A whole bunch of questions...

[stan.distortion]

Right, where'd I get to with that meandering brainfart? Ah yes, the recirculatory function in sustainable gold based systems and the use of inflation to perform the same role in fiat systems. Right, miss that out and you get an ever increasing accumulation of wealth, "the rich get richer and the poor get poorer" is an unfortunate inevitability and the more scarce the necessities of life, the worse it gets. When there's abundance and even the poorest are able to live with even a slight surplus it's not much of an issue but when there's not enough to go around... not nice times.

How does Bitcoin fix that problem? Simple answer, its doesn't and neither does Dash and for what it's worth neither do any of the fiat systems we have today, taken individually they all reach a point of failure in a relatively short time. The key point is right there though, "taken individually" and that's where Bitcoin, Dash and all the other multitude of cryptos kick fiat right into the gutter, no one is forcing you to use them. It's all to easy to miss the significance of that point, one of the key properties of money is a store of value but enforce the use of a single kind and it quickly overwhelms the value it's intended to represent, it pools together to the point where there's more value stored in the form of money than real things to spend it on, 99.999% of the gold sits in vaults while the entire economy struggles to get by with the remaining 0.001%.

Fiat is only very slightly better in that regard, inflation magics some of that value out of the vaults but only a very little, you still get so much pooled together that there's more stored value than real but at least some of it is coming back into circulation. In short, a cludge. How to fix it? One way is to do away with all artificial forms of value but that's only barely become practical since the communications revolution and the chances of it actually happening are so slim they're not worth considering, crypto will move some way in that direction with things along the lines of Etherium and Bitshares enabling global markets to exist with little or no need for a monetary medium but there will always be the deranged willing to accept things like tons of wheat to be grown in 100 years time as value today, that's as inevitable as the poor getting poorer :/

Cryptos alternative is to put so damn many forms of exchange out there that their value is placed purely on their merits and that plays out rather well when inefficiencies of communication are removed. When you have to go to the bank during business hours to exchange your collapsing Yellenbucks for booming Legardbucks then you're going to loose out to everyone in the que in front of you but when you can do it instantly, globally, automatically and in a multitude of directions the individual "store of value" aspect becomes insignificant and you can use money for it's real purpose, moving value from one market to another and for that you chose the best kind for the purpose, for example the one with the fastest transactions, the best privacy, the most innovation and the best governance

 

[xdashguy]

To be sustainable, a crypto needs to have the opposite set of characteristics of Bitcoin- an unlimited self-regulating supply, a limited blockchain size, a steady rate production, and a means for recovering lost coins.

I agreed. When I was in the bitcoin scene I also made these arguments. The truth is you only need to look at history and even modern day. There is NO widely used currency that is not inflating. Even gold is still inflating every year. I think pegging the yearly mining reward to 3% of total dash supply would be a good thing.

The truth is, these coins will adopt this method regardless. It is unlikely they will generate enough volume / fees to maintain security, so as the mining reward drops they will be in a catch-22. The only way out will be to guarantee so some "inflation rate" which can be used to maintain the security of the network.

Regarding dash in particular, how will the decentralized governance work when there are no longer any mining reward coins to fund projects? Fee income could be very unreliable and volatile, so it is not a reliable source of dash units to fix a budget.

 

[TroyDASH]

I agreed. When I was in the bitcoin scene I also made these arguments. The truth is you only need to look at history and even modern day. There is NO widely used currency that is not inflating. Even gold is still inflating every year. I think pegging the yearly mining reward to 3% of total dash supply would be a good thing.

The truth is, these coins will adopt this method regardless. It is unlikely they will generate enough volume / fees to maintain security, so as the mining reward drops they will be in a catch-22. The only way out will be to guarantee so some "inflation rate" which can be used to maintain the security of the network.

Regarding dash in particular, how will the decentralized governance work when there are no longer any mining reward coins to fund projects? Fee income could be very unreliable and volatile, so it is not a reliable source of dash units to fix a budget.

If the system scales way in the future to millions of TX per day, the average TX fee would not have to be very high to allow for large budgets. And, even though mining reward decreases over time in terms of coins, that does not mean a decrease in value. If the price of DASH increases 100x due to adoption and deflation then a few block halvings won't really be a problem.

 

[xdashguy]

If the system scales way in the future to millions of TX per day, the average TX fee would not have to be very high to allow for large budgets. And, even though mining reward decreases over time in terms of coins, that does not mean a decrease in value. If the price of DASH increases 100x due to adoption and deflation then a few block halvings won't really be a problem.

Yes, IF it gets millions of TX per day, then perhaps. However, that is a loooong way off. Based on the current usage of coins it does not seem like the future. The coins are being used as a settlement layer and transactions are either not occuring (being used as a store of value) or they are occurring off-chain.

