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Free Minds & Free Markets

Bitcoin Sends Elite Economists Into Glorious Fits of Confusion

Joseph Stiglitz is the George Costanza of economists: Every instinct he has, do the opposite.

If you're looking for another reason to take the plunge and finally buy some bitcoin, check out Nobel Prize-Winning economist Joseph Stigltiz's new interview with Bloomberg, in which he says it should "be outlawed" and warns that the government "could crack down at any moment and then [bitcoin] collapses."

Stiglitz is the George Costanza of economists: Every instinct he has, do the opposite. In 2002, he coauthored an infamous paper concluding that "the risk to the government from a potential default on [Fannie Mae and Freddie Mac] debt is effectively zero." And it's almost a decade to the month since he was in Caracas praising Hugo Chavez's economic policies.

||| Bloomberg TelevisionBloomberg TelevisionSpeaking of Venezuela, Stiglitz also told Bloomberg that bitcoin "doesn't serve any socially useful function." While it's true that cryptocurrency's world-altering potential won't be fully realized until the technology advances quite a bit, it's already enabling the citizens of that country ravaged by socialism to obtain life-saving food and medicine.

Is it that Stiglitz is an advocate of expansive government power in all contexts (he's also urging the U.S. to outlaw cash), or is it that he's too arrogant to bother trying to understand the most successful free-market money system running on the internet? I say both. (Fellow Nobel Laureate Paul The-Internet-Will-Be-About-as-Useful-as-the-Fax-Machine Krugman is also a bitcoin skeptic.)

One of the great pleasures of observing bitcoin's rapid rise in price and prominence is that it's sending elite economists into fits of confusion and stoking their insecurity. ("We ought to just go back to what we always have had," Stiglitz told Bloomberg.)

In calling for bitcoin to be "outlawed," Stiglitz demonstrated that he doesn't understand that bitcoin is just code, which makes a global ban impossible. Thanks to the recently launched bitcoin satellite service, and a system in development for sending cryptocurrency transactions through radio signals, even shutting down the internet wouldn't stop bitcoin.

Stiglitz is also unaware of one of cryptocurrency's most important paradigm shifts: It turned money into speech, thus affording it First Amendment protection. In the most recent episode of Forbes journalist Laura Shin's excellent Unchained podcast (published before Stiglitz' remarks), the prominent venture capitalist Naval Ravikant (arguably the most articulate thinker in the crypto space) expounded on this point:

What bitcoin did is it turned code into money. So bitcoin is pure code—there's no paper, there's no guns, there's no federal government. It's just pure code. So to stop bitcoin you've got to stop code, and code is actually just speech. It's just a bunch of numbers and letters that I write down and that the computer interprets. So you have to stop me from writing those numbers or letters down in a certain sequence and conveying them to other people, [and then] to stop them from loading it on a computer somewhere in the world, [and then] to stop someone else from then turning that into money. So you can't control the way money flows unless you can stop the developers from...talking to each other, and thinking. And the regime that could do that would probably be one of the evilest regimes on the planet.

Thanks to a landmark 1996 ruling by Judge Marilyn Hall Patel and later affirmed by the Ninth Circuit Court, there's strong legal precedent for the idea that code is speech. Mathematician Daniel Bernstein, with assistance from the Electronic Frontier Foundation, had sued the U.S. government in 1995 for blocking publication of an encryption program he had written. "Computer language is just that, language," Judge Patel wrote in her decision.

Upholding that principle, I believe, will be the most important free speech battle in the years to come.

I explored this topic in a recent video:


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  • John||

    There is an old saying that psychology fails because psychologists are terrible economists and economics fails because economists are terrible psychologists. Bitcoin is a perfect example of this blind spot in economists. Economists look at bitcoin and think that because it isn't backed by the force of law and is not anything tangible it doesn't really have value and thus any value it does have will not last. What they don't understand is that value is a product of psychology. Something is valuable because people collectively decide that it is. There is nothing that says gold, for example, should be any more valuable than other metals. Sure, it has lots of industrial uses and is relatively rare, but it is neither the rarest nor the most valuable metal. What gives gold its value is the collective decision of people to value it. And once that decision is made, it becomes self reinforcing. People consider something valuable because other people value it and the more people value it the more value people attribute to it.

    Once people decided that bitcoins had value, that was it. They have value. And that value is just as real and lasting as the value anything else has. Economists have a hard time grasping that.

