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Does Bitcoin Disprove MMT?

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Do you think that the rise and success of Bitcoin disproves MMT and the State Theory of Money? Bitcoin appears to prove that money can arise entirely without a government and be viable. The network effect of Bitcoin is enough alone to make it workable. But does this disprove MMT in your opinion? Can we really have money without governments?

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Posted by (Questions: 8, Responses: 29)
Posted on 12/21/2017 1:46 PM
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Bitcoin seems like it has some structural issues to work through before it could be used by a sizeable portion of the population as a currency. Sure a few die-hards can live off it now, but that requires some serious sacrifices to avoid dollars all together. Also the vast fluctuations in value make it difficult for people to use in a dependable way. Could some type of blockchain enabled currency eventually solve those problems? Sure, but we aren’t there yet.

“A boy asked his Bitcoin-investing dad for $10 worth of Bitcoin currency
Dad: $17? What do you need $132 for?”

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Posted by (Questions: 1, Responses: 9)
Answered on 12/21/2017 7:23 PM
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I think Bitcoin’s network effect adds credence to my theory that MMT is based on flawed understandings. For instance, MMT says that “taxes drive money”. They say govt’s don’t really need to issue money so taxes are just a way to create demand for the currency they create. But what we’re seeing with Bitcoin is a powerful network effect. People use USD for much the same reason. It’s got nothing to do with taxes and everything to do with a powerful network effect. Why did you open your first bank account? My guess is it was simply because having a bank account gave you access to the most widely used payment network.

None of this touches on the fact that govt’s definitely “fund” their spending. Every money issuer needs willing holders of their liabilities. When you can’t find willing holders of your liabilities you’ve run out of credit. We see it with banks and we see it with governments when they are fighting hyperinflations and no one wants to hold the currency they issue.

So, I don’t think I’d say that Bitcoin’s success disproves MMT, but I would say it proves that the network effect of money is extremely powerful and adds to the theory that MMT overstates their “taxes drive money” view.

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Cullen Roche Posted by (Questions: 10, Responses: 1855)
Answered on 12/22/2017 2:53 PM
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Yeah, money as a medium-of-exchange is solely a network effect thing we are learning due to cryptocurrencies. Historically, government elites just adopted whatever the free market had already decided to use as money so they had the ability to fund themselves for their wars and other self-interested wealth-generating schemes by debasing it. What are they gonna do in a world where decreed state money is no longer the preferred form by the masses? Not really my problem.

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Posted by (Questions: 36, Responses: 635)
Answered on 12/27/2017 2:05 AM
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I wonder what the endgame here is? After all, we now know that the private sector can create a totally viable form of money that will be accepted as a medium of exchange. There’s no government necessary in any of this because it’s decentralized. But what can governments do to halt their growth? I would think that more and more bitcoin forks will create inflation risk at some point. For instance, what if Amazon starts accepting Bitcoin and Bitcoin Cash and Litecoin? Then you have all this new money, the supply of which is growing daily, competing for the same amount of goods and services. I would imagine this becomes inflationary at some point?

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Posted by (Questions: 8, Responses: 29)
Answered on 12/27/2017 8:04 PM
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I recently wrote a post that discusses bitcoin & MMT that readers might find interesting Of Bitcoins and Balance Sheets: The Real Lesson From Bitcoin

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Answered on 12/29/2017 6:40 AM
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Hi Clint,

A few thoughts:

1) Your post starts off on the wrong foot. The types of balance sheet expansion include govt, foreign, and domestic. Domestic should further be broken down into households and businesses. In fact, most of the financial assets in the world are issued by corporations (this is not just banks).

2) The value of any currency is derived not only from the credibility it has within a payment system, but also the utility of the payment system. Think of it like a theater ticket. We expect the theater to enforce the credibility of the tickets, but the tickets are only valuable if the show is valuable. The theater cannot force the tickets to be valuable just by charging you an admission price.

3) Bitcoin is obviously worth more than $0. It has a verifiable market price. I believe the MMT people say its value is $0 because they have this narrow minded view of “money” wherein money cannot be a valid instrument unless the govt is involved in it. I disagree with this view. Bitcoin is currently valued at $14,500. I watched a recent interview with Warren Mosler discussing Bitcoin and he has a very limited understanding of what it is and how it works. The fact is, Bitcoin shows that you don’t really need a govt involved in any of this to have a valid payment system and viable currency.

