{"items": [{"author": "David&nbsp;Chudzicki", "source_link": "https://plus.google.com/106120852580068301475", "anchor": "gp-1384197067625", "service": "gp", "text": "This post makes a similar point with slightly different numbers, but (in contrast with your last sentence) claims that you can't really bet against bitcoins (unless you happen to already have a lot of them):\u00a0\nhttp://noahpinionblog.blogspot.com/2013/11/the-price-and-future-of-bitcoin.html", "timestamp": 1384197067}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635297137322", "anchor": "fb-635297137322", "service": "fb", "text": "Bitcoin is so so so stupid. We are doomed if it gets to dollar scale.", "timestamp": "1384197916"}, {"author": "Danner", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635297531532", "anchor": "fb-635297531532", "service": "fb", "text": "I foresee bitcoin being just one of multiple virtual currencies. nothing prevents someone else from coming up with a copy of the system, with a similar backing and growth system. you'd end up having virtual currency exchange systems, and apps that can transfer funds between them - bitcoin may occupy a 'gold standard' sort of situation, but it won't be the only setup, thereby increasing the total number of virtual coins in circulation, and devaluing individual bitcoins overall.", "timestamp": "1384198179"}, {"author": "Jeff&nbsp;Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635297611372", "anchor": "fb-635297611372", "service": "fb", "text": "@George: What is stupid about bitcoin?  If it works what's the problem?", "timestamp": "1384198236"}, {"author": "Jeff&nbsp;Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635297945702", "anchor": "fb-635297945702", "service": "fb", "text": "@Danner: There are major network effects with currencies.  It's just so much easier to use money that other people also use.  What fraction of currency usage inside the US is in dollars?  What fraction in the EU is euros?  There's very little reason to use something other than the biggest one.", "timestamp": "1384198463"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635298319952", "anchor": "fb-635298319952", "service": "fb", "text": "It is inherently deflationary. It is techno-libertarian gold-buggery. If it actually was a large fraction of the global economy, not having the ability to do monetary policy with it would be disastrous.", "timestamp": "1384198733"}, {"author": "Jeff&nbsp;Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635298334922", "anchor": "fb-635298334922", "service": "fb", "text": "@Danner: for example, litecoin is 2% the size of bitcoin and all the others are smaller.", "timestamp": "1384198742"}, {"author": "Danner", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635298644302", "anchor": "fb-635298644302", "service": "fb", "text": "@Jeff but virtual currencies are easier to convert, since no physical transaction takes place. How many currencies are involved with stock markets, and the interactions between them? When finding bitcoins becomes too expensive, some people will find that they can get better return for the added risk of converting their bitcoin miners to litecoin miners and such. When gold mining becomes too expensive, people mine for silver/copper/aluminium/oil.", "timestamp": "1384198899"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635298754082", "anchor": "fb-635298754082", "service": "fb", "text": "Is the US dollar a virtual currency? It is pretty easy to convert and you don't need to do any physical  transactions to convert it.", "timestamp": "1384198978"}, {"author": "Jeff&nbsp;Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635298833922", "anchor": "fb-635298833922", "service": "fb", "text": "@George: \"not having the ability to do monetary policy with it would be disastrous\"<br><br>Printing more money is only one of the tools of monetary policy, and not the main one governments use.  Buying and selling bonds is the big one, as is changing the interest rate charged to banks for short-term loans.", "timestamp": "1384199065"}, {"author": "Danner", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635298853882", "anchor": "fb-635298853882", "service": "fb", "text": "George: it's represented by a physical form, although the physical currency is dwarfed by the value that it represents (in the form of fractional loans)", "timestamp": "1384199071"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635299253082", "anchor": "fb-635299253082", "service": "fb", "text": "The federal reserve, when conducting open market operations to buy bonds uses newly printed money to buy them. From wikipedia: \"When the Federal Reserve makes a purchase, it credits the seller's reserve account (with the Federal Reserve). The money that it deposits into the seller's account is not transferred from any existing funds...