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Author Topic: BoingBoing Update on Bitcoin Alternatives  (Read 5836 times)
mouser
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« on: July 25, 2011, 11:27:46 AM »

I have to say this Bitcoin thing makes no sense to me -- but then neither does any of economic theory.

Today boingboing has a nice couple of links to an alternative proposal that uses some of the same ideas as bitcoin, and a link to a crazy true story of how a virtual currency in Brazil solved a huge country-wide financial crisis in Brazil by tricking people into thinking their currency had magically become stable.

Am I the only person who gets the feeling that the entire world economy is one big confidence game sham?


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Renegade
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« Reply #1 on: July 25, 2011, 11:31:18 AM »

Am I the only person who gets the feeling that the entire world economy is one big confidence game sham?

Nope.
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« Reply #2 on: July 25, 2011, 12:59:04 PM »

Am I the only person who gets the feeling that the entire world economy is one big confidence game sham?

No, it's not only you.
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nudone
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« Reply #3 on: July 25, 2011, 01:05:26 PM »

I think that's become common knowledge over the past couple of years.
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Deozaan
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« Reply #4 on: July 25, 2011, 01:30:04 PM »

That summary of the Brazilian currency story doesn't seem accurate to me. They didn't trick the people into thinking their currency was suddenly magically stable. They phased out an unstable currency and replaced it with a new, stable one.

Sounds to me like they allowed the value of their URV to inflate at the same rate as inflation. Which sounds a lot like how the "gold standard" works to me.
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mouser
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« Reply #5 on: July 25, 2011, 01:40:10 PM »

Interesting piece talking about the brazil currency event and telling a few other cool stories:
http://planetpov.com/2011...r-question-what-is-money/

Quote
There was an island in the South Pacific called Yap. They had an impractical method of currency—gigantic stone disks, some taller than a person. They only used them for big purchases, like for a dowry or to ransom a warrior captured in battle. I‘m sure you can see where this is going: Pretty soon, the actual giant stone circles did not need to be physically transferred between parties; it became understood who the owner was. That was an innovation! The stone that was quarried for these giant circles was on another island, and one time, during a storm, the raft used to carry the stone was overturned. The crew survived but the stone was at the bottom of the Pacific. When they arrived on Yap, it turned out to be no problem. The islanders said, Look, we believe you. There is a giant stone at the bottom of the ocean and it still belongs to So-and-so. That is not so different from what we do today.

Again the key point is that the whole monetary system is based on how CONFIDENT people are in the "system".. It's all a mental game:

Quote
The value of our money is based on that trust—not gold, or tulips. The magic of Central Banking is it works SOLELY on trust. It is an agreed-upon fiction. Once that trust is gone, our money becomes just another stone on the bottom of the ocean.  I think that’s both very cool and very strange.

As I understand the point of the brazil story, and i could very well be wrong here since this is all so alien to me, is that the brazillian currency got into a cycle of collapsing in value (inflation) because people no longer trusted it to be stable.. The fix was therefore a completely made up fictional replacement currency that made it APPEAR that prices were stable.  By tricking themselves into believing the currency had stabilized, they achieved the goal of stabilizing the currency.  Money is a mental feedback loop -- if the masses think it's stable and trustworthy, it is -- if they lose faith in it, it enters a self-fulfilling feedback loop where it gets worse and worse until it's worthless.

And again this seems like the story of our entire financial system and why the financial overlords of our countries are always talking about "restoring confidence" to the market.  We are supposed to believe the stock prices are based on the inherent "value" of companies and the goods/services they produce.. but more and more it seems like it has nothing to do with some ACTUAL value, but rather all a series of fictional feedback loops based on "perceived" value.