  • NotAnotherSkippy||

    Or they remember tulips, not that I'm saying that's stiglitz's argument here. I made the argument that bitcoin may be the new gold since it has baked in scarcity. On the other hand it's all based on math and when have we ever found flaws in math before...

  • John||

    Mechanical watches. If you had asked economists in 1960 what the future of the mechanical watch industry was they would have said it had none because the invention of the cheap quartz watch rendered them obsolete. Yet, today there are probably more mechanical watches made than ever before. When everyone could have a perfectly accurate watch, having an inaccurate one that needed to be wound became a way to show your status.

  • CE||

    Crypto currencies have zero scarcity. Bitcoin may be capped, but anyone can start a new crypto currency at any time.

    Fiat dollars have value because you can pay your taxes with them and avoid jail time. Bitcoin has value why exactly? It's going up because it's going up, and we all know how that will end.

  • JFree||

    nothing that says gold, for example, should be any more valuable than other metals.

    Well that's nonsense. It's geologically rare - hence pricey by both volume/weight. It's chemically dense - hence near impossible to counterfeit until modern times. Its color is also distinctive. And it shares with many metals the characteristics to define/anchor/standardize a weights/measures system - which is the language of market transactions. Which is why gold became the metal used to define/anchor/standardize weights/measures across/between markets - ie exchange rates.

    Gold deposited in banks with a depository receipt issued - well that has none of those characteristics of gold. So maybe that's why you think its all so arbitrary.

  • John||

    It's geologically rare lots of metals are and Gold is by no means the rarest. And platinum and silver and probably a lot of other metals fit the same description you give. There is no reason why any of those metals or any of the rare earth couldn't take the role that gold does. The fact that gold has is because it worked out that way not because there is anything special about gold.

  • NotAnotherSkippy||

    Rare earths aren't actually that rare. Things that are rare are dense as they all sink to the core. Think platinum group metals: iridium, ruthenium, osmium... all of those are produced at a fraction of gold mining every year.

  • JFree||

    It's geologically rare lots of metals are and Gold is by no means the rarest. And platinum and silver and probably a lot of other metals fit the same description you give.

    The wiki page on abundance of elements in earths crust - https://goo.gl/mWqkaH

    No - lots of metals AREN'T as rare. Only the 'precious metals' are. And no cheaper/abundant metal is anywhere near as dense as gold - except tungsten and uranium - and no one figured out how to work those metals on any scale until the 20th century.

  • JFree||

    There is no reason why any of those metals or any of the rare earth couldn't take the role that gold does.

    If there were easy-to-find substitutes for gold (ie ways to counterfeit it); then alchemy would have been screamingly successful around the world. Chrysopoeia (the transmutation of base elements into gold) was the main impetus behind it everywhere. It failed - everywhere.

  • NotAnotherSkippy||

    Substitute is hardly the same thing as counterfeiting. There are 6 other metals that are rarer in the earth's crust than gold. The naturally occurring periodic table has 92 elements. 6 is a rather significant fraction of 92.

  • JFree||

    Substitute is EXACTLY counterfeiting if the substitute is good enough to pass as the other. Substitute a lead round with a pretty gold surface for - a pure gold coin - and hey presto you have a potential counterfeit. Substitute a gold round with a pewter surface for - a lead coin - and you will go broke fast.

    Ignore the religious foofoo of alchemy. Counterfeiting was the pot of gold at the end of that rainbow.

    And all the geologically-rarer-than-gold metals are also post-gold-standard metals (re either their discovery, purification, or ability to 'work' them like ancient metals). So they are irrelevant to why gold became money and remained money for so long.

  • Bill||

    Gold also does not tarnish like silver and is very soft
    so it can be divided into tiny pieces (or hammered into
    gold foil).

  • Microaggressor||

    Something is valuable because people collectively decide that it is

    You're close, but still missing the reason they decided that.

    It's valuable because of its utility for facilitating trade, especially in places like Venezuela. Currency helps get around the shortcomings of bartering and is a good store of value when your other currency options are rapidly inflating, making it possible to accumulate wealth. That's why it's needed, not just wanted. The $ value derives from that need.

  • Fist of Etiquette||

    And it's almost a decade to the month since he was in Caracas praising Hugo Chavez's economic policies.

    That alone tells you all you need to know. The social science of economics is the third lowest science, and only a select few are able to elevate themselves above their chosen discipline.