\"", "timestamp": "1384199314"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635299617352", "anchor": "fb-635299617352", "service": "fb", "text": "Removing monetary policy tools is the last thing we need. But the bigger problem is that bitcoin is inherently deflationary and thus likely to have substantial volatility indefinitely.", "timestamp": "1384199563"}, {"author": "Jeff&nbsp;Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635299787012", "anchor": "fb-635299787012", "service": "fb", "text": "@Danner: \"When finding bitcoins becomes too expensive, some people will find that they can get better return for the added risk of converting their bitcoin miners to litecoin miners and such.\"<br><br>The expected total cost of mining a coin is approximately the current market price.  This is true for all the bitcoin-like currencies.  Miners entering the market and moving between various currencies keeps it that way.  But the market price is determined by people's expectations about the future value of that currency, and here there's a strong winner-take-all effect.", "timestamp": "1384199628"}, {"author": "Jeff&nbsp;Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635300021542", "anchor": "fb-635300021542", "service": "fb", "text": "@George: \"when conducting open market operations to buy bonds uses newly printed money to buy them\"<br><br>Ah, I see.  If the government sold bonds to get the money to buy bonds they wouldn't be changing the total value of bonds out there.  But they only need to do this to decrease the size of the money supply right?  If the problem is that bitcoin grows much too slowly couldn't they be constantly selling bonds and exert control by choosing how much to sell?", "timestamp": "1384199801"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635300196192", "anchor": "fb-635300196192", "service": "fb", "text": "Jeff, you have it wrong still. Buying bonds (with money created from thin air) is one important way the government increases money supply. This tool is actually a way to set interest rates and a tool that wouldn't work with bitcoin in any way I can see.", "timestamp": "1384199925"}, {"author": "Jeff&nbsp;Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635300450682", "anchor": "fb-635300450682", "service": "fb", "text": "@George: \"Buying bonds is one important way the government increases money supply.\"<br><br>So by selling bonds they decrease the money supply?  Government selling bonds is deflationary while buying (with created money) is inflationary?", "timestamp": "1384200094"}, {"author": "Al", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635300640302", "anchor": "fb-635300640302", "service": "fb", "text": "Not sure bitcoin actually has value:  When the Feds recently seized $28Billion \"worth\" of bitcoin during the raid on Silkroad, the total amount in \"circulation\" was back to the value before the $28Billion was taken out of circulation in only a few days...  <br><br>If it was a real commodity and was taken out of circulation, the loss should have shown up somewhere...", "timestamp": "1384200200"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635300670242", "anchor": "fb-635300670242", "service": "fb", "text": "Selling bonds is taking money from someone on the open market and giving them a contract that entitles them to get the money back (with interest). So yes, to contract the money supply the fed sells bonds and selling more bonds increases the supply of bonds so they mus pay a higher interest rate.", "timestamp": "1384200218"}, {"author": "David&nbsp;Chudzicki", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635300725132", "anchor": "fb-635300725132", "service": "fb", "text": "Seems right. If the Fed buys bonds (gives people cash in exchange for bonds), then there's more cash out there.", "timestamp": "1384200230"}, {"author": "David&nbsp;Chudzicki", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635300914752", "anchor": "fb-635300914752", "service": "fb", "text": "It's extremely clear bitcoins have value. (Al, if you happen to have any, I'd be happy to give you $300 each.)", "timestamp": "1384200340"}, {"author": "BDan", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635301054472", "anchor": "fb-635301054472", "service": "fb", "text": "Al: that seems similar to a real commodity. If, say, a large quantity of gold were taken out of circulation, wouldn't the price of the remaining gold rise in response?", "timestamp": "1384200403"}, {"author": "Jeff&nbsp;Kaufman", "source_link": "https://plus.google.com/103013777355236494008", "anchor": "gp-1384200439665", "service": "gp", "text": "@David&nbsp;Chudzicki\n\u00a0\"you can't really bet against bitcoins unless you happen to already have a lot of them\"\n<br>\n<br>\nIf you want to bet bitcoin is going down, you should be able to find someone who thinks it's going up, and that person instead of buying bitcoins could just make an agreement with you. \u00a0Something like \"I'll pay you the value of one bitcoin in a year, minus the value today, plus something to make it worth your while\".", "timestamp": 1384200439}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635301308962", "anchor": "fb-635301308962", "service": "fb", "text": "Bitcoin fever is driven by a bunch of libertarians with wrongheaded economic beliefs and supported by many tech people excited about cryptocurrencies with even less of an understanding of economics than I have.", "timestamp": "1384200524"}, {"author": "Al", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635301363852", "anchor": "fb-635301363852", "service": "fb", "text": "hmmm, but would the price necessarily make up teh entire difference to keep the  total at the same value?", "timestamp": "1384200538"}, {"author": "Jeff&nbsp;Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635301643292", "anchor": "fb-635301643292", "service": "fb", "text": "@Al: \"When the Feds recently seized $28Billion...