Off-Topic discussion about Bitcoin and cryptocurrency.

NeuM

@richardyot said:

@NeuM said:

@richardyot said:

@NeuM said:

@richardyot said:
Fiat currencies are backed by the strength of the economies that issue them. The more productive an economy is, the stronger the currency.

Balancing the budget is not necessary, and in fact for nations that are net importers like the US it's in fact impossible. Why? Because there is always two sides to a balance sheet: for every asset there is a corresponding liability, which means that when you have a trade deficit with the rest of the world the exporting nations accumulate financial assets in your currency, which in turn means you have to run continuous deficits to account for these.

This framework is based on sectoral balances:

https://en.wikipedia.org/wiki/Sectoral_balances

The problem with comparing a government budget to a household one is that this always ignores one side of the balance sheet. If a government runs a because that would mean that households spend more than they earn) the only way that any government can run continuous surpluses is if they are a net exporter of goods, such as Germany. Countries such as the US or UK that are net importers have to run continuous deficits, which is exactly what they do.

Government debt is equal to private sector assets. Those bonds are assets to the people and institutions that hold them. They can be taxed away, and that would get rid of the government debt, but the private sector would then be poorer as a result. It's mathematically impossible for it to be any other way, because there are always two sides to the balance sheet.

And what happens to this debt-based economy when it’s shut down by politicians in response to a virus? Oh, and did I mention that same government has been flooding markets with multi-trillions of fiat dollars in an effort to stave off complete economic collapse?

If this has prevented economic collapse as you say, then where's the problem?

FWIW one of the main reasons the Great Depression was so bad was because of the Gold Standard. Without a lender of last resort many viable and solvent banks and businesses went bust because their assets were tied up in other institutions that were failing. We avoided this in 2008 and 2020 thanks to fiat currency.

I daresay you’re repeating falsehoods you’ve been told since childhood. Let’s see what this economic historian and economist have to say about it: https://tomwoods.com/ep-1847-the-truth-about-the-great-depression/

I'll take a look tomorrow, but I'm guessing that's from an Austrian economist

You guess correctly. Also, stop listening to Paul Krugman (if he’s one of your sources). He’s the “most wrong” economist in modern history.

richardyot

Instead of saying the national debt, you could turn the thing on its head and call it "national savings", because that's what it is: bonds held as savings by the private sector.

Think of a bank: if you deposit $1000 the bank is technically in debt to you to the tune of $1000. Does anyone panic when private banks accept more deposits, even though technically they are taking on more debt? No, of course not. Is this debt ever "paid off"? No of course not, because as some people withdraw money others will make new deposits, so this "debt" is always rolled over as people deposit and withdraw money.

This is exactly how government debt works as well, except that the government is the biggest and safest bank in the whole economy.

NeuM

@richardyot said:
Instead of saying the national debt, you could turn the thing on its head and call it "national savings", because that's what it is: bonds held as savings by the private sector.

Think of a bank: if you deposit $1000 the bank is technically in debt to you to the tune of $1000. Does anyone panic when private banks accept more deposits, even though technically they are taking on more debt? No, of course not. Is this debt ever "paid off"? No of course not, because as some people withdraw money others will make new deposits, so this "debt" is always rolled over as people deposit and withdraw money.

This is exactly how government debt works as well, except that the government is the biggest and safest bank in the whole economy.

I have a podcast just for you: https://the-bitcoin-standard-podcast.castos.com/episodes/51-the-global-bond-market-and-bitcoin-with-greg-foss

richardyot

@NeuM said:

@richardyot said:

@NeuM said:

@richardyot said:

@NeuM said:

@richardyot said:
Fiat currencies are backed by the strength of the economies that issue them. The more productive an economy is, the stronger the currency.

Balancing the budget is not necessary, and in fact for nations that are net importers like the US it's in fact impossible. Why? Because there is always two sides to a balance sheet: for every asset there is a corresponding liability, which means that when you have a trade deficit with the rest of the world the exporting nations accumulate financial assets in your currency, which in turn means you have to run continuous deficits to account for these.