  • John||

    Rising above the discipline requires understanding that people are not fungible and as a result, human behavior cannot always be reduced to and described by math. Economists are in love with mathematical modeling. Socialist economists especially so. If you assume everyone acts the same way according to a given set of motivations, the models work wonderfully. But they don't predict a damn thing correctly or provide any kind of valuable description of reality. Instead, they function as ready-made rationalizations for whatever central planning scheme suits their creator's fancy.

  • ||

    Your title doesn't make you an authority on things you don't bother to understand.

    Because bitcoin is simultaneously dead simple to use, readily penetrated by even the most basic of minds, *and* incomprehensibly different and divergent from anything that came before it.

    It's really kinda sad that bitcoin is the fulcrum on which this particular lever turns.

  • John||

    I don't find bitcoin that easy to penetrate. I understand the concept of electronic currency well enough. What I have never understood is what it means to "mine Bitcoins" or how these things are created.

  • loveconstitution1789||

    There will be a finite amount of Bitcoins "mined" (21 million) by those who try and solve a mathematical problem after so many ledger transactions are proved. Rewarded Bitcoins are given to those entities that mine.

    Since Bitcoin is currently around $9,313 per bitcoin most transactions are in fractions of Bitcoins. Owning a Bitcoin is better than "owning" parts of a Bitcoin since the owner of a Bitcoin is pretty much giving you an IOU on the transactions under 1 Bitcoin.

  • John||

    There will be a finite amount of Bitcoins "mined" (21 million) by those who try and solve a mathematical problem after so many ledger transactions are proved. Rewarded Bitcoins are given to those entities that mine.

    What does that mean? Solve what mathematical problem? And who awards the Bitcoins? Why does solving the mathematical problem instead of doing anything else give you a bitcoin?

  • loveconstitution1789||

    "With Bitcoin, miners use special software to solve math problems and are issued a certain number of bitcoins in exchange. This provides a smart way to issue the currency and also creates an incentive for more people to mine."
    Bitcoin mining info

    Mining gets peer recording of blockchains and they get Bitcoins as an incentive, plus it keeps the number of Bitcoins in circulation at a publicly known pace.

  • John||

    Why doesn't everyone go get a copy of the software and start mining? And if the total amount available is limited, then why hasn't it been exhausted already leaving nothing to mine?

    I am sorry to be a pain in the ass, but I have honestly never understood how this works.

  • BYODB||


    Why doesn't everyone go get a copy of the software and start mining?


    Because you need to pay real money for electricity to do so would be my guess.

  • ||

    Because you need to pay real money for electricity to do so would be my guess.

    Well, at this point, the margins are so thin that the hardware is highly specialized as well.

    What started out as and was supposed to be a decentralized network in perpetuity has somewhat effectively become a walled garden. Not that it's morally wrong or won't work. Just that the notion of a currency with liberty engineered into it should be and should've been seen as nonsense.

  • JFree||

    Because you need to pay real money for electricity to do so would be my guess.

    And that is also why bitcoin will fail as a currency. Bitcoin mining currently consumes more electricity than 159 countries - 30 TwH. For 300,000 transactions/day. That means a single transaction consumes roughly the same as a week's worth of an American households electricity usage. And blockchain technology can't really scale and is designed to be inefficient.

    Maybe as an ostentatious store of value for people it can work. But the moment electricity usage reaches capacity - and it becomes an economic conflict between regular folks using light bulbs and refrigerators vs people transferring bitcoins from Davos to the Caymans - then people will start swinging from lampposts. That is probably just about the time that libertarians will be mobilized as the useful idiots for the gated compound class - to support measures to ensure 'stability' in the bitcoin price and to ensure its broad acceptance.

  • NotAnotherSkippy||

    Confusing mining with using the currency is stupid.

  • JFree||

    Confusing mining with using the currency is stupid.

    No it isn't. That mining is what allows the blockchain to be created and added to. That is purpose of the math problems - solving those is what creates the next block. With the reward for the miner being an additional bitcoin created.

  • NotAnotherSkippy||

    Transferring a block does not require creating a new coin. If it did that would mean an infinite amount of currency instead of the finite 21million cap.

  • JFree||

    Transferring a block does not require creating a new coin.

    No. Transferring a ledger record so that it is verified by the entire network and made transparent/irreversible requires a new block. And the features of that new block (the hashcash) is what requires a math puzzle - difficult to solve, easy to verify - which is the 'proof of work' for miners. If miners disappear - so does transaction verification. If all but a handful disappear, then it becomes a closed currency system (eg a central bank settlement system) - where 'trust' is far more efficient. If the transaction/block creation ever becomes 'easier', then the entire blockchain becomes more hackable - and useless. If it remains difficult, then electricity usage remains obscene and transaction costs become enormous. TINSTAAFL.