\"<br><br>$28 million, not billion.  The value of all bitcoins out there at the current market price is only ~$4 billion.  The seized amount (144k BTC) was about 1% of the total number outstanding.", "timestamp": "1384200686"}, {"author": "Kevin", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635302082412", "anchor": "fb-635302082412", "service": "fb", "text": "Bitcoin is hilarious. Anyone interested in it is only interested in it as an investment asset and not as a currency. It's inherently deflationary and so long as there are suckers out there its value will go up. So there's no point in using it as a currency to buy things. Why use it to buy something now when I know tomorrow I can buy more things with it? That means no one will use it to buy things. That means businesses are not going to bother with using it, especially with the additional risks it comes with. So as a currency it has almost no value. It's basically a virtual gemstone. Its value depends entirely on the enthusiasm level of its tech geek userbase. That will wane eventually but in the meantime it may be worth doing a short term buy and sell on it to take advantage of the misguided excitement of the economically illiterate techies.", "timestamp": "1384200966"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635302202172", "anchor": "fb-635302202172", "service": "fb", "text": "http://www.slate.com/.../10/bitcoin_s_deflation_problem.html", "timestamp": "1384201042"}, {"author": "BDan", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635302222132", "anchor": "fb-635302222132", "service": "fb", "text": "Not necessarily; it depends on how elastic the demand is. If demand is inelastic and price-insensitive enough, it could actually make the total value *greater* than it was before. Bitcoin, being a currency rather than a physical commodity, seems unlikely to work this way, but it's not impossible.", "timestamp": "1384201048"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635302287002", "anchor": "fb-635302287002", "service": "fb", "text": "Being deflationary is more likely to produce price swings just like with gold since if people start using bitcoin enough the price will go up, encouraging hoarding which sends the price plummeting, etc.", "timestamp": "1384201088"}, {"author": "Jeff&nbsp;Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635302875822", "anchor": "fb-635302875822", "service": "fb", "text": "@George: The slate article has: \"if the price of a bitcoin is on a steady upward trajectory, then nobody's actually going to want to spend a Bitcoin on anything. And if everyone's hoarding their Bitcoins, then the network is actually useless. Then, since it turns out to be useless, you get a crash.\"<br><br>Why would bitcoin go on a steady upward trajectory?  Why would any deflating currency do that?  That's like saying there's a limited amount of land and an increasing demand so we should expect the price to rise continuously.  Instead people choose prices factoring in all their expectations about future value.", "timestamp": "1384201410"}, {"author": "Al", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635303694182", "anchor": "fb-635303694182", "service": "fb", "text": "thanks, that makes more sense and a 1% correction in commodity pricing is easily absorbed.", "timestamp": "1384201849"}, {"author": "David&nbsp;Chudzicki", "source_link": "https://plus.google.com/106120852580068301475", "anchor": "gp-1384202776062", "service": "gp", "text": "Sure, but that'd be a pretty illiquid market, with lots of transaction costs -- finding the counterparties, counterparty risk (more for the person going long bitcoins, requiring they be paid even more extra), etc. ", "timestamp": 1384202776}, {"author": "Ben", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635307701152", "anchor": "fb-635307701152", "service": "fb", "text": "Interesting post. Two minor objections: US dollars in circulation isn't the correct numerator to use (hard to imagine bitcoin replaces the dollar w/o replacing the world's currencies). Also, I'd like to be convinced that the ultimate potential of bitcoin is the primary factor in determining its current price (outcomes aren't binary - it has a clear current use on the black markets, regardless of becoming the world's reserve currency). According to wikipedia, the illegal drug trade alone is estimated at 1% of global GDP.", "timestamp": "1384204378"}, {"author": "Daniel", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635307756042", "anchor": "fb-635307756042", "service": "fb", "text": "I think a lot of people get confused because our culture conflates \"currency\" and \"value store\". Basically you should not save by buying currency and putting it in a bank; instead, you should find real tangible investments