This framework is based on sectoral balances:

https://en.wikipedia.org/wiki/Sectoral_balances

The problem with comparing a government budget to a household one is that this always ignores one side of the balance sheet. If a government runs a because that would mean that households spend more than they earn) the only way that any government can run continuous surpluses is if they are a net exporter of goods, such as Germany. Countries such as the US or UK that are net importers have to run continuous deficits, which is exactly what they do.

Government debt is equal to private sector assets. Those bonds are assets to the people and institutions that hold them. They can be taxed away, and that would get rid of the government debt, but the private sector would then be poorer as a result. It's mathematically impossible for it to be any other way, because there are always two sides to the balance sheet.

And what happens to this debt-based economy when it’s shut down by politicians in response to a virus? Oh, and did I mention that same government has been flooding markets with multi-trillions of fiat dollars in an effort to stave off complete economic collapse?

If this has prevented economic collapse as you say, then where's the problem?

FWIW one of the main reasons the Great Depression was so bad was because of the Gold Standard. Without a lender of last resort many viable and solvent banks and businesses went bust because their assets were tied up in other institutions that were failing. We avoided this in 2008 and 2020 thanks to fiat currency.

I daresay you’re repeating falsehoods you’ve been told since childhood. Let’s see what this economic historian and economist have to say about it: https://tomwoods.com/ep-1847-the-truth-about-the-great-depression/

I'll take a look tomorrow, but I'm guessing that's from an Austrian economist

You guess correctly. Also, stop listening to Paul Krugman (if he’s one of your sources). He’s the “most wrong” economist in modern history.

Yeah I'm not a follower of Krugman, he uses theoretical models (DSGE and the like) which I think are nonsense. I'm more in the Keynesian and Post-Keynesian camp, empirically based (unlike Austrians who reject empiricism).

Krugman is a New Keynsian which is a mixture of Keynes and 1970s micro-foundations, not my cup of tea at all.

NeuM

@richardyot said:

@NeuM said:

@richardyot said:

@NeuM said:

@richardyot said:

@NeuM said:

@richardyot said:
Fiat currencies are backed by the strength of the economies that issue them. The more productive an economy is, the stronger the currency.

Balancing the budget is not necessary, and in fact for nations that are net importers like the US it's in fact impossible. Why? Because there is always two sides to a balance sheet: for every asset there is a corresponding liability, which means that when you have a trade deficit with the rest of the world the exporting nations accumulate financial assets in your currency, which in turn means you have to run continuous deficits to account for these.

This framework is based on sectoral balances:

https://en.wikipedia.org/wiki/Sectoral_balances

The problem with comparing a government budget to a household one is that this always ignores one side of the balance sheet. If a government runs a because that would mean that households spend more than they earn) the only way that any government can run continuous surpluses is if they are a net exporter of goods, such as Germany. Countries such as the US or UK that are net importers have to run continuous deficits, which is exactly what they do.

Government debt is equal to private sector assets. Those bonds are assets to the people and institutions that hold them. They can be taxed away, and that would get rid of the government debt, but the private sector would then be poorer as a result. It's mathematically impossible for it to be any other way, because there are always two sides to the balance sheet.

And what happens to this debt-based economy when it’s shut down by politicians in response to a virus? Oh, and did I mention that same government has been flooding markets with multi-trillions of fiat dollars in an effort to stave off complete economic collapse?

If this has prevented economic collapse as you say, then where's the problem?

FWIW one of the main reasons the Great Depression was so bad was because of the Gold Standard. Without a lender of last resort many viable and solvent banks and businesses went bust because their assets were tied up in other institutions that were failing. We avoided this in 2008 and 2020 thanks to fiat currency.

I daresay you’re repeating falsehoods you’ve been told since childhood. Let’s see what this economic historian and economist have to say about it: https://tomwoods.com/ep-1847-the-truth-about-the-great-depression/

I'll take a look tomorrow, but I'm guessing that's from an Austrian economist

You guess correctly. Also, stop listening to Paul Krugman (if he’s one of your sources). He’s the “most wrong” economist in modern history.