    Bitcoin 21 million coincap is nothing special. They could have simply created 21 million (dropped them from a helicopter) - with no more created - and rewarded miners solely for verifying transactions. That would be a medium of exchange - but not necessarily a store of value.

  • JFree||

    And that paying real money for electricity is also why bitcoin and other cryptocurrencies (mostly monero right now I think) have crossed the threshhold and are now stealing electricity from others. Via websites that use malware to hijack their visitors CPU's - sold as a way to provide revenue for the website without the proven crappy ad-based model.

  • BYODB||

    Trading a real good, that being electricity, for an inherently worthless piece of data is a familiar con.

  • Mitsima||

    Forgive my ignorance, but isn't this same argument valid for mining precious metals? There are only so many back hoes & drilling machines and if they aren't being used to mine "useful" materials, like copper or iron, shouldn't many someones make other someones into street side Christmas ornaments?

  • JFree||

    isn't this same argument valid for mining precious metals?

    Yes. Maybe that's why metals aren't the basis of currency anymore. Even in the day though gold/silver tended to be byproducts of other industrial mining - or byproducts of a murder exchange (lead bullets in native Americans heads for the gold around their neck). In effect, that gold/silver is already an economic surplus (all the stuff about 'industrial' uses for them is generally hooey/hype) and was monetized. Which meant that the fixed capital to find/open the mine wasn't destroyed with volatile prices for the main mine products. As long as an actual surplus is monetized, then Say's law works - one either consumes one metal output or one saves a different metal output and the switch between the two is countercyclical.

    Electricity does have upfront fixed costs in it - but is mostly about variable input fuel costs. And I don't see any reason why bitcoins use/value will naturally drop if fuel costs rise - or if interest rates rise.

  • NotAnotherSkippy||

    Because it is computationally expensive. Why doesn't everyone sieve the ocean for gold? Because it is energetically expensive. You need cost effective scale to mine. That's why the miners have gone from cpus to gpus to asics. Each of these is a more specialized and efficient processor for solving these specific problems.

  • loveconstitution1789||

    No problem. I only know the basics of mining. I considered doing it myself but countries like North Korea and China have set up huge Bitcoin mining operations and computing power tends to win the mining race. Plus, Bitcoin mining math problems get harder.

    Anyone can mine for Bitcoin, which is why those Venezuelans were doing it secretly.

    A new blockchain of Bitcoin called Bitcoin Gold started Nov 12, 2017. It supposedly makes it easier for anyone with a typical CPU to try and compute the Bitcoin problem to be rewarded Bitcoins.

    Evidently when 21 million Bitcoins are mined, there will be no opportunity to mine. The race to mine as much as possible has been quietly happening for years. Evidently, as of June 20, 2017, Bitcoin has reached the total circulation amount of 16.4 million coins

  • John||

    Thanks. This was very informative. I honestly had no idea how it worked until now.

  • loveconstitution1789||

    No prob John.

    Its pretty interesting stuff and illustrates how the media can hype things up. I even see that its being equated to a Ponzi scheme. Its not, as there is a value to Bitcoins right now. They are just way overpriced, IMHO. There are no pharaohs at the top of the pyramid. Anyone who bought hundreds of Bitcoins at less than $15 will make a killing when selling them at $9,000 each. The price will drop as more hit the open market and then people will buy them to conduct anonymous business.

    The crazy thing is a bunch of drug dealers bought into Bitcoin early and are gonna get rich from inexperienced investors who are now paying $7-9,000 per Bitcoin.

  • some guy||

    I'll just add that each new Bitcoin that is mined requires more computation that the previous Bitcoin. I don't remember how quickly it grows, but I know it's faster than linear. So even though most of the Bitcoins have already been mined it will probably still take many years to finish mining them.

  • NotAnotherSkippy||

    The entire foundation is mathematical. Imagine the problem is finding the roots of x^2-1. The answer is 1 and -1, so your "coins" would be the roots and the equation itself. There are also a provably finite number of roots.

    Obviously the problems are much more complicated than that as is the bookkeeping, but you get the gist.

  • John||

    I guess the problems are so difficult it would take the typical home computer weeks or even years to solve them even if you had software that could do it? At ten thousand dollars per coin, I am having a hard time imaging a problem that is both solvable and difficult enough to keep the supply of bitcoins from being exhausted very quickly.