Even if Dash solves the scalability issue, I am not sure consumers will use it that way. Most consumers will probably be using Dash in some type of 3rd party wallet (think Google Wallet, Paypal, etc, which enables dash payments), so most transactions will occur off-chain.

But you are right, if Dash reaches a future where it actually does millions of transactions per day, then it might be able to continue to fund security, budgeting, etc, without the need for inflating. If it ends up being used mostly as a settlement layer with the option to use it like cash though, then it will likely need to implement 3% per year inflation target to fund itself.

 

[Sapereaude]

But merchants usually hate volatility. That's why some pegged to USD token could be useful. In case this is offtopic, a discussion about it took place here.

For small time merchants that have orders in one currency and expenses in another, yes. Bigger companies on the other hand simply hedge, buy options etc and companies have other options like getting their manufacturer to accept part of the payment in the currency being sold in.

It's just another cost of business for companies that are worth lets say 10million, 10 million being not that big and there are thousands on thousands of those size business in every country of the world.

 

[Sapereaude]

Right, where'd I get to with that meandering brainfart? Ah yes, the recirculatory function in sustainable gold based systems and the use of inflation to perform the same role in fiat systems. Right, miss that out and you get an ever increasing accumulation of wealth, "the rich get richer and the poor get poorer" is an unfortunate inevitability and the more scarce the necessities of life, the worse it gets. When there's abundance and even the poorest are able to live with even a slight surplus it's not much of an issue but when there's not enough to go around... not nice times.

The problem with gold-standard based systems is the fact they have no money creation, which severely impedes the ability of the economy to grow. If you keep all else constant the bank creating the money for the loan should be cancelled out by the future earnings that loan creates. The more difficult you make it t borrow money the slower the economy grows. So for an example case lets say a bearded guy gets a loan to buy an expresso machine, organic sourced cruelty free coffee and and then charges a pretentious amounts for it. Now he can pay back the "created money" and from the income stream he "created" out of shitty garage and some stools.

If the bank couldn't create money then it would be alot (read all the gold in the world is only worth 7 Trillion and that wouldn't cover USA let alone the rest of the planet) harder to get the loan and there would be less coffee/one more hipster without a barista job. Of course this example can break down in several ways (e.g borrowing to consume) but it is the main reason why no economy on the planet currently uses or is likely to go back to the gold standard and why no mainline economists are looking into bringing it back.

The benefits simply outweigh the costs.

The fascinating part, that in a perverted way it's working. The inequality gap is growing faster, but those living below the UN poverty line are also disappearing as if attached to a rocket. Of course it's a case of most people getting cents and others hundred dollar bills, but it's hard to put a price on people not starving. Which is why economists rarely can give clear cut answers and people rarely listen us.

 

[stan.distortion]

I wouldn't say no economies on the planet use the gold standard, the entire Muslim world still uses is (or is supposed to at least, many do), Iran and Syrias economies are gold based and so was Libyas until a few years ago. It's conspicuous that the places still using it are the number 1 enemies of "freedom and democracy", practically the first thing the "rebels" did in Libya was give up their central banks sovereignty and 144 tons of gold was stolen from the country in the process, we westerners keep saying gold's not important anymore but we seem to bring an awful lot of chaos and suffering to anywhere that thinks differently.

/Rant and sorry for going off topic, gold was used merely as an example and cowrie shells would have done just as well, the problem caused by it would be just the same. Anything that tries to use a single type of money mixes all kinds of value together and that ends up throwing the entire system off balance, some kinds of value are persistent (ie, improvements, autobahns, production machinery, etc.), some temporary (crops, labour, etc.), some irrational (tuplimania, dogecoin, etc.) but with a single form of money they all get mixed together and treated the same way. There's no way of distinguishing between the autobahn adding long term value to the nation and the crops adding value only until they're consumed, real value is both created and destroyed but a centralised economy has only a tenuous connection with that process and inflation is an extremely crude means of destruction, a time based mechanism that penalises all equally and serves to do little more than raise the bar on accumulation of monetary wealth.

Growth as a measure of of progress... sorry but this rant 'aint done because that's like trying to use a barometer to measure temperature. We might as well rip up all the autobahns because the inefficiencies that would cause would do wonders for economic growth Keep going down that road and we'll all be working 60 hour weeks making things to hand straight over to someone beside us to smash up for recycling and calling it progress, if there's anything to wake the world up to the madness of economics it's the GDP.

I'm not saying the entire field of economics is BS, far from it but there's certainly a narrow minded majority who can't see outside a system basically built with the aim of centralising power and coated with a thin veneer of sudoscience masquerading as legitimacy. There's no avoiding economics and economists who see the current system for what it is and dream up and test out all kinds of weird and wonderful alternatives are badly needed at the forefront but if they ever manage to get it those kinds of positions they don't stay there long, Yanis Varoufakis dared to suggest alternatives and was tried for treason.