Now, don’t get me wrong. I think BTC is a very bad form of money. It has significant limitations and I suspect that it’s massively overvalued. But that does not mean it’s worth $0. In fact, in corrupt economies like Venezuela it is potentially undervalued. The govt is the entity that drives the demand for black market currencies because they mismanage the currency. So I think MMT is overstating the case here and dramatically misunderstanding the scope of the issue.

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Cullen Roche Posted by (Questions: 10, Responses: 1855)
Answered on 12/29/2017 2:29 PM
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VG,

I suspect that BTC will eventually be banned as a merchant payment system. The govt will just say it can’t be used at Amazon, etc. They kind of have to because anyone can create these new coins. And once people start using these things as real currencies then the money supply can potentially get way out of hand. So yes, I think you basically have this right.

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Cullen Roche Posted by (Questions: 10, Responses: 1855)
Answered on 12/29/2017 2:31 PM
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Cullen – I am just talking about the horizontal (banking sector) money supply in that bit – nothing controversial about it. It has value because the legal system enforces contracts (loans) made in it and its numeraire is recognized by the gov as valid for paying taxes, full stop. It results from the expansion of (the sum of) bank balance sheets; as you of course know, loans create deposits; the public trades those deposits around as (horizontal) money. Cryptocurrencies are not created in this way, and their value, once the beanie baby fad is over, will fall to zero as sure as the sun will rise tomorrow. People think they are buying shares in the next facebook, but the endless replicability of crypto means it does not even have any patentable commercial value

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Answered on 12/29/2017 9:38 PM
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Clint,

Bank money has value because it’s the dominant medium of exchange in the payment system. Paying taxes has nothing to do with whether it has value or not. Granted, the credibility attributed to these contracts via courts is very valuable, but that’s tangential to the fact that deposits are valuable because they are accepted everywhere as a medium of exchange.

This dovetails with the way MMT people misunderstand Bitcoin. They dogmatically say it has no value because it’s not recognized as a currency issued by the state or protected by states. But you miss the fact that the reason there is high demand for BTC is largely because many societies don’t trust their govt issued money. You have it exactly backwards with BTC. The fact is, much of the demand for BTC is coming from authoritarian regions of the world. Imagine if you lived in China, North Korea or Venezuela? Would you not want some portion of your assets in a decentralized currency that you could take with you anywhere simply by remembering a password?

I am not convinced that MMT people have a good understanding of BTC and their closed-minded state centric view results in many of these misunderstandings and the dogmatic sort of rejection that has, thus far, been very very wrong.

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Cullen Roche Posted by (Questions: 10, Responses: 1855)
Answered on 12/29/2017 10:31 PM
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Crypto enthusiasts respond to the criticism that crypto is endlessly replicable by saying that fiat is as well. What they do not understand is that fiat is profoundly constrained by precisely that which gives it value- credit analysis and analysis of the potential for growing the real economy. Fiat money creation is limited by the ability and the desire of the public to have loans that create deposits (money) made for them. Crypto tokens are created just, well, because.
Balance sheet accounting, credit analysis, and the gov and contract law that surrounds it is the result of thousands of years of civilization. Fiat money expands in a way in which every token is inherently valued in the system and remains so. Crypto currencies are endlessly replicable and have no in-built value. When the fad passes this will become evident and their true zero value evident.
Accounting, history, law and government mean something; the techie man boys and fad obsessed public are going to suffer from trying to find shortcuts around what has taken thousands of years to develop.

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Posted by (Questions: 0, Responses: 20)
Answered on 12/29/2017 10:45 PM
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I think we certainly agree that BTC is a very bad form of money. But so is gold. And its value is inflated in part because it’s viewed as money by a lot of people. The same basic point is true with BTC. It’s a totally decentralized form of money that no govt can say has no value. It has value if people think it has value. And it will retain at least some value because there will always be governments that drive the demand for something other than the currency they sometimes ruin.