It all seems insane to me.  But I'm probably misunderstanding some essential economic concepts.
« Last Edit: July 25, 2011, 02:37:57 PM by mouser » Logged
nudone
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« Reply #6 on: July 25, 2011, 02:24:42 PM »

I think you understand perfectly. I think we had a video posted on the site somewhere that explained things very well. If not, I'll try and find it. Anyway, this video was an epiphany to me; i think it predicted the recent banking catastrophe but more alarmingly it described how the whole financial system was built on a complete lie from the very beginning. In short, the system was constructed by creating money out of thin air, money that never existed and would never exist. And they justified it by giving it the name Inflation. We've been conned ever since.
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« Reply #7 on: July 25, 2011, 06:36:11 PM »

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Am I the only person who gets the feeling that the entire world economy is one big confidence game sham?

You mean it's nothuh
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« Reply #8 on: July 25, 2011, 09:24:55 PM »

I just saw this today and it's related to the thread:

Brazilian currency at highest level since 1999

Though I'm not sure if that's a good thing or a bad thing. . .
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« Reply #9 on: July 25, 2011, 09:44:48 PM »

Though I'm not sure if that's a good thing or a bad thing. . .

currency devaluation is the latest trend in combating inflation (internal) and promoting trade (externally). more details here.

• Currency rise leaves Brazil in bind
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« Reply #10 on: July 25, 2011, 10:13:21 PM »

It all seems insane to me.  But I'm probably misunderstanding some essential economic concepts.

Yes. The markets will take care of themselves. If we try to interfere, then we're evil socialists, and should be shot.

Nope. I don't think you're missing anything important.

To further add to the insanity...

http://en.wikipedia.org/w...ractional-reserve_banking

Particularly, check the table:

http://en.wikipedia.org/w...of_deposit_multiplication

I utterly fail to understand how anyone that understands that system can be oblivious to its inherent insanity. It's printing money from nothing. With nothing to back it up. It's just NOT stable. Recalling enough debt would cascade disastrously. It's very similar to a pyramid scheme.

"Belief" isn't a foundation. Heck, there are still wackos that believe the earth is flat! That doesn't make it true. It doesn't even make the belief useful.

If software were written like the banking system, nothing would even run.
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« Reply #11 on: July 30, 2011, 08:35:49 AM »

Before the world became a frighteningly complex place, money was simple. It's a commodity, like anything else. The conceit, the deal, if you like, is that we all accept that money can be exchanged for any other commodity.

So if the world only contained three bananas, three fish and three coins, and we all accepted these were of equal value, then you have a starting point. But if you make three more coins, then you need two coins to buy a fish. Because you can create infinite amounts of money, but other resources are limited. Then derivatives came along...

For a slightly more sensible, more complex, but excellent "Economics 101", which predicted and describes what's happened to the world economy in the last few years (and is very depressing if you buy the author's ideas in full) read this:

http://www.hedgefundlette...ate-for-understanding.pdf

And there's an interesting piece on the guy who wrote that article in the New Yorker this month:

http://goo.gl/h14hA
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mouser
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« Reply #12 on: September 08, 2011, 07:44:55 PM »

Paul Krugman (highly regarded economist and writer at the NY Times) has a short piece today on bitcoin:

Quote
What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin... So to the extent that the experiment tells us anything about monetary regimes, it reinforces the case against anything like a new gold standard – because it shows just how vulnerable such a standard would be to money-hoarding, deflation, and depression.

http://krugman.blogs.nyti...9/07/golden-cyberfetters/
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JavaJones
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« Reply #13 on: September 09, 2011, 05:05:53 PM »

Quote
What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin...

Ah, so it mirrors the real economy in that way then? cheesy

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« Reply #14 on: September 10, 2011, 10:20:08 AM »

Now here is an example of a big confidence game sham... errr..... world economy in action... Zimbabwe in 2008 - 2009!

http://www.cato.org/zimbabwe

A quote from that article at the CATO Institute web site:
Quote
New Hyperinflation Index (HHIZ) Puts Zimbabwe Inflation at 89.7 Sextillion Percent

And even a handy chart:



And here is a pic of the largest denomination currency note in the world! (Well, actually a few of them; I use them for a magic effect where I instantly change these to $2 bills!   smiley  ):



Now that is a sham!

Jim
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