A model I'd really like to see is a something based on limitless competing currencies, I'm sure some mad economist has tried to build that kind of model and as far as I can see the result is currencies given value based purely on their merits, the best monetary medium, company shares, reserves of commodities, etc. and everything with dubious value falling away. I think that's where we're headed with crypto and some foresight into what to expect could come in useful.

 

[Sapereaude]

I wouldn't say no economies on the planet use the gold standard, the entire Muslim world still uses is (or is supposed to at least, many do), Iran and Syrias economies are gold based and so was Libyas until a few years ago. It's conspicuous that the places still using it are the number 1 enemies of "freedom and democracy", practically the first thing the "rebels" did in Libya was give up their central banks sovereignty and 144 tons of gold was stolen from the country in the process, we westerners keep saying gold's not important anymore but we seem to bring an awful lot of chaos and suffering to anywhere that thinks differently.

I am assuming you are talking about riba and other forms of islamic banking. I knew a researcher who tried to put together an index for Islamic banking instruments once, he gave after every place he checked out eventually led to regular bank. Then again Mecca is supposed to be a holy place and looks more like Las Vegas nowadays, but I digress the simplest explanation is that they use gold precisely because they are locked out the western banking system. They are not exactly flourishing economies either. But you are right, I should have said no economy on the planet, willingly uses gold standard because the benefits outweigh the costs and we can prove it.

/Rant and sorry for going off topic, gold was used merely as an example and cowrie shells would have done just as well, the problem caused by it would be just the same. Anything that tries to use a single type of money mixes all kinds of value together and that ends up throwing the entire system off balance, some kinds of value are persistent (ie, improvements, autobahns, production machinery, etc.), some temporary (crops, labour, etc.), some irrational (tuplimania, dogecoin, etc.) but with a single form of money they all get mixed together and treated the same way. T, real value is both created and destroyed but a centralised economy has only a tenuous connection with that process and inflation is an extremely crude means of destruction, a time based mechanism that penalizes all equally and serves to do little more than raise the bar on accumulation of monetary wealth.

What do you mean by value? It is a hugely subjective area I mean time alone is a huge factor, one day a 1 tulip is worth a house the next day its worth nothing and what are you referring to as the "system"?

Those improvements are what are called increases to productivity and are not related (directly but lets not get distracted) to the monetary system they would exist no matter what type of money we had. Tulipmania, Dogecoin, The Internet Bubble are all examples of "irrational" markets and investor behavior and not the type money we have, again they could have happened if we used seashells. As for inflation as long as the value created by inflation (eg economic growth is a 3% and inflation is a 2%) then benefits outweigh the costs but this depends on a whole host of factors one of which is a good independent central bank.

As for the accumulation of wealth, yes there is a clear snowball effect in regards to wealth, but we are talking about the best type of money here. This again could occur if we had seashells. The fact the rich are getting richer is to due to multiple factors, nature of the current economy, the productivity of capital vs labor, labor laws (0 hour contracts *ugly horrible nasty things* ), lowering tax rates and globalization/algorythmization/automation of the methods of production and services. Lets stick to money itself for now, I have nightmares enough about the terrible dystopian future ahead without dwelling on those further.

Growth as a measure of of progress... sorry but this rant 'aint done because that's like trying to use a barometer to measure temperature. We might as well rip up all the autobahns because the inefficiencies that would cause would do wonders for economic growth Keep going down that road and we'll all be working 60 hour weeks making things to hand straight over to someone beside us to smash up for recycling and calling it progress, if there's anything to wake the world up to the madness of economics it's the GDP..

We would only suggest that as a joke because that would not increase economic growth. It would increase employment but we would produce less stuff so it would have the opposite effect. Also we are aware of how useless GDP is we use NGDP and other statistics now.

I'm not saying the entire field of economics is BS, far from it but there's certainly a narrow minded majority who can't see outside a system basically built with the aim of centralising power and coated with a thin veneer of sudoscience masquerading as legitimacy. There's no avoiding economics and economists who see the current system for what it is and dream up and test out all kinds of weird and wonderful alternatives are badly needed at the forefront but if they ever manage to get it those kinds of positions they don't stay there long, Yanis Varoufakis dared to suggest alternatives and was tried for treason..

Look if I wanted an easier subjects I would have been a physicist or a chemist, you put the same mix of atoms in a room at the same temperatures and the same level of energy or a catalyst you will always get the same results. Unfortunately we are stuck with human beings and they just don't wanna co-operate and clones are just so god damn expensive : p. As difficult as it is it something that needs to be studied and if used correctly could improve the world beyond your most cherished fever dreams. Hell a single health economist can save more lives than a hospital or kill more...