  • NotAnotherSkippy||

    Yes. Here's a better example except for the finite supply part: find all of the prime numbers. The small ones are easy. Try verifying a prime number with 1000 digits.

  • Veilosh||

    **Owning a Bitcoin is better than "owning" parts of a Bitcoin since the owner of a Bitcoin is pretty much giving you an IOU on the transactions under 1 Bitcoin.**

    I feel the need to correct you here. You can absolutely own fractions of a bitcoin. There are no IOUs involved. Each bitcoin is divisible by 100million pieces. It's important that people know this so that they realize that they can purchase small amounts and aren't required to front 10k to get started.

  • JFree||

    But once you move to satoshis (that 100 millionth of a bitcoin) as the unit of account to measure both the value stored (bitcoin/$) and the transaction cost (satoshis/byte), then its easy to see how inefficient it all is.

    If the median transaction - say 200 satoshis/byte x 250 bytes/transaction to settle in idk 15 minutes - costs 50,000 satoshi (or $5 currently) per transaction, that's very inefficient. 2000 transactions per full bitcoin and all its 'stored value' disappears as a payment (transaction tax) to miners while you've wasted 21 full days waiting for all those transactions to settle. Coins obviously last a lot longer than 2000 transactions. So do debit cards for that matter. And neither of them require one to pay $10,000 for the privilege of acquiring one.

    Obviously there are still uses - but the more expensive bitcoin gets, the more those uses will be limited to transferring land title or yacht title or central bank reserves or somesuch. If the only use ends up being transferring bitcoins around, then what's the point of it all?

  • Veilosh||

    Fees are currently prohibitive for small purchases. That's well known. There are scaling proposals in development to bring layer 2 and 3 solutions to bitcoin. With this, many thousands of transactions will be able to be condensed into a single settlement on the base blockchain, reducing costs and opening up bitcoin to micropayments.

    That being said, the primary goal of bitcoin is to create a reserve currency that is not subject to the wills of a government. That's something I think most people on this site would be able to get behind.

  • ||

    I don't find bitcoin that easy to penetrate.

    You don't have to. It's mystique/smoke-and-mirrors/hucksterism. You understand that gold is hard to mine and cash is difficult to print, right? You understand that runs on gold or cash can artificially inflate their value and that and abundance of them, especially if faked, decouples their value as a medium of exchange, right? Economically speaking, you don't have to know much more than that about gigahashes per blockchain any more than you have to know the stoichiometry of gold to arsenic.

  • loveconstitution1789||

    "If you're looking for another reason to take the plunge and finally buy some bitcoin,...."
    If you buy a limited resource when the price is high and is riding a frenzy of media attention you deserve what happens to your money.

    I bought hundreds of Bitcoins when they were dirt cheap and I am cleaning up by selling some now. Thanks suckers.

  • John||

    My sense is that there is a bubble going on here Bitcoin is getting so crowded that soon no one will ever go there. When you think about Yogi Bera perfectly described economic bubbles.

  • loveconstitution1789||

    It totally is a bubble ready to burst.

    The only really winners are those of use who bought Bitcoins 5 years ago when they were under $15 each.

  • loveconstitution1789||

    As with the housing bubble, its not that Bitcoin is not worth "x". Its just over inflated and needs to have an adjustment in price downward.

  • Veilosh||

    Correct, and this has already happened a dozen times for bitcoin. Every subsequent crash settles higher than the one before it.

  • CE||

    Until someone starts a new and improved cryptocurrency.

  • BYODB||

    ^ exactly this.

  • Curt||

    "Stiglitz is also unaware of one of cryptocurrency's most important paradigm shifts: It turned money into speech, thus affording it First Amendment protection"

    What is money other than a system of IOUs? US cash is a system of regulated, government sponsored IOUs. But their value is only determined by the amount that people value them. As John says, people consider something valuable because other people value it. There've been tons of different currency that existed over time. And their success/failure has depended entirely on how much people valued them.

    The funny thing about this is that the economists see the nature of bitcoin (off the books; outside government regulation) as a bug. Somehow they refuse to accept that this nature is a feature... a feature that greatly increases its value.

  • Sevo||

    Money, as the price of goods, is also about the only wayto figure out what is needed or wanted where and when. If that isn't "speech", I don't know what it is.

  • John||

    I was initially skeptical of bitcoins but I am starting to change my mind. You make an excellent point. Ordinary currency is only as valuable as the strength of the government and economy that backs it. If the economy collapses or the government goes berserk and devalues it, you are screwed. Bitcoin, in contrast, does not depend on the viability of any government. Sure, if all of the governments of the world collectively decided to get rid of it, your bitcoins probably wouldn't be worth anything outside of the darknets. That, however, is unlikely. More likely is that bitcoin floats above the ebb and flow of governments and economics and maintains its value.