Yeah I'm not a follower of Krugman, he uses theoretical models (DSGE and the like) which I think are nonsense. I'm more in the Keynesian and Post-Keynesian camp, empirically based (unlike Austrians who reject empiricism).

Krugman is a New Keynsian which is a mixture of Keynes and 1970s micro-foundations, not my cup of tea at all.

_"Austrian economics is not empirical."

False.

Empirical studies ("history") are important in Austrian economics and have larger scope than in mainstream economics. Mises worked with applied research in the Vienna Chamber of Commerce and founded the Austrian Institute for Business Cycle Research, for which he appointed Hayek as the first director. This is where Hayek did much of the business cycle research that later won him the Nobel Prize. What critics fail to understand is Austrians' narrower definition of theory, which is not a collection of hypotheses but true, general statements. Austrian economic theory cannot be developed using incomplete and imprecise measurements of observations. But this does not mean Austrians cannot or will not do empirical research._

https://austrian.economicblogs.org/mises-us/2020/bylund-debunking-seven-criticisms-austrian-economics/

wim

Whether they're good or bad, at some point deficits become unsustainable. That's what I worry about.

World bank on the "tipping point" expressed as debt interest as a percentage of GDP: 77% ¹
US 3rd quarter 2020 ratio: 124%. ²

---

1. World Bank. "Finding the Tipping Point—When Sovereign Debt Turns Bad." ↩︎

2. Federal Reserve Bank of St. Louis. "Federal Debt: Total Public Debt as Percent of Gross Domestic Product." ↩︎

NeuM

@wim said:
Whether they're good or bad, at some point deficits become unsustainable. That's what I worry about.

World bank on the "tipping point" expressed as debt interest as a percentage of GDP: 77% [^1]
US 3rd quarter 2020 ratio: 124%. [^2]

[^1]: World Bank. "Finding the Tipping Point—When Sovereign Debt Turns Bad."

[^2]: Federal Reserve Bank of St. Louis. "Federal Debt: Total Public Debt as Percent of Gross Domestic Product."

Exactly. And where will the money be coming from to “pay back” all this debt when the wealthy are about to get shafted by the Federal government with hugely increased taxes. And where will the working class people be coming from to “work off” this debt when we have a declining labor pool and lower birth rate? People aren’t dumb. Their money is quickly moving into higher paying asset classes and cryptos are part of that. And the wealthy are leaving the high tax States and cities (CA, NYC, etc.) and moving to lower tax states.

dendy

@richardyot said:

@dendy said:

@richardyot
There is only one input into the Bitcoin economy, which is people buying Bitcoin, but there are multiple outputs (energy costs, transaction fees) and every penny of profit also has to come from new buyers

You can say exactly same thing about whole financial market, especially FOREX, and various derivatives used by banks like CDO and so on..

Indeed, on that we agree 😀

Ah ok understand. You are wrong in epic way about this, but i understand, it's complicated to get deeper into financial markets and understand how they work, for ordinary people it's just "speculations", greedy wall street sharks .. common socialistic and commies agenda No seriously, this is just result years of propaganda deeply imprinted even into people who are not (at least not consciously) socialists or commies .. I thought it's problem just in post-communistic countries like mine one, but i see it's emergent also in western countries.

dendy

@richardyot said:
I'll take a look tomorrow, but I'm guessing that's from an Austrian economist

yeah, only economy which actually makes sense, rest is more like pseudoscience ... like astronomy vs. astrology

u0421793

One of the big problems with the cryptocurrency scene as I see it, and it’s only my opinion, is that there are so many altcoins and shitcoins that amount to almost nothing. At first sight it’s easy to think “why does this or that shitcoin even exist? It’s worth almost nothing, just as it has always been. It shouldn’t even exist.”