I am tired so I am going to a be a bit blunt and say I so god damn furious exhausted and sick to the deepest parts of my stomach of these asinine conspiracy deductions from armchair economists. You wouldn't go up to a general and tell him how to deploy his troops or make a diagnosis if you are not a doctor, but every man and his dog has this idea they the entire economic system is a giant conspiracy theory. Especially since as I've explained it is so very hard for us to get simple results and there is always a but, if when, only when, clauses to what we study!!

However the fact that people are screwing everyone over all the time It is not so difficult to explain. example - banker one starts making lots of money selling these subprime mortgage thingy(SPMT), he brags to his friend who goes to his boss and says they should start selling these SPMT's, soon everyone's selling SPMT's and everything seems great until some guy realizes these SPMT's are shit, but hes not gonna say anything because hes also making the moneys and around and around it goes util we get the hangover we richly deserve.

THIS IS DUE TO underpaid second rate legislators going up against their well paid better educated counterparts and fact that the justice system is letting these guys off!!! This is a result of politics. Not economics! I mean Adam smith was giving examples of this BS nearly a century ago... I am not saying that conspiracies do not exist but mostly its just a whole bunch of shortsighted people(assholes) interacting, who organically create a system that supports each other because they are all benefiting(making dat bling) from it.

So let me reiterate, money in the form it is now is the most efficient method for economic growth that we know of and while I do see crypto possible replacing it, it has not matured enough yet.As for all the other issues they are mostly political issues or not directly related to the nature of money. We do have a lot of work done on those issues as well but people ignore us or cherry pick the results. The whole moronic Austerity stuff was based on 1 paper that ended being discredited *sigh*.

On A lighter note I would suggest you watch this fake rap battle between two of the more famous economists, it is one of my favorites. They not only more entertaining than me, but highlight some issues you brought up. You will like Hayek : ).

Edit- Maybe all economists should start rappin.

 

[stan.distortion]

Lol, very good Yeah, definitely cheering for Hayek in that fight but probably cheering for a different ring entirely if they'd both argue in favour of a single currency, I'd imagine Hayek wouldn't if he argues for complete freedom of markets though.

I am assuming you are talking about riba and other forms of islamic banking. I knew a researcher who tried to put together an index for Islamic banking instruments once, he gave after every place he checked out eventually led to regular bank. Then again Mecca is supposed to be a holy place and looks more like Las Vegas nowadays, but I digress the simplest explanation is that they use gold precisely because they are locked out the western banking system. They are not exactly flourishing economies either. But you are right, I should have said no economy on the planet, willingly uses gold standard because the benefits outweigh the costs and we can prove it.

Libyas economy was doing incredibly well using the gold standard but that's because they have oil and so a constant surplus. Same for Iran and Syria, they've got a lot of what the world wants (oil) and are able to sustain themselves so they grow rich on the gold standard but a country that can't run a surplus couldn't, they'd quickly be cut off from international markets.

The other end of the scale interests me more though, many Muslims manage their own savings rather than save with banks which is a complete opposite to here where savings are highly discouraged, it's seen as a backlog in the pipes that must be tapped and circulated and I'd strongly agree with that principle but using something that's also intended to be a store of value as the medium for it makes no sense at all, it's like trying to attach wheels to a house. The ironic thing there is fiat in the Islamic world likely works much better because it's purpose is convenience, anything that stays around long enough to be called savings goes into gold or other things better suited as a store of value.

What do you mean by value? It is a hugely subjective area I mean time alone is a huge factor, one day a 1 tulip is worth a house the next day its worth nothing and what are you referring to as the "system"?

Those improvements are what are called increases to productivity and are not related (directly but lets not get distracted) to the monetary system they would exist no matter what type of money we had. Tulipmania, Dogecoin, The Internet Bubble are all examples of "irrational" markets and investor behavior and not the type money we have, again they could have happened if we used seashells. As for inflation as long as the value created by inflation (eg economic growth is a 3% and inflation is a 2%) then benefits outweigh the costs but this depends on a whole host of factors one of which is a good independent central bank.

As for the accumulation of wealth, yes there is a clear snowball effect in regards to wealth, but we are talking about the best type of money here. This again could occur if we had seashells. The fact the rich are getting richer is to due to multiple factors, nature of the current economy, the productivity of capital vs labor, labor laws (0 hour contracts *ugly horrible nasty things* ), lowering tax rates and globalization/algorythmization/automation of the methods of production and services. Lets stick to money itself for now, I have nightmares enough about the terrible dystopian future ahead without dwelling on those further.