  • ||

    Bitcoin, in contrast, does not depend on the viability of any government. Sure, if all of the governments of the world collectively decided to get rid of it, your bitcoins probably wouldn't be worth anything outside of the darknets. That, however, is unlikely. More likely is that bitcoin floats above the ebb and flow of governments and economics and maintains its value.

    This is a bit of a chicken and egg problem and not one that's solved by engineering or cryptography. As I indicated kings and queens didn't become so by being the best and fastest miners. They had accumulated the means and connections to control the mines and the supply chains. Successive kings didn't ban the previous dictator's gold (or didn't remain king long if they did). They seized it, re-minted it with their own likeness, and redistributed it to the populace. None of this changed with bitcoin and there's plenty of evidence to support that fact.

  • ||

    As I indicated kings and queens didn't become so by being the best and fastest miners.

    By this I mean, as above, it's exceedingly likely few of them understood mining in full detail any more than Krugman understands the computing involved with bitcoin.

  • John||

    I am not really sure what prevents a dedicated criminal organization or state like North Korea from corrupting the mining process and engaging in counterfeiting. That might be impossible. But it seems like it would be. And if it is possible, someone will eventually do it and the whole thing turns into Weimar Germany.

  • NotAnotherSkippy||

    The math along with the distributed ledger prevents counterfeiting. Of course that assumes that all of the math is correct as I said earlier and that you can't control enough of the ledger to become the validating authority.

  • John||

    I suspect it would be possible for someone with enough resources and enough determination to get control of the ledger and become the validating authority. I am not an expert enough to say so. But if it is possible, it will happen at some point. Anytime there is a fortune to be made, someone will figure out a way to make it. And getting control of the ledger would make a fortune for the entity or person that does it.

  • NotAnotherSkippy||

    It is very well distribited today and there will always be competing forces trying to do the same thing. Cornering markets has never really been a successful strategy in the past. I'd be more worried about flaws in the math. Just look at how rapidly hashes have become obsolete in just this century.

    Of course you have another problem in that there are probably an infinite number of alternative coin schemes, so your entire reliance is on psychology, just like facebook has absolutely no reason to be popular other than the fact it is popular.

  • ||

    I said earlier and that you can't control enough of the ledger to become the validating authority.

    Or, one step down the 'rubber hose cryptography' chain, control enough of the exchanges to sufficiently strangle the flow of the currency into/out of vital regions.

  • NotAnotherSkippy||

    True but you don't technically have to have an exchange.

  • ||

    If you want to do anything other than accumulate bitcoin or buy/sell goods at an exceedingly local or individual level you need some form of exchange.

  • NotAnotherSkippy||

    But the barrier to creating a new exchange is low.

  • JFree||

    you can't control enough of the ledger to become the validating authority.

    The miners are the validating authority for the ledger. Those already require massive scale-up and industrial usage of electricity. So all that is needed to shut most of them down is differential pricing for electricity - which electric utilities are gonna have to do - or start jacking up electric prices for normal people to subsidize the miners. And once you get down to a 'manageable' number of miners then that's exactly when you can control enough of the ledger.

  • loveconstitution1789||

    Absolutely. Bitcoin will continue to be popular because more and more people are having faith in it as currency.

    As you say, cash and gold are only "valuable" because people put faith in its value.

    The strongest positive of Bitcoin is it is peer controlled and is not subject to endless printing of government dollars which devalues the currency of nations.

  • Sevo||

    "(Fellow Nobel Laureate Paul The-Internet-Will -Be-About-as-Useful-as -the-Fax-Machine Krugman is also a bitcoin skeptic.)"

    Here it is nearly 13 months later, and I'm still in denial, hoping he's wrong about the market recovery from the horrors of a Trump election...

  • BYODB||

    You would probably need to be mentally retarded to buy Bitcoin right now. If you don't think it's massively overvalued at the moment, I don't think you're paying attention.


    If you bought it a while back, you were probably smarter than the rest of us though.

  • loveconstitution1789||

    This super high price is relatively few people trying to get Bitcoins after the price went over $1,000.

    Doubtful the price will ever get back to under $100 because people will never want to take a loss from paying $9,000 per Bitcoin. If you bought some under $8,000 sell most and keep a few.