So we might agree that BTC is overvalued, but I think some form of crypto currency (maybe not BTC, but another coin) will retain some value precisely because govts don’t always do a very good job of trying to set the value of their own currencies.

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Cullen Roche Posted by (Questions: 10, Responses: 1855)
Answered on 12/29/2017 10:51 PM
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Agreed. Our collective effort would be best spent trying to make sure our bank regs support the value of our currency though

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Answered on 12/29/2017 11:02 PM
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> Crypto currencies are endlessly replicable and have no in-built value. When the fad passes this will become
> evident and their true zero value evident.

You obviously have no idea what you’re talking about, conflating crypto-currencies and crypto-tokens as if they were both the same thing. Crypto-currencies are intentionally limited in supply; the scarcity is basic Economics 101. Fixed supply, increased demand = rising prices aka inflation. The reason crypto-currencies have increasing demand is they’re intrinsically a better form of value storage than gold or fiat financial assets. And, like real estate, they’re just not making any more of the “beach front property”. It’s just that simple.

In contrast, crypto tokens are an access utility function and have no upper issuance limit since more can be generated by the issuer as needed. Their long-term value is < $1 and won't amount to much more than the marginal deflationary costs of the software, hardware and electricity needed to maintain them. That goes for "medium of exchange" crypto-currencies as well. There's an inherent oxymoron between having a fixed supply and wanting to be digital cash via the network effect. Money as a dominant medium of exchange never has much value, which is why no one "saves" in it.

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Posted by (Questions: 36, Responses: 635)
Answered on 01/04/2018 4:56 PM
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As far as “overvaluation” goes, you can’t apply the discounted cash flow model mentality for a real world business to currency to be able to determine whether or not there is “overvaluation”. Apples vs oranges. Like gold or other real assets, the value will be what the free market decides it will be, which is a fancy way of saying that its value will be determined relative to other assets and after accounting for marginal costs (which is $3289-$6425 per bitcoin in terms of just electricity cost in the USA).

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Posted by (Questions: 36, Responses: 635)
Answered on 01/04/2018 5:15 PM
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“Crypto-currencies are intentionally limited in supply; the scarcity is basic Economics 101. Fixed supply, increased demand = rising prices aka inflation. The reason crypto-currencies have increasing demand is they’re intrinsically a better form of value storage than gold or fiat financial assets. And, like real estate, they’re just not making any more of the “beach front property”. “

Crypto currencies are endlessly replicable – I would say they are “a dime a dozen” but they are not even worth that much. There is zero limit on their “supply” and their intrinsic value of zero will be obvious once the beanie baby phase is over

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Posted by (Questions: 0, Responses: 20)
Answered on 01/04/2018 10:06 PM
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“you can’t apply the discounted cash flow model mentality for a real world business to currency to be able to determine whether or not there is “overvaluation”. “

My analysis is not based on a “discounted cash flow model”. As to the worth of crypto as currency, its value is zero because there is no inbuilt demand – crypto is not part of an expanded balance sheet and therefore no one has an inherent need for it. As far as an investment opportunity – blockchain is vastly overrated – if our system ran on blockchain now tech companies would be scrambling like mad to invent the centralized, safe, fast, insured, transparent payments system we have now; ditto for real estate, legal, energy etc contracts. Even if blockchain becomes an important aspect of some areas of fintech, if there is a need for “tokens” they will not be the ones floating around now. Hence I conclude the ones floating around now are useless from any investment perspective as well.
It’s just that simple :;

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Posted by (Questions: 0, Responses: 20)
Answered on 01/04/2018 10:15 PM
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I’m with Clint on the supply point. Cryptos have an endless supply. There is nothing limiting their creation which is why they have the potential to be hugely inflationary.

I’m with MG on value. Cryptos have some value precisely because state issued currency is often mismanaged. Anyone living in a turbulent emerging economy like Venezuela or China or North Korea would be insane to hold their entire net worth in the domestic currency. Holding some in something like Bitcoin is not necessarily irrational and this is where we’re seeing much of the demand come from.

On the value of blockchain I’m with Clint. Yes, I think this whole movement has become massively overvalued and the reality will never match the hype.