Lol, the holy church of the dollar bill and all it's supporters is what I guess I mean by "the system", life in the modern world is practically impossible without money and we have a hard time even thinking about value without reference to it, the only other concept I can think of that reached a position of such importance is God. But we're not talking about theology so just sticking with pipes and flows... no value is created by inflation, it's value transferred from the money in circulation to the issuer. Not the kind of idea many would choose if given a choice but it has it's uses and they're where it should be used, things like state budgets, not as a hub entire economies revolve around. A large economy is an incredibly complex system and has a lot in common with fluid dynamics, we can't even predict every flow and pressure of air currents through a small town so what hope do we have when the "air" has many different forms, all of them subjective, the area is entire continents and the flow isn't restricted to 3 dimensions? When we can predict the weather with a high degree of accuracy for long periods we may have a hope of making reliable economic predictions but for now the best we can do is carry an umbrella and that's pretty much where crypto comes into the picture.

We would only suggest that as a joke because that would not increase economic growth. It would increase employment but we would produce less stuff so it would have the opposite effect. Also we are aware of how useless GDP is we use NGDP and other statistics now.

Look if I wanted an easier subjects I would have been a physicist or a chemist, you put the same mix of atoms in a room at the same temperatures and the same level of energy or a catalyst you will always get the same results. Unfortunately we are stuck with human beings and they just don't wanna co-operate and clones are just so god damn expensive : p. As difficult as it is it something that needs to be studied and if used correctly could improve the world beyond your most cherished fever dreams. Hell a single health economist can save more lives than a hospital or kill more...

I am tired so I am going to a be a bit blunt and say I so god damn furious exhausted and sick to the deepest parts of my stomach of these asinine conspiracy deductions from armchair economists. You wouldn't go up to a general and tell him how to deploy his troops or make a diagnosis if you are not a doctor, but every man and his dog has this idea they the entire economic system is a giant conspiracy theory. Especially since as I've explained it is so very hard for us to get simple results and there is always a but, if when, only when, clauses to what we study!!

However the fact that people are screwing everyone over all the time It is not so difficult to explain. example - banker one starts making lots of money selling these subprime mortgage thingy(SPMT), he brags to his friend who goes to his boss and says they should start selling these SPMT's, soon everyone's selling SPMT's and everything seems great until some guy realizes these SPMT's are shit, but hes not gonna say anything because hes also making the moneys and around and around it goes util we get the hangover we richly deserve.

THIS IS DUE TO underpaid second rate legislators going up against their well paid better educated counterparts and fact that the justice system is letting these guys off!!! This is a result of politics. Not economics! I mean Adam smith was giving examples of this BS nearly a century ago... I am not saying that conspiracies do not exist but mostly its just a whole bunch of shortsighted people(assholes) interacting, who organically create a system that supports each other because they are all benefiting(making dat bling) from it.

So let me reiterate, money in the form it is now is the most efficient method for economic growth that we know of and while I do see crypto possible replacing it, it has not matured enough yet.As for all the other issues they are mostly political issues or not directly related to the nature of money. We do have a lot of work done on those issues as well but people ignore us or cherry pick the results. The whole moronic Austerity stuff was based on 1 paper that ended being discredited *sigh*.
...

It doesn't take a conspiracy nut to see something's not quite right. For example there's something like an estimated $16 trillion sitting in offshore accounts, that's equivalent to the entire US GDP and that's just the stuff that's buried, many times more is perfectly legitimately sitting around doing nothing. Sure, the rich get richer but what you're seeing there is amplification, riches beyond the limits of wealth and more value than there are things to buy and that can't happen with a system that's working properly, the rich get richer until there's nothing left to buy and then it stops. Trying to fix that problem has instead amplified it by allowing the accumulation of artificial value and there's no upper limit to it, raising inflation to 5% just means only those accumulating at more than 5% keep getting richer while the poor get poorer with 5% compound interest and at some stage we have to ask ourselves where is the supposed value that's backing all those trillions?

The issuer gets to spend what's taken out by inflation and that's just fine if you trust the issuer. The issuer here is the lender of last resort and that position came from owning a damn big chunk of pretty much everything worth having, more than enough to cover any debt but does that still hold true? If even a few percent of all those trillions came flooding out the results would be catastrophic, the rest wouldn't be far behind them and that can only get worse as more artificial value is created and accumulated. Neither Keynes nor Hayek fix that problem and can't without majorly changing the way we look at value and that goes way beyond what we consider economics.

 

[Sapereaude]

stan.distortion

Libyas economy was doing incredibly well using the gold standard but that's because they have oil and so a constant surplus. Same for Iran and Syria, they've got a lot of what the world wants (oil) and are able to sustain themselves so they grow rich on the gold standard but a country that can't run a surplus couldn't, they'd quickly be cut off from international markets.

Well is a relative term, they would have been doing better without the gold standard.

The other end of the scale interests me more though, many Muslims manage their own savings rather than save with banks which is a complete opposite to here where savings are highly discouraged, it's seen as a backlog in the pipes that must be tapped and circulated and I'd strongly agree with that principle but using something that's also intended to be a store of value as the medium for it makes no sense at all, it's like trying to attach wheels to a house. The ironic thing there is fiat in the Islamic world likely works much better because it's purpose is convenience, anything that stays around long enough to be called savings goes into gold or other things better suited as a store of value.

