentlyhere said:

Re: "Armies? Do you believe that turning an army on its own people to enforce use of a certain currency is a valid method of governance?"

No, but I believe that when rational people choose what form to spend, store and invest their money in, they're mindful of what the prevailing Government of the day is and the power that lies behind that.

If you aren't willing to use the army, it has no coercive threat. 

Frequentlyhere said:

Last points, am genuinely a bit confused as to why you want to draw this technical distinction of how exactly money is paid and settled around the World.

If you knew this, why were you, in a previous post, stating that money can be sent 'instantly'?

When you mislead, it calls in to doubt all of the arguments you are presenting.

Frequentlyhere said:

Why should we care if a Revolut or credit card payment isn't technically settled for however long it is?  Providing the recipient can instantly use their funds and the person can instantly take away and use their product/service, why does that matter? 

Because the speed of a moneys transfer is related to the economic benefit it can provide a society.

Bitcoin isn't trying to be a currency; its trying to be money. Money is an economic good that sends value in to the future. Currently, money is treasuries and gold. Bitcoin settles far faster than these across international borders and for large value transfers. 

Settlement is relevant to trustlessness. There's no proof that governments own the amount of gold they say they do and this arises because it is expensive and time consuming to ship gold frequently around the world. Treasuries can't be trusted because Russia just had $600BN marked down to zero because another country disagreed with its actions. There is no need to trust in a Bitcoin system, you can verify. The comparison to Revolut is a red herring by people that think a measure of Bitcoins success is whether you can use it to pay for a coffee. 

Frequentlyhere said:

As an aside, the more we have this debate the more I feel you're just presenting the arguments of some sort of neo-Gold bug, Darren.

Taking a look at investopedia,

"Although people differ in their reasons for being a gold bug, they commonly share a perception that the purchasing power of fiat currencies will decline due to factors such as inflation, expansionary monetary policy, and the rising national debt"

Sounds pretty similar to the conversation just had, no? People have been at this same set of arguments for decades.

Gold was an approximation to a solution to a problem humanity had; the need for a hard, unchanging asset that can send value in to the future.

Bitcoin beats gold in almost every conceivable metric. Quicker to transfer, more divisible, more fungible, more verifiable.

If Bitcoin out competes Gold at being Gold, ignoring any other mechanism of value accrual, then it would win a market cap of $10T giving Bitcoin a value of $500k+ / coin.

Seems bullish.

Frequentlyhere

Thanks for chipping in @FeralHog, I'm glad it's not just me.

It's a bizarre and quite unsatisfying whack-a-mole game this. A totally outrageous set of claims is made out of line with all known reality, refuted quite simply, and then you receive a response where both your refutation and the original claim are altered. But then multiplied over several points so that it would take hours just to defuse the most patently ludicrous scenarios.

I'm also just not a fan of the incredulous tone. It's one thing having 'out there' views, but I'm finding it wearing for these being expressed as not only an opinion, but an inevitable truth that should be obvious (obvious!) to anyone with eyes. I mean of course the $ is going to collapse under the weight of impossible to control inflation, of course!

I found it quite interesting initially, but frankly it's just not worth it. It's been interesting @darren232002 but I'll leave it there for now. We'll no doubt reconvene at some point.

Malthusian

hallmark said:

One of the problems for Bitcoin believers is simply it's been too successful, and everytime it has been it's supporters immediately revise their expectations upwards (as we saw when BTC was close to $70,000 and people instantly began talking about it going to $1,000,000)

Indeed. No point in buying Bitcoins at $70,000 in the hope that they'll rocket to $100,000, a mere 42% return that conventional mainstream positive-sum investments could deliver in a good five year period (NB: good period, not all periods). People don't buy lottery tickets so they can fantasise about matching four numbers.

I suspect in 2009 even the most ardent fans would have settled happily for BTC doubling in value every year for the next 13 years.

In 2009 a lot of Bitcoin's fans at the time would have recognised that BTC doubling in value every year would be a big problem for Bitcoin. Remember that its original fans in 2009 envisioned it as an alternative to fiat currency. If BTC doubled in value every year that would represent rampant deflation, and prevent its adoption as a currency, for the same reason that deflation of a fiat currency is fatal for an economy. Because everyone would hodl their BTC waiting for number go up instead of using it to buy and sell. (Except those who didn't have the option of waiting for it to go up because they had bills to settle that could only be paid in BTC, i.e. Silk Road traders.)
It is safe to assume that Bitcoin's 2009 holders didn't really appreciate the possibility of it rocketing in value once it had gained public attention.  If they had they wouldn't have lost so many coins on discarded hard drives or given them away for pizza. At the time, BTC parity with the dollar was an unimaginably distant future goal. One which would probably have given the developers enough money to buy a new car, not retire to the Bahamas.