and buy those. In other words, your currency position should be small compared to your net worth. If people thought about investment this way, there'd be no problem with using BTC as a currency - you'd only ever be \"in\" BTC briefly, when you need to make changes in your positions. The historical fact that inflation seems to be good for the economy is probably caused by the fact that inflation encourages people to do real investment instead of just stashing their cash beneath the mattress.", "timestamp": "1384204414"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635309647252", "anchor": "fb-635309647252", "service": "fb", "text": "Well, if bitcoin is just an exotic transaction processing method where you use dollars as the unit of account and convert to bitcoin just for the transfer and then convert back on the other end, that is even stupider. I agree that people hoarding bitcoin or gold or whatever aren't investing, they are speculating. The gold standard played an important role in the great depression and I would hate to see a modern version of it adopted by too many people.", "timestamp": "1384205506"}, {"author": "David&nbsp;Chudzicki", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635310001542", "anchor": "fb-635310001542", "service": "fb", "text": "Is the difference between investing and speculating just that the latter is more volatile? (So a number of independent speculations could be an \"investment\", since the average is less volatile than each.) Or do the terms imply a disagreement about expected value? Or something else?", "timestamp": "1384205653"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635310121302", "anchor": "fb-635310121302", "service": "fb", "text": "The idea with investing is you are buying something that has a reason to increase in value long term. So FOREX I would call speculating, but buying bonds or stocks would be investing, even though you can also speculate on those instruments.", "timestamp": "1384205737"}, {"author": "David&nbsp;Chudzicki", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635310490562", "anchor": "fb-635310490562", "service": "fb", "text": "Even something that's not expected to increase in value can be part of a reasonable portfolio, if its correlations with everything else are appropriate. But I imagine you don't think that's a good reason to buy-and-hold bitcoins either.", "timestamp": "1384205901"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635310580382", "anchor": "fb-635310580382", "service": "fb", "text": "Right, you could use something as a hedge, but I don't think bitcoin is very good for that either. That said, I think bitcoin is stupid regardless of what happens to its price in the near future.", "timestamp": "1384205952"}, {"author": "Arthur", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635340914592", "anchor": "fb-635340914592", "service": "fb", "text": "The chances that gold would become an important medium of exchange again in the event of the total collapse of the electronic financial infrastructure are better than Bitcoin's chances of becoming a real currency (a smaller number of really unlikely things have to happen), and I still think holding gold is pretty dumb.", "timestamp": "1384221498"}, {"author": "David&nbsp;Chudzicki", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635341563292", "anchor": "fb-635341563292", "service": "fb", "text": "\"What should you hold to hedge against a total collapse?\" is an interesting question... bullets, I guess?", "timestamp": "1384221852"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=635353549272", "anchor": "fb-635353549272", "service": "fb", "text": "Canned goods are going to be better than bullets.", "timestamp": "1384228673"}, {"author": "James", "source_link": "https://plus.google.com/106345404829653994850", "anchor": "gp-1384235066438", "service": "gp", "text": "The amount of paper and coin currency is not the right point of comparison. Rather, you should compare against the St. Louis Monetary Base ($3.6T) or to M2 ($11T) (\nhttp://research.stlouisfed.org/fred2/series/M2/\n). You also have to adjust for the fact that Bitcoin's success or failure will be resolved with many coins still left to mine, and that some coins are and will be irrevocably lost. These adjustments point in the same direction: lower market estimate of Bitcoin's chances. On the other hand, you also have to adjust in the other direction for counterparty risk and theft risk.", "timestamp": 1384235066}, {"author": "opted out", "source_link": "#", "anchor": "unknown", "service": "unknown", "text": "this user has requested that their comments not be shown here", "timestamp": "1384266816"}, {"author": "Al", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=637442747502", "anchor": "fb-637442747502", "service": "fb", "text": "http://dealbook.nytimes.com/.../regulators-see-value.../...", "timestamp": "1384870679"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/635295161282?comment_id=637453116722", "anchor": "fb-637453116722", "service": "fb", "text": "I would like to see the US dollar go completely virtual and then banks can pay negative interest rates!", "timestamp": "1384877522"}]}