People managing their own savings in the sense of hiding money under the couch or burying gold on the farm is actually very bad for the economy. Since it is not being used to finance shops or purchase goods and usually leads to deflation. Not to mention saving in aggregate is not always good, in the sense that a saving rate greater than the the real potential growth capital needs of a country would in fact cause growth to be slower(japan has a huge problem with this). There is in every sense of the word an optimal saving rate for a country. If anything we actually have a saving glut worldwide at the moment, of course most of this is money owned by the rich but we are talking about available capital investment from savings, not wealth inequality.

Being a store of value is only one consideration of something being a money and I will have to strongly disagree with fiat in the Islamic world working much better. Once again putting money into gold means the gold is not being used for productive purposes and hoarding leads to deflation. It is also more inefficient or time consuming to use gold. E.g. To start a business it takes me 10 seconds to transfer money or get a loan on my phone, while you would physically have to take the gold to a merchant and if he is in another city... http://krugman.blogs.nytimes.com/2010/08/02/why-is-deflation-bad/?_r=0

Lol, the holy church of the dollar bill and all it's supporters is what I guess I mean by "the system", life in the modern world is practically impossible without money and we have a hard time even thinking about value without reference to it, the only other concept I can think of that reached a position of such importance is God. But we're not talking about theology so just sticking with pipes and flows... no value is created by inflation, it's value transferred from the money in circulation to the issuer. Not the kind of idea many would choose if given a choice but it has it's uses and they're where it should be used, things like state budgets, not as a hub entire economies revolve around. A large economy is an incredibly complex system and has a lot in common with fluid dynamics, we can't even predict every flow and pressure of air currents through a small town so what hope do we have when the "air" has many different forms, all of them subjective, the area is entire continents and the flow isn't restricted to 3 dimensions? When we can predict the weather with a high degree of accuracy for long periods we may have a hope of making reliable economic predictions but for now the best we can do is carry an umbrella and that's pretty much where crypto comes into the picture.

So the choice to use money is bad because we can't predict economic growth? Again we would have this problem with seashells... while using bitcoin as the reserve currency of the world would actually have negative consequences because of its lack of inflation. http://www.bankofcanada.ca/wp-content/uploads/2016/03/swp2016-14.pdf

It doesn't take a conspiracy nut to see something's not quite right. For example there's something like an estimated $16 trillion sitting in offshore accounts, that's equivalent to the entire US GDP and that's just the stuff that's buried, many times more is perfectly legitimately sitting around doing nothing. Sure, the rich get richer but what you're seeing there is amplification, riches beyond the limits of wealth and more value than there are things to buy and that can't happen with a system that's working properly, the rich get richer until there's nothing left to buy and then it stops. Trying to fix that problem has instead amplified it by allowing the accumulation of artificial value and there's no upper limit to it, raising inflation to 5% just means only those accumulating at more than 5% keep getting richer while the poor get poorer with 5% compound interest and at some stage we have to ask ourselves where is the supposed value that's backing all those trillions?

Okay it seems we are not longer talking about money here, since again there could be 16 trillion worth of seashells in overseas accounts. There methods for preventing accumulation of wealth, taxes, legislation preventing rent extraction, inheritance levy etc but most of these are difficult to implement Politically(Read not economics or has anything to do with money per say). Now "riches beyond the limits of wealth and more value than there are things to buy" is a curious phrase. I would venture that prices would simply increase depending on demand(inflation) so such a scenario is not possible, the system as it is working "properly" and you could never run out of things to buy.

As for the rest I am trying to follow if, but you need to define what is being done to fix the problem? Why whatever is being done to fix the problem is making it worse? Inflation at 5% would mean those holding money would have their money be worth 5% less after a year. Why does something have to back those trillions? Nothing has backed those trillions for a long time and we are all better off for it. I cannot see why having a monetary system where money is backed by reserve banks leads directly to the wealthy accumulating being faster. Once again we could use seashells had the current scenario occur since the accumulation is not cause by the nature of the money, but due to other factors. Weak legislators, low taxes/tax heavens, externalities not being included in costs etc.

The issuer gets to spend what's taken out by inflation and that's just fine if you trust the issuer. The issuer here is the lender of last resort and that position came from owning a damn big chunk of pretty much everything worth having, more than enough to cover any debt but does that still hold true? If even a few percent of all those trillions came flooding out the results would be catastrophic, the rest wouldn't be far behind them and that can only get worse as more artificial value is created and accumulated. Neither Keynes nor Hayek fix that problem and can't without majorly changing the way we look at value and that goes way beyond what we consider economics.