The problem seems to me to be caused by a blockchain that has a legitimate and often very good technical reason to exist. (There’s obviously a lot of blockchains that don’t have such a good reason and are either jokes like Dogecoin, or vanity projects so a person/org can say they have their own coin – ignore those for the remainder of this paragraph). What seems to happen is that the technical team builds a testnet then a mainnet while the commercial team hunts for further funding. To get it funded means pretending the tokens used on-chain are some kind of coin (well, they may as well be, it’s easy to think of them that way) and that — like BTC — seem worth very little now, but we promise you they’ll be worth a lot soon, so invest now. That’s the driver. The need for further investment on what is often a fairly innocent and good technical idea by itself, but it all gets sullied with the rudeness, the bad manners, the poor taste of having to be involved with finance.

richardyot

@dendy said:

@richardyot said:
I'll take a look tomorrow, but I'm guessing that's from an Austrian economist

yeah, only economy which actually makes sense, rest is more like pseudoscience ... like astronomy vs. astrology

While I definitely don't agree with the Austrian school (they have their own blind spots) it's absolutely true that a lot of mainstream economics is something like astrology, or more aptly it's like pre-Copernican Astronomy: building complex models that are completely wrong.

For example DSGE (Dynamic Stochastic General Equilibrium) models used by many orthodox economists don't include money or the financial sector, and the economy is represented by one single individual ("representative agent") who has infinite foresight and is always "maximising their utility". These models are created to try and create some mathematical riguour in what is a soft science, but without the fundamental assumptions that are built into them the maths falls apart.

In these kinds of models there is no involuntary unemployment and there are no asset bubbles, which is why so few economists predicted the 2008 financial crisis: their entire worldview was based on a fairy-tale.

u0421793

Also, I know this isn’t where advice should be given or taken, but…

Don’t keep your stash on someone else’s exchange, certainly not with the intent that that’s where you’re keeping it long term.

A hardware wallet isn’t difficult. Buy one first, even before you get any cryptocurrency. Get familiar with it, so you don’t make mistakes later with real amounts. Don’t buy a hardware wallet on eBay, it’ll come preloaded with keys, which obviously the seller knows, all printed up to make it look like that’s how it’s supposed to be. Buy it direct from the wallet maker, it’s safer and usually about the same cost.

richardyot

@wim said:
Whether they're good or bad, at some point deficits become unsustainable. That's what I worry about.

World bank on the "tipping point" expressed as debt interest as a percentage of GDP: 77% [^1]
US 3rd quarter 2020 ratio: 124%. [^2]

[^1]: World Bank. "Finding the Tipping Point—When Sovereign Debt Turns Bad."

[^2]: Federal Reserve Bank of St. Louis. "Federal Debt: Total Public Debt as Percent of Gross Domestic Product."

Prior to the pandemic the Fed already owned a quarter of the US government debt (bought via the QE programme), since then that has increased to probably around one-third. Any interest paid on that debt to the Fed goes straight back to the Treasury.

If it so wished the Fed could buy all of the public debt, Japan-style. That's not necessarily a good idea, but it illustrates the point that the currency-issuer is not financially constrained. The constraint is inflation, not the debt itself.

After WW2 the US debt level was at around 110% of GDP, yet the decades after the war were some of the most prosperous in human history, so it's not necessarily true that high debt levels present a drag on the economy. The UK came out of WW2 with a debt-to-GDP ratio of 250% yet it still prospered after the war.

It's much better to have low unemployment and working infrastructure than to worry about government debt levels.

richardyot

You may have seen this before, but it's pretty funny:

richardyot

Part 2 is even better, the lyrics are a pretty great summary of both points of view. They were written by an Austrian BTW, so Hayek "wins" in the end, but the authorities cheat him of his victory

richardyot

Also, it's worth noting that Hayek's views were more nuanced than many people might believe, for example in the Road To Serfdom he advocates for a social safety net and socialised medicine:

https://sites.google.com/site/wapshottkeyneshayek/hayek-on-health-care-social-safety-nets-and-public-housing

The differences between Keynesians and Austrians revolve around the idea of government intervention and regulation in markets, but Hayek still believed in a mixed economy rather than a fully market-based one. So the disagreement is really over where you draw the line, not whether that line exists at all.

dendy

After WW2 the US debt level was at around 110% of GDP, yet the decades after the war were some of the most prosperous in human history,

This happens alwas after any war. It's simply because you need to rebuild what was destroyed which results to rapid growth of GDP.

so it's not necessarily true that high debt levels present a drag on the economy.