Still, I think MMT types overstate their case regarding Bitcoin. Likewise, the Libertarians pumping Bitcoin are also overstating their case….

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Cullen Roche Posted by (Questions: 10, Responses: 1855)
Answered on 01/04/2018 10:31 PM
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The cost of producing something does not contribute to its value. The value/price is comes form the buyer’s evaluation. The cost of production only comes into play when a highly competitive market situation puts downward pressure towards the cost of production into the production chain.

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Posted by (Questions: 22, Responses: 345)
Answered on 01/05/2018 8:45 AM
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A competitive market plus buyers evaluation at par or higher than the cost of production.

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Answered on 01/05/2018 8:58 AM
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Cullen highlighted this piece on Twitter yesterday. It’s a really good read:
http://www.livemint.com/Opinion/sf3sOyMpNPQwZu2ExNnswO/Solving-the-wrong-problem-Bitcoin-misunderstands-money.html

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Answered on 01/05/2018 12:49 PM
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Cullen, I’ll admit you have come up with the only decent explanation for why crypto might have and retain any real value. Although I still think VPN type methods for people in those countries to get their savings into a stable real currency would be better for them. Anyway, their plight is part of a much larger problem and I doubt btc type tokens are the best long run solution.

Interestingly, the little value crypto inherently has still fits the taxes drive currency reality.

Crypto gained some value as a means to evade taxes; as I put it, taxes drive currency and tax evasion drives crypto. In the same vein, and as you well know (you wrote one of the best papers on hyperinflation there is)the reason currencies in places like Venezuela, North Korea etc don’t hold their value is that they are inept and/or corrupt and thus they literally “lose all currency” with their population as they lose the ability to effectively tax and/or (usually both) destroy their own ability to produce anything of value.

In other words, not only does tax evasion drive crypto- inability to effectively tax in banana republics drives crypto as well.

But it all comes down still to one thing:
Taxes drive currency

Ps imagine one Venezuelan manages to get their savings into a crypto, and another into Sterling or USD or whatever. What actually maintains the crypto year after year except for froth fad and sentiment? But the UK or US is sure as shooting going to be forcing millions to pay up sterling or dollars, this year, next year, in five years , and in 20 years. And banks are going to have UK or US law on their side demanding repayments of billions of dollars this month, next month, in 5 years and in 20 years. Myself..I’m betting the assuredness of all that tax and debt repayment backed by the UK or US government is going to maintain the value of private savings far better than any other system. People are always going to literally be begging for my pounds or dollars ; will they for today’s crypto tokens in 5 years ? Why would they?

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Posted by (Questions: 0, Responses: 20)
Answered on 01/05/2018 9:36 PM
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Sorry that posted somehow repeatedly from my mobile, I guess you can easily delete the repeats, sorry though. Also, one sentence was unclear, it should read :
” In other words, not only does tax evasion drive crypto; the inability to effectively tax in banana republics drives crypto as well.

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Posted by (Questions: 0, Responses: 20)
Answered on 01/05/2018 9:41 PM
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Oh, that anyone can come up with a cryptocurrency or token, for sure, but thats like anything in life aka Pareto Principal. 80% will be worthless, 20% will have all the value. But that doesn’t mean any individual cryptocurrency per se is “endlessly replicatable”. There are real world limits and if its not resources to mine into existence, then its behavioral economics. Yet, that doesn’t mean making utterly stupid generalized statements like “intrinsic value is zero” is worth anyone’s time to engage with. Look around you… are Amazon, Apple, Google, Facebook, Netflix, et al. worthless because 80% of the stock issuance during the dot.com bubble are now? (Yahoo was also an exception, not the rule.)

Blockchain right now is like a 300 baud dialup modem in the late 80’s. The full potential is in the future not the present. That’s crypto-currencies. However, adding an extra layer of complexity with the use of crypto-tokens to be able to buy/access products and services is a whole different ball game. My intution is the mainstream is far from tech savvy enough to be ready for a world like that where managing participation in such an token-based economy is not handled for you by AI bots. But, that too is the future. For example, IOT devices need to be able to account for and manage resource utilization and tokens are ideal for that.