    I am guestimating the price will settle around $1-2,000 per Bitcoin. Pretty much about the gold price, maybe a few thousand more.

  • Domestic Dissident||

    It could easily go down to zero if some Preet Bahara - like shithead decides to drop the hammer on them.

    Some dude on the thread the other day told me that this could never possibly happen, but that's exactly what Ray Bitar and some of the other online poker site owners thought too, until the day they suddenly found themselves getting arrested by federal agents when they stepped off a plane.

    Who knows though, maybe these Cryptocurrency magnates are smarter and they're like Julian Assange, permanently locked away in a place where no U.S. government agent or assassin can ever get to them and they never plan to travel anywhere the rest of their lives. Tough way to live though.

  • ||

    It could easily go down to zero if some Preet Bahara - like shithead decides to drop the hammer on them.

    IMO, Pai's repeal of NN was a bigger boon than anything somebody like Preet could do. Cryptocurrencies as an idea may not live and die by network infrastructure, but bitcoin certainly does (at least for now). And this, once again, reinforces my point that once a cryptocurrency mesh network is achieved, the cryptocurrency is the non-issue that everyone will be ballyhooing like the cloning technology from The 6th Day (while 'syncording' was far more revolutionary and powerful).

  • BYODB||

    Or, and I'm just going to go out on a limb here, people will lose a huge amount of value in it when the bubble bursts and people will abandon it.

    Bitcoin has no intrinsic value whatsoever as far as I'm aware.

  • loveconstitution1789||

    Its a currency that is more anonymous than credit cards and has the ability to be a secured transaction for online purchases.

    That in itself is worth "x".

    DD made the good point that government outlawing Bitcoin could destroy it.

    Other than that, it will probably some value for people. Just not worth $9,000 per Bitcoin.

  • ||

    Its a currency that is more anonymous than credit cards and has the ability to be a secured transaction for online purchases.

    This is, again, a bit of misdirection. It's not more anonymous than cash and it plainly isn't, and can't be, credit. What you're saying is a bit like saying it's more anonymous than a loan and more secure than gift cards. Bitcoins can't be stolen or seized but that's not the problem with credit cards.

  • Sigivald||

    "The value of an object is what someone will pay for it".

    But yes, it's in a speculation bubble.

  • BYODB||

    Which is why I said it doesn't have intrinsic value. Gold, for example, is a fantastic conductor and thus even if you remove it's nominal value as a currency it has intrinsic value as a commodity.

    If you don't spend a Bitcoin, exactly what would it be good for otherwise?

    Obviously the U.S. dollar (and any nonconvertible fiat currency) has the same problem, but it is what it is.

  • MWG||

    A lot of people (both for and against BTC) have a fundamental misunderstanding about what BTC is, which makes sense given that it's a relatively new technology we've never seen before.

    BTC is NOT a currency. It's a protocol for transferring and storing value. Currency is simply one application, but theoretically anything that has "value" can be traded/transferred/held using its protocol.

    What's Bitcoins value? I don't know in the long run, but if it acts ONLY as a store of value (one of its main current uses), that alone could make it worth trillions of dollars. Now image if we started trading stocks, mortgages, titles, etc... AND using it as a cross border currency.

    A protocol for transferring value uncontrolled by any central government/authority!? Shut up and take my money!

  • Sigivald||

    Clarification: No object has intrinsic value.

    There's "use value" for money-like objects like gold ("it's pretty and has some industrial uses" or "other people keep irrationally valuing it as somehow magically special" as well as "is/can be used as money"), and there's "value as money" for any money*.

    And plain "use value" for every non-money-or-money-like object that has any economic value at all.

    Intrinsic value is a broken concept left over from before people figured out that use value is what they were talking about, and they didn't realize that their local use values weren't built into the object as a transcendental property of it.

    (* Ref. Rothbard, money is any object or entity whose primary or sole value is as a medium of exchange. A dollar bill is basically worthless without the ability to use it for exchange. So's a bitcoin.

    Arguably the only reason cowrie shells made it as jewelry was that they were also money; wealth displays fit under "money" more than "use value" in a fiscal analysis.)

  • BYODB||

    Fair enough, but it seems like semantics to me.

  • Veilosh||

    You seem to think that there are individuals who control bitcoin as if it were a company. There are no heads that a government can cut off. Those poker sites were hosted web servers, not a distributed, decentralized network. This technology is very different and incredibly resilient.

  • I am the 0.000000013%||

    And yet the IRS is taxing bitcoin profits, and almost certainly will increase their interest in it.