DannyCarey

Malthusian said:

hallmark said:

One of the problems for Bitcoin believers is simply it's been too successful, and everytime it has been it's supporters immediately revise their expectations upwards (as we saw when BTC was close to $70,000 and people instantly began talking about it going to $1,000,000)

Indeed. No point in buying Bitcoins at $70,000 in the hope that they'll rocket to $100,000, a mere 42% return that conventional mainstream positive-sum investments could deliver in a good five year period (NB: good period, not all periods). People don't buy lottery tickets so they can fantasise about matching four numbers.

I suspect in 2009 even the most ardent fans would have settled happily for BTC doubling in value every year for the next 13 years.

In 2009 a lot of Bitcoin's fans at the time would have recognised that BTC doubling in value every year would be a big problem for Bitcoin. Remember that its original fans in 2009 envisioned it as an alternative to fiat currency. If BTC doubled in value every year that would represent rampant deflation, and prevent its adoption as a currency, for the same reason that deflation of a fiat currency is fatal for an economy. Because everyone would hodl their BTC waiting for number go up instead of using it to buy and sell. (Except those who didn't have the option of waiting for it to go up because they had bills to settle that could only be paid in BTC, i.e. Silk Road traders.)
It is safe to assume that Bitcoin's 2009 holders didn't really appreciate the possibility of it rocketing in value once it had gained public attention.  If they had they wouldn't have lost so many coins on discarded hard drives or given them away for pizza. At the time, BTC parity with the dollar was an unimaginably distant future goal. One which would probably have given the developers enough money to buy a new car, not retire to the Bahamas.

https://twitter.com/DrBitcoinMD/status/1165004233663496197?t=cZukWFx_Uq__h_BNAW1IZg&amp;s=19

Malthusian

Hal Finney's putative price of $10 million per Bitcoin relied on the assumption that worldwide wealth ~= $200 trillion, bitcoins ~= 20 million, therefore if Bitcoin was adopted as the only mechanism of payment available (Finney used the word "dominant" but his maths says "only"), each Bitcoin would be worth $10 million.
There are a number of practical problems with this idea, but the most obvious is one that Finney could be forgiven for overlooking. He died in 2014 so didn't live to see the ICO boom. For the total price of all Bitcoin to correspond to the total value of the world's wealth, not only do all fiat currencies have to dump to zero, but all competing cryptocurrencies have to dump to zero as well. 
There is also no economic justification for the idea that total value of money supply = total value of world's wealth in the first place. But Finney was a video game developer, not an economist, so it would be unfair to pull apart his spitballing 13 years later.
Finney is your classic example of an early experimenter. He was there at the very early stages when Bitcoin was valued at less than a cent, and lived to see it hit 4 figures, and yet he didn't get rich. He exhausted most of his stock of Bitcoin on his treatment for his terminal illness. He wasn't buying up and mining every BTC he could get his hands on in the expectation it would go to $10 mil in his lifetime. 
This is just a new angle on a problem we've been going over since 2014. In order to rocket in value Bitcoin has to reach mass adoption as a currency. For it to see mass adoption as a currency it has to stop rocketing in value. The latest attempts to handwave away this problem have just ended in tears, again.

bugbyte_2

@ Frequentlyhere, I get exactly where you are coming from. Several months ago we debated on here how it is impossible to reason with someone who will go over every single point infinitely in massively long rambling posts that slip in central precepts to their arguments that if just stated would be insane. They win by default because just no one is that bothered, and you would have to be a special type of person to need to 'win' any argument on the internet.

But to fact check some points from above:

Yes governments print money. However, Bitcoin literally blinked into existence by 'printing' itself, and continues to 'print' itself to this day.

Yes printing money is inflationary and leads to a higher debt to GDP ratio. But as MSE is a UK site, this ratio is currently 98% (Sept 2022) - not 130% +. You may note that 98% is less than half the ratio found in the late 40's, early 50's, just before the 'white heat of technology boom' which meant my parents generation had the greatest increase in living standards ever. Not at all bad really.

Have governments inflated debt away before? Of course they have, and they will do so again in the future. Yes the value of your £ goes down but only if you do not do something about it, like buying inflation proof assets.

And anyway, who owns that debt? Our government (who we 'own') sells debt to the Bank of England (who we also own) - Approximately a third of the UK National Debt is owned by the British government due to the Bank of England's quantitative easing programme, so approximately a third of the cost of servicing the debt is paid by the government to itself. Oh the fun of being a reserve currency. 

And finally - Here is a list of countries with very low Debt to GDP ratio. Of the 20 countries listed, most of them (bits of China, Russia, Middle East countries) I definitely would not like to live in due to human rights violations / lack of freedom and the rest are so small they are not comparable, and will probably be under water very soon anyway.