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Posted by (Questions: 36, Responses: 635)
Answered on 01/06/2018 10:37 AM
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BTW, many cryptocurrencies work on the inflationary principle because there needs to be enough supply to meet the demand of the network effect. There’s a yearly fixed issuance to be mined or generated every year and at the lower levels (usually 5%) its considered a risk free rate. There is no hard cap at all. Best example of that is Ether which is the gas needed for the Ethereum global computer to operate.

Superfluous cryptocurrencies (aka shitcoins) may be “wildcat banking”, but the market will sort it all out as always. Total network value is the equivalent of market-cap weighting.

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Posted by (Questions: 36, Responses: 635)
Answered on 01/06/2018 10:47 AM
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From Roberts link

“There is no such thing as “fiat money”; we should put the term out of circulation.
What can be created in more or less disciplined ways are promises to pay real value.”

Also see the papers by Meir Kohns on Bills of Exchange and Deposit banking , where he identifies how Bills of exchange contributes to the establishment of bank deposit money , – no mention of taxes there.

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Posted by (Questions: 22, Responses: 345)
Answered on 01/06/2018 10:49 AM
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P.S. No one has come up with what we all really want… an elastic cryptocurrency. There have been several attempts but all have failed (even Ripple tried in the very beginning). In my view, it may not be possible to have elasticity without basing it on credit which is rather ideologically anathema to the cryptosphere right now.

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Posted by (Questions: 36, Responses: 635)
Answered on 01/06/2018 10:53 AM
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> Anyway, their plight is part of a much larger problem and I doubt btc type tokens are the best long run
> solution.

I really don’t get the idea that you have any clue what blockchain is all about, what problems it solves and what it will do to change the world for the better. You have to understand the ideology first to understand why it even came about. If you ignore that, then none of what is going on will make any sense whatsoever and it will all just be “intrinsically worthless” because you can’t grok. Are you an MMTer? Because it sure sounds to me like you’re trying over and over to fit a square peg into a round hole. Some advice… ditch ideologies. Understand them, empathize with them even, but don’t make them your reality and worldview. They’re all flawed.

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Posted by (Questions: 36, Responses: 635)
Answered on 01/06/2018 10:58 AM
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And for another head slapper, the fair value of Bitcoin is currently $5328.97:

https://s19.postimg.org/kfzp98xpf/screenshot_2018_01_06_at_07_26_12.png

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Posted by (Questions: 36, Responses: 635)
Answered on 01/06/2018 11:28 AM
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MachineGhost managed to get one right anyway….

“but the market will sort it all out as always”

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Posted by (Questions: 0, Responses: 20)
Answered on 01/06/2018 11:46 AM
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The inherent value of something is not its cost of production.

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Posted by (Questions: 22, Responses: 345)
Answered on 01/06/2018 11:47 AM
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“You have to understand the ideology first”
“Some advice… ditch ideologies”

Coherent, yeah. But yes, ditch ideologies…blockchain is clever, and can probably find some niches. But not the billions of $ the hype says. Wankel engine

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Answered on 01/06/2018 11:50 AM
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here’s a genuine question. If the market decides that the price of BTC is below the cost of mining (which might or might not be $5,300, depending on whether you include the sunk costs of purchasing mining rigs) then clearly any rational miner is not going to engage in mining if the price is below the cost of production. How, then, will any sale below this price be validated, if nobody is doing any validation?

I appreciate that the price of BTC was below this level not so long ago, but I guess the cost of production was substantially lower then. I don’t regard it as at all unlikely that the price of BTC could drop to the current cost of production very quickly, so my question is – what happens then?

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Posted by (Questions: 8, Responses: 99)
Answered on 01/06/2018 1:05 PM
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Clint, you said:

“tax evasion drives crypto.” This is totally untrue. Bitcoin is getting taxed in the USA and it’s demand boomed last year like never before. People are definitely not buying it to avoid taxes. That might be a reason some people buy it, but the majority of owners will have to pay taxes and know this before buying it. The IRS has made this very clear and has already ordered the major exchanges to turn over trading records.

Also:

“the reason currencies in places like Venezuela, North Korea etc don’t hold their value is that they are inept and/or corrupt and thus they literally “lose all currency” with their population as they lose the ability to effectively tax and/or (usually both) destroy their own ability to produce anything of value.”