Actually the issuer get seigniorage and you can be a lender of last resort without owning anything, you just need the legal right to issue more currency. As for the rest man there is no such thing as artificial value, something can be temporarily overvalued. That thing can be a currency but it is no permanent as markets will eventually(in the long term) adjust to reflect this. There is no need to revalue "value" nor would it be possible to do so since it is a relative term. https://en.wikipedia.org/wiki/Value_(economics)

Let me show you a simple thought experiment to display that wealth concentration can be caused by other factors other than the kind of money we choose to use.

I wave my magic wand and now there are-
1.100 people in the world.
2.100 golden sea shells in this world and they are the only currency.
3.A rule making the richest 10% of the population having 30 shells and other 90% having the remaining 70 shells.
4.Population Increases at the replacement rate of 2.5 for poor people and 2.4 for rich peoples.

Rich 10 12 14 17 20 24 29 35 42 50
Poor 90 113 141 176 220 275 344 430 538 673
No. Shells per rich 3.00 2.50 2.14 1.76 1.50 1.25 1.03 0.86 0.71 0.60
No. Shells Per poor 0.78 0.62 0.50 0.40 0.32 0.25 0.20 0.16 0.13 0.10
Inequality 3.86 4.04 4.32 4.44 4.71 4.91 5.08 5.27 5.49 5.77


So we can see that by simply having a 0.05% lower birth rate, inequality can increase from 3.86 to 5.77 in 10 generations. Now these numbers are rounded, but the point I am trying to make is that income inequality has a number of factors and simply replacing dollars with grams will not change that.

 

[stan.distortion]

What is it with economists and savings? You mentioned a few posts back that simple human nature can cause all sorts of problems for economists yet they keep trying to convince us savings are bad and there's about as much chance of that happening as convincing a squirrel not to store nuts in the autumn, a squirrel isn't going to take out a loan to get through the winter months and trying to force humanity to do so will only lead to unnatural tensions. Folks will try to save regardless of the difficulties imposed to prevent it and if that's not good for the economy then that's something wrong with the economy, not the individual.

That's what I mean about economies functioning more as intended in the Islamic world, technically fiat currencies are forbidden under Islamic law and the result is they're used for convenience but savings are in the form of gold or tangible assets, the money gets spent on gold, houses, cars camels, whatever, and stays in circulation but us poor dumb western fools upset economists by trying to save it up because we don't know any better. Just convert anything we try to save into megacorp shares or something instead and the problem is solved, now they can stop pretending the stuff is "money" and instead admit it's scrip and make it worthless a month or so after issue, we'll all behave like good little consumers and spend, spend, spend.

Back to the rest in a bit, busy at the mo but an interesting topic

 

[Sapereaude]

The key is not all saving is bad, but always saving is bad see Japan and it's deflation problems. Also note saving does not equal investing and I am talking about aggregate saving.

Edit- This may prevent us understanding each other, many times the words I use have very specific technical meanings related to my field and are not general terms.

Functioning as intended? by what definition?

They may be forbidden, but they sure use them a lot. It's like they are better than the alternative.

If savings are in houses, cars and camels then the money is no longer in circulation, it is just asset trading and most importantly the money is not being used productively.

You are constantly intermixing several distinct issues - money, the value of money, economic growth, asset values and the productivity of money. As well as others that are not related to economics, but let's take just one these, money itself. For something to be a defined as money it needs to satisfy three broad categories - accepted as a medium of exchange, be a unit of accounting, and a store of value. Money does not need to be backed by something, to be money... I cannot highlight this enough.

 

[jimbit]

I was impressed with Bitcoin when I first heard about it. I was going to buy some until I realized that most of it's characteristics make it unsustainable. It has a limited supply, an unlimited blockchain size, a declining rate of production, and no means of recovering lost coins or preventing hoarding which is necessary when the supply is limited. It may be useful now but in the long run the scarcity will kill it.

Dash sound amazing but the current incarnation of Dash is also unsustainable. Doesn't anybody realize why fiat is inflationary? Because that is what's required to support savings. The mere act of saving money removes it from circulation and inflation is necessary to replace it in order to maintain the velocity and liquidity of the market. Inflation also increases the value of business inventory. Deflation reduces the value of business inventory which is one of the reasons merchants are reluctant to accept deflationary cryptos.

To be sustainable, a crypto needs to have the opposite set of characteristics of Bitcoin- an unlimited self-regulating supply, a limited blockchain size, a steady rate production, and a means for recovering lost coins.

It also needs a way to manage inflation and deflation without effecting the values of accounts. Inflation is what should happen when the supply becomes concentrated in a small percentage of accounts. Deflation is what should happen when the supply becomes evenly distributed among the majority of accounts. One way to do this is to introduce a new variant of the same coin with a different color association and exchange rate. This would not be a hard fork because it's the same coin. An exchange rate less than one to one, such as two to one, would decrease the supply thereby facilitating deflation while an exchange rate greater than one to one, such as one to two, would increase the supply thereby facilitating inflation. As long as merchants understand the color and exchange rate, the prices of goods should change accordingly and the value of accounts will be preserved.

edit: I replied to this post before reading all the others.. pardon me.