Really to use post-war growth as argument that rapidly growing depth is not issue is a bit twisted. It's actually one of reasons to be worry even more, because this big depth can lead to new wars - local ones or even global.

Or huge increasing of taxes - which is already happening in US and few other countries.

Btw probably coincidence, for sure it has nothing to do with 35% of existing dollars printed since beginning of corona-crisis ...

richardyot

@dendy said:
This happens alwas after any war. It's simply because you need to rebuild what was destroyed which results to rapid growth of GDP.

The US mainland was pretty much unaffected by the war, apart from Pearl Harbour there was nothing to rebuild

@dendy said:
Really to use post-war growth as argument that rapidly growing depth is not issue is a bit twisted. It's actually one of reasons to be worry even more, because this big depth can lead to new wars - local ones or even global.

Which wars have started because of a high debt-to-GDP ratio?

@dendy said:
Or huge increasing of taxes - which is already happening in US and few other countries.

What taxes have risen in the US?

It's very likely that there will be tax rises, but none have been legislated yet. Tax levels are a political choice, so people can (and will) vote for low-tax parties and candidates if they wish to.

@dendy said:
Btw probably coincidence, for sure it has nothing to do with 35% of existing dollars printed since beginning of corona-crisis ...

There are shortages of supplies in many commodities right now, from lumber to concrete and other building materials. This is a supply-side problem, not a "money printing" one. As economies ramp up again after the pandemic demand for construction materials has soared, which means supply is stretched.

One of the issues that Austrians overlook is the difference between a stock and a flow. Money is a stock, spending is a flow.

You can have a vast stock of money which is not in circulation, and it will have no effect on the economy. For example the hundreds of billions of dollars that are stashed away in offshore tax-havens, from an economic perspective these might as well not exist since they have zero impact on the economy. Should they be bought back into the US and spent again, and thus become a flow rather than a stock, then they would have an impact. The quantity of money is not what drives inflation, it's spending which is the driving factor.

Could the Biden stimulus cause inflation? Yes, of course, if there is too much spending relative to supply.

ExAsperis99

What on earth do you think that chart is showing? What does the average price of commodities have to do with money in circulation? What does it have to do with the pandemic?

ExAsperis99

@ExAsperis99 said:
What on earth do you think that chart is showing? What does the average price of commodities have to do with money in circulation? What does it have to do with the pandemic?

Deleted. Going to make music.

u0421793

@richardyot said:

@dendy said:

@richardyot said:
I'll take a look tomorrow, but I'm guessing that's from an Austrian economist

yeah, only economy which actually makes sense, rest is more like pseudoscience ... like astronomy vs. astrology

While I definitely don't agree with the Austrian school (they have their own blind spots) it's absolutely true that a lot of mainstream economics is something like astrology, or more aptly it's like pre-Copernican Astronomy: building complex models that are completely wrong.

For example DSGE (Dynamic Stochastic General Equilibrium) models used by many orthodox economists don't include money or the financial sector, and the economy is represented by one single individual ("representative agent") who has infinite foresight and is always "maximising their utility". These models are created to try and create some mathematical riguour in what is a soft science, but without the fundamental assumptions that are built into them the maths falls apart.

In these kinds of models there is no involuntary unemployment and there are no asset bubbles, which is why so few economists predicted the 2008 financial crisis: their entire worldview was based on a fairy-tale.

Similar to game theory, which starts by assuming rational agents. Wait, what?

richardyot

@u0421793 said:

@richardyot said:

@dendy said:

@richardyot said:
I'll take a look tomorrow, but I'm guessing that's from an Austrian economist

yeah, only economy which actually makes sense, rest is more like pseudoscience ... like astronomy vs. astrology

While I definitely don't agree with the Austrian school (they have their own blind spots) it's absolutely true that a lot of mainstream economics is something like astrology, or more aptly it's like pre-Copernican Astronomy: building complex models that are completely wrong.

For example DSGE (Dynamic Stochastic General Equilibrium) models used by many orthodox economists don't include money or the financial sector, and the economy is represented by one single individual ("representative agent") who has infinite foresight and is always "maximising their utility". These models are created to try and create some mathematical riguour in what is a soft science, but without the fundamental assumptions that are built into them the maths falls apart.