Hyperinflations can occur for many reasons and yes, Conservatives on the whole misunderstand the difference between a hyperinflation and an insolvency. But hyperinflations don’t occur because the govt can’t tax. Mugabe didn’t run out of mean men with guns. He ran out of productive output in that currency. When people stop using your currency to produce domestic goods and services it can cause hyperinflation and the reduction in tax receipts is the result, not the cause of this.

I think you’re making some of the same mistakes that Conservatives make by using such a govt centric model of the world. The MMT people are very imbalanced in the same way. Conservatives start by unfairly attacking everything govt does. And MMT starts by unfairly defending everything govt does. These models that focus on govt first and the private sector second are largely misrepresentations of the world we live in. Our govt, BY DEFINITION, facilitates our private sector. Not the other way around. Any economy theory that starts with the govt is misrepresenting how our economy actually works.

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Cullen Roche Posted by (Questions: 10, Responses: 1855)
Answered on 01/06/2018 2:10 PM
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“P.S. No one has come up with what we all really want… an elastic cryptocurrency. There have been several attempts but all have failed (even Ripple tried in the very beginning). In my view, it may not be possible to have elasticity without basing it on credit which is rather ideologically anathema to the cryptosphere right now.”

BINGO. Bitcoin can be a monetary unit built on top of credit, but because it cannot be created in an elastic manner (because that requires counterparty risk) you cannot have crypto become the dominant form of money in the economy.

Crypto evangelists fundamentally misunderstand that most money is credit and that credit is the center of the monetary world.

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Cullen Roche Posted by (Questions: 10, Responses: 1855)
Answered on 01/06/2018 2:12 PM
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Cullen – You wrote “Mugabe didn’t run out of mean men with guns. He ran out of productive output in that currency.”

I had written “the reason currencies in places like Venezuela, North Korea etc don’t hold their value is that they are inept and/or corrupt” … “they…destroy their own ability to produce anything of value.”
So we agree there.

“But hyperinflations don’t occur because the govt can’t tax. ..”When people stop using your currency to produce domestic goods and services it can cause hyperinflation”

People stop using the currency because the government becomes de-legitimized and isn’t effectively taxing in that currency.

“and the reduction in tax receipts is the result, not the cause of this” the reduction in receipts is the result, agreed. The reduction itself is caused by the overall illegitimacy and ineffectiveness of the government, as you wrote in your paper I believe. Sometimes illegitimacy is more prevalent, sometimes ineffectiveness is more prevalent, the exact mix being due to war, regime change, outside forces, internal corruption, factions, etc.

Overall, whether through destruction of productive capacity or due to illegitimacy or some mix (more common) – the cause of “people stop using your currency to produce domestic goods and services it can cause hyperinflation” is because the government no longer is effectively taxing in that currency (and as I point out to Mosler, the horizontal sector becomes corrupted too and loan contracts are no longer effectively enforced by the system either).

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Posted by (Questions: 0, Responses: 20)
Answered on 01/06/2018 6:57 PM
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“BINGO. Bitcoin can be a monetary unit built on top of credit, but because it cannot be created in an elastic manner (because that requires counterparty risk) you cannot have crypto become the dominant form of money in the economy. “

Yes, I started to highlight that bit as well – basically same point – crypto is not part of a balance sheet and so it is inherently worthless; crypto people learn their econ from Austrians and/or the mainstream, and thus they have money fundamentally wrong; this is where they err. They always say “you don’t understand blockchain!”; but the fact is, they don’t understand accounting

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Posted by (Questions: 0, Responses: 20)
Answered on 01/06/2018 7:01 PM
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“People stop using the currency because the government becomes de-legitimized and isn’t effectively taxing in that currency.”

Yes, but what many MMT people overlook is that it’s often the govt itself that de-legitimizes the currency. That’s unusual, but it does happen. And it’s part of the reason why there is so much demand for Bitcoin. People are extremely concerned that governments will spend inefficiently and de-legitimize their currencies. It might not be a real risk in diverse developed economies like the USA, but it’s a very serious risk in most undeveloped emerging economies….