You should research other coins then.. for instance freicoin. I disagree with 'it should be inflationary'. scarcity will just make the value go up over time.

crypto currencies are NOT to replace fiat, but enhance them. (imo). the banks are printing plenty of fiat, that is your inflation.

 

[stan.distortion]

edit: I replied to this post before reading all the others.. pardon me.

You should research other coins then.. for instance freicoin. I disagree with 'it should be inflationary'. scarcity will just make the value go up over time.

crypto currencies are NOT to replace fiat, but enhance them. (imo). the banks are printing plenty of fiat, that is your inflation.

Nothing to pardon, we've been stretching the original topic to breaking point so it's us that should be apologising, you're the one on-topic

The key is not all saving is bad, but always saving is bad see Japan and it's deflation problems. Also note saving does not equal investing and I am talking about aggregate saving.

Edit- This may prevent us understanding each other, many times the words I use have very specific technical meanings related to my field and are not general terms.

Functioning as intended? by what definition?

They may be forbidden, but they sure use them a lot. It's like they are better than the alternative.

If savings are in houses, cars and camels then the money is no longer in circulation, it is just asset trading and most importantly the money is not being used productively.

You are constantly intermixing several distinct issues - money, the value of money, economic growth, asset values and the productivity of money. As well as others that are not related to economics, but let's take just one these, money itself. For something to be a defined as money it needs to satisfy three broad categories - accepted as a medium of exchange, be a unit of accounting, and a store of value. Money does not need to be backed by something, to be money... I cannot highlight this enough.

5 actually, portable and fungible too. Inflation casts doubt on the store of value aspect but anti money laundering measures break fungibility entirely and are actually self-contradictory, either fiat is scrip or Aristotle was talking BS. I'm not too sure about those technical meanings either, we're supposed to be talking about one thing here, money, but some savings are good, some bad, some kinds of spending ok, some not... how about the phase of the moon, does that come into it anywhere? That might sound like a stupid question but if something can't explain something in terms anyone can understand then it's likely they don't understand it clearly themselves and economists have proven that point time and time again, whatever economics are they sure 'aint science.

Take the 2 fundamental points, growth and employment. Both are a fallacy, we had to invent bureaucracy just to keep the second going and the lunacy of perpetual growth doesn't need pointing out, millions of hours spent every day on pointless tasks just to satisfy a long obsolete mandate and millions of tons of resources wasted every day on throwaway goods for the same. Economy implies efficiency but the pursuit of those 2 goals have created just the opposite, call that growth, productivity, whatever but at this stage they're just fancy terms for a waste of time and resources. That's how we seem to want economics to function, a new car or fridge-freezer every 5 or so years today, every 2 years tomorrow and every month before too long, that's not progress, it's insanity.

Want to see real economics, watch China. Their ideas for what's being termed as a credit rating system have the potential to re-write value, today we treat terms like economic value and social value as entirely different things but not so long ago that word "value" had a single meaning and it looks a lot like they're trying to turn that back around. Maybe I'm wrong about that and considering they're getting the financial sector to implement it then it's probably doomed from the start but it could sow the seeds for something even bigger than the idea of a peer to peer economy, hard to be sure from here but time will tell.

 

[AnarchicCluster]

The mere act of saving money removes it from circulation and inflation is necessary to replace it in order to maintain the velocity and liquidity of the market.

I think you are overestimating the power of inflation. If I want to buy a coffee I will go ahead and buy it. I will not wait until tomorrow because tomorrow it will be a fraction of a cent cheaper. It applies to most cases you can imagine. At some point people and business decide that buying something now gives you more benefits than waiting with the decision a bit longer only because the value of money will slightly increase.

Inflation also increases the value of business inventory.

No it doesn't. It is the value of money that decreases not the other way round. Inflation hurts everybody and especially people on fixed incomes (e.g. pensioners)

Deflation reduces the value of business inventory which is one of the reasons merchants are reluctant to accept deflationary cryptos.

As I said before, it is false thinking, the value of money goes up not the value of inventory goes down. However even if it was true, the changes in value are tiny and are taken into account only in very long term projects. In this case if the deflation (or inflation) is stable it gets factored in the planning of long term projects anyway.

To be sustainable, a crypto needs to have the opposite set of characteristics of Bitcoin- an unlimited self-regulating supply, a limited blockchain size, a steady rate production, and a means for recovering lost coins.

Generally it doesn't really matter if it is deflation or inflation. As long as it is small and stable (no rapid changes) it gets baked into people's or business's expectations and their longterm plans stall. Here is a good take on why we should not worry about bitcoin's (and Dash's) deflation http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-deflation/#401dc1cc29d0