    The IRS could effectively destroy bitcoin in the USA by putting a prohibitive tax on bitcoin profits.

    It's all well and good to say a government can't kill it, but in truth if they make collecting the benefit effectively illegal, it's going to cut the trading and hence the value down considerably.

  • Microaggressor||

    Enforcement would be difficult to impossible, though. It would be just like the war on drugs. People who fail to cover their tracks might get their life ruined, while everyone else quietly carries on trading bitcoins.

  • MargeBouvier||

    The IRS just wants their cut. Their only problem with illicit industries (drug dealing, prostitution etc.) is the tax evasion part of it. Other parts of the government, like the Treasury dept maybe, might have more incentive to shut down competitive currencies to the USD, and crazy legislation and taxes would be a good way to do that without actually "outlawing" Bitcoin. But yes, if the taxes are prohibitive enough, it will be driven off-shore or underground.

  • MWG||

    There is absolutely no sign and a diminishing chance of the government trying or even being able to "drop the hammer" on bitcoin.

    The CME and, as of yesterday, the Nasdaq are soon going to be trading bitcoin futures.

    Even if the feds wanted to shut it down, Bitcoin is decentralized, open source code. There's nothing to drop the hammer on.

  • Juice||

    This is also the reason the stock market is in bubble mode right now. After Trump got elected lots of people pulled thir money out only to see prices go even higher. They kept their money out knowing in their heart it would crash. It didn't. Some of them chased driving prices even higher. Many didn't. The longer they wait on the sidelines the higher the prices get. When the last of them finally give in and buy, that's when it'll pop.

  • loveconstitution1789||

    I would agree with this assessment.

    That's why I will be turning my portfolio into cash as soon as the media starts pushing for lefties to buy buy buy.

    I will be like, sell sell sell.

  • Microaggressor||

    I'm not too confident in the future value of cash either. Your best bet is a variety of assets.

  • Sigivald||

    Well, BitCoin has a finite supply; it's inherently deflationary in the long run.

    It'll only drop if people are abandoning it, but it doesn't really have a cap if people keep adopting it, which is the real question...

    (If adopted as a world currency in someone's daydreams, we'd all be moving perhaps millionths or billionths of them around for small transactions ...

    Fortunately this ain't ever gonna happen.)

  • CE||

    BitCoin is finite, but there are no barriers to starting additional cryptocurrencies. The supply is infinite, so the value is near zero.

  • Juice||

    You would probably need to be mentally retarded to buy Bitcoin right now.

    Said everyone when it hit $400, then $1200, then $4000....

  • Diane Reynolds (Paul.)||

    "the risk to the government from a potential default on [Fannie Mae and Freddie Mac] debt is effectively zero."

    Wouldn't that make him the Barney Frank of economics?

  • wef||

    Maybe Joseph Stiglitz is the Harvey Weinstein of economists.

  • Cynical Asshole||

    Joseph Stigltiz's new interview with Bloomberg, in which he ... warns that the government "could crack down at any moment and then [bitcoin] collapses."

    I'm assuming he was furiously masturbating when he said that.

  • Phos||

    Therefore the collapse at the end of his statement.

  • MWG||

    I wish Reason would cover Bitcoin news more. From a libertarian perspective, it's one of the most interesting things currently "happening". The space is full of libertarians and anarcho-capitalists.

  • Freedomist||

    Its no surprise to me that Stiglitz, your typical left-wing Democrat, wants to outlaw bitcoin. Following his logic, he would have opposed taking out of circulation Silver Certificates and replacing them with Reserve Notes. Since logic isn't a Democrat's strong suit, and despite him winning a Nobel Prize in Economics, he's probably trusts the government more the private sector.

  • jomo||

    All this guy has to do is tell DJT that bitcoin is only used by "freaks" and the next day Sessions will announce a new task created to shut it down.

  • Ned Netterville||

    He and Krugman look and reason--if you can call it that--alike. They may not come right out and say the worship at the alter of state, but they do. Thank you Bitcoin for uncovering useful idiots. The p rove a number of economic theories, like the law of diminishing returns. The longer their listened to the more irrational they become.

  • Response||

    I love the idea of crypto-currency, but I haven't bought any primarily because governments (like China) have/could outlaw its use causing the currency to dive. That is, of course, speculation and the recent explosion in cc says that my speculation is wrong compared to current trend. But cc were designed to protect against inflation and current speculation has risen cc so high that I don't see a protection against inflation as much as a counter to its original intent.

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