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Cullen Roche Posted by (Questions: 10, Responses: 1855)
Answered on 01/06/2018 8:04 PM
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The MMT people have a very narrow understanding of these things. They are so focused on state money and state power that they can’t possibly understand the idea of a decentralized currency.

Here’s one MMT economist named Eric Tymoigne in 2013 saying that Bitcoin is worth zero. That was over 2,500% ago. Could they have been more wrong about this?

http://neweconomicperspectives.org/2013/12/fair-price-bitcoin-zero.html

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Posted by (Questions: 10, Responses: 11)
Answered on 01/07/2018 12:24 AM
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@Robert That’s where you separate the True Believers from the Profit Seekers. I certainly don’t mine when the profit is below the marginal costs to do so. To make such a case, it would have to become an investment which means whatever is being mined needs to have the necessary attributes that would make it profitable in the long-term since you would be dollar cost averaging into what is being mined. It’s easy to see this in hindsight for Bitcoin, but honestly only True Believers were mining it back when there was no real profit to be had in any way, shape or form. Those True Believers have been proven right many times over as multi-millionaires and billionaires, while skeptical naysayers like Clint remain poor. That’s just how it is.

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Posted by (Questions: 36, Responses: 635)
Answered on 01/07/2018 9:07 AM
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@Robert So when its not profitable to mine, it will be only True Believers that are mining. It’s no different than in commodities where the cure for low prices is low prices, e.g. supply scarcity. The less miners there are, the lower the total network difficulty goes and inversely the more profitable it becomes to mine again. It’s dynamic like that. Anyway, because of the expense and resource inefficiency and scaling issues, mining that way is on the way out and blockchain is slowly evolving to a staking model (he who has the most gold, rules the roost).

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Posted by (Questions: 36, Responses: 635)
Answered on 01/07/2018 9:14 AM
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> Crypto evangelists fundamentally misunderstand that most money is credit and that credit is the center
> of the monetary world.

True, but many technological breakthroughs in history have come about from delusions. So they are useful idiots.

What knuckleheads like Clint don’t get is that blockchain is not just a technology to add to the existing order. Its a part of the long decentralization trend of reducing the power and profit of centralized coercion. “Government” as it is now is still very anarchronistic in terms of centralized violence in a world that is decreasing of need of it and its necessary “representative” corruption. It may be true the “government” facilitates the private sector, but aware people are getting fed up with the constant corruption and bailouts to the crony State Capitalists. Not to mention the centuries of war profiteering.

Seriously, the old way of agitating to pass/change legislation is not going to reign in any of that kind of maleovolent behavior that’s been going on for tens of centuries. We’re gonna need much more pragmatic and immutable controls.

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And BTW, decentralized is not the same thing as distributed. It’s easy to conflate the two. Decentralized is like a bunch of city-states vs a single monolithic nation-state that we have now. Distributed would be true individual sovereignty and that is probably not possible without first being in a Star Trek-like future with intelligent, if not sentient, AI everywhere. They key driver to this is the technology. Don’t make the mistake of thinking it’s going to be minor. Humans are, if anything, very keen on regaining their personal power.

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Answered on 01/07/2018 9:36 AM
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Quickly cooked this up:

Attachments:
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Answered on 01/07/2018 11:57 AM
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This year, next year, and in 5 years, my dollars will have value, because they ALWAYS cancel out debts in the system. It is inbuilt in to them because they are created as part of a balance sheet, with loan/tax obligations denominated in them and balanced by them.

Made up numbers popped into existence with no balancing debt correspondingly have no balancing value. In the long-run they will tend to zero. When everyone starts at the same time starts trying to unload their digital numbers in exchange for money that inherently cancels debt at the same time they are suddenly going to find that no one wants to to trade with them. Just watch, you’ll see.
That is crucial so I will repeat it

No one who has money that inherently cancels out debts is going to trade that store of value for made up digital numbers that do not inherently cancel out debt

Interesting times ahead 🙂

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Answered on 01/07/2018 8:14 PM
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You did quickly cook that up – it is missing the part where bitcoin automatically cancels someone’s debt. It doesn’t, which is why post-fad it will fall to zero

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Answered on 01/07/2018 8:16 PM