In these kinds of models there is no involuntary unemployment and there are no asset bubbles, which is why so few economists predicted the 2008 financial crisis: their entire worldview was based on a fairy-tale.

Similar to game theory, which starts by assuming rational agents. Wait, what?

That's right, those famously rational humans 🙃

wim

https://futurism.com/the-byte/cryptocurrency-worth-more-than-us-currency-circulation

Cryptocurrency has hit a significant milestone: It’s now worth more than all US dollars currently in circulation.
Cryptocurrencies hit a valuation of $2 trillion on April 29, according to The Wall Street Journal. That’s about the same valuation as all US dollars in circulation. However, it has since hit as high as $2.25 trillion — and in the process actually exceeding dollars in circulation.

NeuM

@wim said:
https://futurism.com/the-byte/cryptocurrency-worth-more-than-us-currency-circulation

Cryptocurrency has hit a significant milestone: It’s now worth more than all US dollars currently in circulation.
Cryptocurrencies hit a valuation of $2 trillion on April 29, according to The Wall Street Journal. That’s about the same valuation as all US dollars in circulation. However, it has since hit as high as $2.25 trillion — and in the process actually exceeding dollars in circulation.

That’s not surprising since anyone in the world can (and does) invest in crypto. What the US sorely needs is “currency competition”. Cryptos need to stop being treated as assets with capital gains and start treating them as actual money. Let markets and currency holders determine what is the best path forward for the US. It is because of the wild printing and devaluing of the fiat dollar that Bitcoin came about in the first place.

espiegel123

There has not been historically large devaluation of U.S. currency in the time frame you are talking about.

@NeuM : "Let ... currency holders determine the best path forward for the U.S...."

This sounds a lot like oligarchy. The interests and well-being of the people not just the wealthy should guide policy.

shinyisshiny

im still trying to wrap my head around this whole thing, but im kind of into the high risk high reward coins. The shit coins etc. i know its basically gambling, but i dont really care.

I can put 100 bucks into bitcoin and make 20 bucks in a year, or i can put 100 bucks on some shit coin and make 1000 bucks in a day and then invest that into a lower risk investment. if i lose it, its just 100 bucks, which is still a fair sum of money, but its not going to bankrupt me.

NeuM

@espiegel123 said:
There has not been historically large devaluation of U.S. currency in the time frame you are talking about.

@NeuM : "Let ... currency holders determine the best path forward for the U.S...."

This sounds a lot like oligarchy. The interests and well-being of the people not just the wealthy should guide policy.

Currency competition would literally be the opposite of oligarchic system in place today. Currencies should be competing against the Dollar. If Fed policies were to change to bolster the Dollar to make it more valuable, then that would be an ideal outcome. If the Federal Reserve continues on its current path, the USD dies and will be replaced anyway.

Tarekith

@shinyisshiny said:
im still trying to wrap my head around this whole thing, but im kind of into the high risk high reward coins. The shit coins etc. i know its basically gambling, but i dont really care.

I can put 100 bucks into bitcoin and make 20 bucks in a year, or i can put 100 bucks on some shit coin and make 1000 bucks in a day and then invest that into a lower risk investment. if i lose it, its just 100 bucks, which is still a fair sum of money, but its not going to bankrupt me.

$100 into Bitcoin the last year would have netted you far more than $20.

NeuM

@shinyisshiny said:
im still trying to wrap my head around this whole thing, but im kind of into the high risk high reward coins. The shit coins etc. i know its basically gambling, but i dont really care.

I can put 100 bucks into bitcoin and make 20 bucks in a year, or i can put 100 bucks on some shit coin and make 1000 bucks in a day and then invest that into a lower risk investment. if i lose it, its just 100 bucks, which is still a fair sum of money, but its not going to bankrupt me.

I’ve more than doubled my return on investment so far (I’ve been formally investing in a gradually growing portfolio of about 25 different cryptos spanning roughly 10 months). I like the increased risk and haven’t seen growth like this in a new sector of the economy since the Internet took off.

richardyot

One for the commodity price truthers: